Subscription Slugathon: The Coming Shake-out In Online Gaming

Already, 70% of Internet users are gamers in some way. And 30% of them are subscribing to at least one of the many kinds of modern game services.

Source: Bigstock

Back in the day, there were only a few television channels: ABC, NBC, CBS, and a few others. There were only a few ways to rent a movie or buy an album, mostly by going to a brick-and-mortar store. We know the end of those stories, and now the same tale is being told for the video game industry. An explosion of video game buying options has led to a vast expansion in the numbers of gamers, and in gaming’s reach. Among millennials, more are paying for gaming than are paying for TV.

Here’s some data showing that those who frequent streaming sites and services are often willing to pay, and pay for subscriptions:

(Source: March 2019 Statista Global Consumer Survey)

According to this Statista report on the hobby, “Video games have reached the center of society. In most countries, more than 70% of internet users play video games – the share of those paying for gaming is on average above 50%.” In the United States, it is even higher. In a survey of over 4,000 Americans age 18-64, 79% said that they play video games, and 15% said they spend money on game subscriptions:

(Source: March 2019 Statista Global Consumer Survey, multiple answers allowed)

If the American video game market is 79% of adults (probably higher for the tweens and teens, probably lower for the golden-agers), and if 15% of adults are already paying for subscription game services, then the market for potential growth is quite large.

Not just large, as it turns out, but growing:

(Source: NPD, via Statista)

In America, game software revenue, including in-game purchases and subscriptions, rose 18% from 2017 to 2018, to $35.8 billion. And more current reports suggest that this is no fluke.

In a Deloitte Insights report by Kevin Westcott and others, the trend is clear: “video gaming could provide more disruption in the battle for consumers’ attention and should be factored into most M&E companies’ strategic planning.” The report offers some interesting data to back that up:

  • The compelling shifts among millennial consumers (which now includes people up to age 35 years old) reached an inflection point, with video gaming subscriptions edging ahead of Pay TV subscriptions-53 percent versus 51 percent according to Deloitte’s Digital media trends survey, 13th edition. Just one year ago, video gaming subscriptions among millennials were at 44 percent and Pay TV subscriptions were 52 percent, indicating a significant shift in momentum.

The same Deloitte report, dividing gamers into four main types, provides data showing that multi-platform gamers are most receptive to video game subscriptions, compared with old-school PC gamers, who are least receptive.

(Source: June 2019 Deloitte Insights report)

The research shows that gamers most willing to subscribe are also those most interested in ad-supported streaming. It seems to be the die-hard PC gamers who are more likely to want everything for free. Note the axis labels on this graphic, however; the variation is not as great as the design of this graphic might suggest.

This research does offer insight into the kind of gamer most willing to pay for a subscription compared with gaming “intensity.”

(Source: June 2019 Deloitte Insights report)

Both multiplatform players and console-dominant players are most willing to pay for a game service subscription, at 60%, but the console players are somewhat more intense (again, watch that x-axis).

Companies — both longstanding game companies and giants who are relative newcomers — are capitalizing on this trend, and they are jumping in. Just launched or about to launch this year are such services as Google Stadia, Ubisoft UPlay Plus, Microsoft xCloud, and Apple Arcade. These join existing subscription services such as EA Origin Access, Nintendo Switch Online, PlayStation Now, Discord Nitro, and Valve’s Steam service. Compare that list to this graphic showing the companies which most gamers have done business over the last year:

(Source: Statista Global Consumer Survey)

As the graphic above reveals, there are a lot of companies and options in the mix now. That’s the key takeaway for a turbulent period in which the outlines of the market have yet to solidify. That’s according to Electronic Arts senior vice president Mike Blank, quoted in Wired:

  • I think we’re in the early days, we’re all pioneering here. There’s a lot of experimentation happening. We’ll see what level of fragmentation customers are willing to accept, and over time I think some will rise to the top and other subscriptions will end up not making it. The most important thing is that our players will ultimately decide if this works or if it doesn’t.

Blank gets more specific when he says that players will decide. The incredible variety of options means that players will vote with their dollars, and the selective forces at play will mold the video gaming industry.

  • With a subscription, we’re able to see the kinds of games customers like to play most regularly, and the kinds of experiences within games they might want to play more frequently. By virtue of that, we can try to tailor an offering where we can provide types of games experiences that might be more relevant.

Other industry execs echo the same predictions for a future shake out and winnowing, per this recent report in The Verge:

  • Xbox executive Phil Spencer told The Verge last week that he doesn’t “think we’re going to end up with 100 successful subscriptions out there.” Publishers and platforms are fighting for a piece of consumers’ monthly entertainment budget. It’s a facet of the industry’s imminent future.

And for a take from the gamer perspective, Osmund Chia at SlashGear sees subscription costs rising for now, with hope for relief in the future:

  • What gamers want is a clear champion: A subscription service that provides most of the games we want at a reasonable price. But it seems we’ll be bombarded with countless options for now, so long as companies keep trying their luck at gaming subscription services. Only until a handful of companies dominate the market – in the vein of Netflix and Amazon Prime Video – will other publishers accept their fate and resort to distributing their games via these platforms. Gamers will finally have one or two services they can be loyal to, without losing too much on games offered by other companies. But till then, the race rages on.

Insider Take

More gamers are playing — and paying — for video games than ever. Gaming has even surpassed paid TV among millennials. In this golden age of gaming, the offerings are vast and many companies are trying out payment plans and options, especially subscription. The winning business model has yet to be determined.

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