How Many Subscribers Are Needed for the Business Model to Work?
On the surface, the numbers for the video game industry appear staggering. DFC Intelligence shares some blame for adding to the hype when talking about over 3 billion video game consumers worldwide. However, this is primarily a number thrown out for mass media journalists. The true analysis lies in the many subsegments where a company like Microsoft can report quarterly revenue in video games of $4.8 billion and it feels like a disappointment.
The problem with Game Pass is the business model does not appear to work. 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.
Xbox Game Pass subscriptions range from $5 month to $15 a month. There is even a $25/$35 a month/for a 2-year financing option that includes an Xbox Series S or X at 0% financing. Sony launched a new PlayStation Plus program last June. The new service is confusing but essentially monthly prices range from $10 to $18 a month, with a significant discount buying yearly of $60 to $120/year/
Meanwhile, there is Nintendo Switch Online which costs only $20 a year or a family plan for 8 accounts is only $35 a year. In late 2021, Nintendo added the option to upgrade to a Nintendo Switch Online + Expansion Pack for $50 a year ($80 for family option).
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.
Of course, if Game Pass could somehow get 100 million subscribers the economics would change. But that is a big if. Even if the Activision Blizzard user numbers (minus mobile users) are added in the numbers fall far short. A top-selling front-line Call of Duty can only hit 30 million units and Blizzard MAUs have hovered around 30 million for years.
Nintendo Switch Online: Average Service at a Reasonable Price
The beauty of Nintendo’s online service is it is not very good in comparison to the competition but offers decent value for the consumer. The basic service gives you online play for a fairly limited number of titles (about 40) as well as a limited number of the 1980s and early 1990s NES and SNES games. The Expansion packs add Sega Genesis (console system launched 1989) and Nintendo 64 (console system launched 1996) games from the mid-to-late 1990s as well as some expansion packs for Mario Kart, Animal Crossing, and Splatoon.