According to games industry market research firm DFC Intelligence, Microsoft’s Xbox Game Pass doesn’t appear to be a sustainable long-term business model.
That’s what the research firm writes in a new article about the gaming subscription services from Microsoft, Sony, and Nintendo. The problem with Game Pass, according to the DFC, is Microsoft is giving away too much content in order to generate its revenue. Meanwhile, although not nearly as good as Xbox Game Pass and PlayStation Plus, Nintendo appears to have found the sweet spot with Switch Online when it comes to offering decent value for consumers.
“The problem with Game Pass is the business model does not appear to work”, the research firm writes. “Comparing subscriber numbers is not necessarily fair because the services have significantly different prices. However, what is clear is how well Nintendo’s subscription service works as an enhancement to the overall business model of selling hardware and software. In contrast, Game Pass appears to be trying to be its own end where Xbox hardware sales are not important.”
“When one does the math, Game Pass is making probably three times the revenue Nintendo Switch Online currently generates and probably getting close to matching PlayStation+ revenue because it is priced higher. However, Microsoft is giving away a lot to generate that revenue and it does not appear to be a sustainable long-term business model.”
The article then goes on to explain why DFC Intelligence believes that Nintendo Switch Online is compelling for both consumers and Nintendo as a company.
“The last part of giving away AAA first-party content is the kicker. Nintendo’s online service includes extra content for Mario Kart 8 and Animal Crossing: New Horizons. However, these titles respectively sold 48 million and 40 million units at full retail price. In other words, these two titles generated more revenue than a year of Game Pass.”
Nintendo’s Switch Online service is believed to work as an enhancement to Nintendo’s overall business model.
“The bottom line is that game subscription services seem to work well as a value-add proposition. Nintendo has shown that with Nintendo Switch Online. There are tens of millions of users that will pay $60+ for a game and a cheap mediocre online service. Taking it to the level of a Game Pass requires not only significantly more expenditure but requires giving up a large established revenue stream.”
Do you agree with the DFC? Is Microsoft’s business model sustainable in the long run and how about Sony’s and Nintendo’s? Hit the comments down below.
