When console games cost $60 or more each, a $10 or $15 monthly subscription with access to that same game is an easy sell. But according to former Sony executive Shawn Layden, it doesn’t work as a business model unless you also manage to scale your user base to 500 million paying subscribers.
Shawn Layden’s career includes stints as COO of Sony Network Entertainment International, CEO of Sony Interactive Entertainment America, and Chairman of SIE Worldwide Studios. Last year, he also pointed out the cost of game development doubling every generation of console hardware is unsustainable. So when he starts talking about game subscription services, he’s backed up by a wealth of experience working in the industry.
In his latest interview with GamesIndustry.biz, Layden details what is an obvious point that doesn’t get talked about too often, “It’s very hard to launch a $120m game on a subscription service charging $9.99 a month. You pencil it out, you’re going to have to have 500 million subscribers before you start to recoup your investment.”
When you consider the number of people who own games consoles today is around 250 million, if Layden is correct, Microsoft would need to double it in order to make Xbox Game Pass a viable business venture. And not just double it, but have every one of those 500 million people subscribing to play games through its service.
Layden goes on to say, “People don’t buy consoles because they want more steel and plastic in the living room. People buy consoles because they want access to the content. If you can find a way to get the content into people’s homes without a box, then yes, indeed. Everyone has a streaming solution of some form. Most of it is limited by whether you have a decent internet connection. And they haven’t constructed the business model that works yet for that.”
The most successful streaming service away from games is Netflix. The service has been streaming content and growing its subscriber base since 2007, but even with worldwide subscribers totaling over 209 million people, the company’s debt rose to $15.6 billion this year, up from $14.7 billion last year according to Simply Wall St. For now, that seems the best comparison available for the future of Game Pass, and it does little to counter Layden’s comments that it can’t work without massive subscriber growth beyond the size of the industry today.
Microsoft is fully-committed to Xbox Game Pass, with Flight Simulator being the latest premium title to be offered at no extra cost to subscribers. And of all the companies out there with a gaming division, Microsoft has the cash to continue to support a loss-making subscription service until a time where it can reach the 500 million subscriber mark. So the question is, will it ever get there?
