Video game subscription services currently only make up only 4% of the North American and European market revenue. However, Xbox Game Pass has now passed 25 million subscribers and continues to grow, and PlayStation has also created its own competing game subscription service after revamping PlayStation Plus. This means that this percentage is likely to grow rapidly in the coming years.
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The thought of PlayStation and Xbox competing through rival subscription services has worried some people within the gaming industry. The former Microsoft Executive, Ed Fries, has expressed his concerns over what Xbox Game Pass and video game subscriptions could do to the industry in a few years. Speaking on the Xbox Expansion Pass Podcast, Fries was asked about what he would change about the video game industry if he could. Fries took this time to explain his hesitance towards Xbox Game Pass and the subscription service model. He compared the possible outcome for the video game industry to that of the music industry after Spotify was created.
Ed Fries claims that Spotify monopolized digital distribution for music and is responsible for vastly reducing the total amount of money the music industry now brings in, and especially the money which goes to the artists themselves. Ed Fries is currently a partner at 1Up Ventures, which is a firm that is connected to many indie developers. This would explain why Fries would have legitimate fears over the video game industry going the way of Spotify, as he has a vested interest in making sure smaller developers are still able to operate and distribute independently.
Video games are one of the most expensive forms of media to produce. AAA titles have already begun surpassing $100 million in development costs, and these costs will only continue to grow across the industry as the technological standard for games only increases. If every AAA developer found itself compelled to distribute every game on a subscription model, then the profit margins for these games would be vastly reduced.
Ed Fries does agree that a subscription service model like Xbox Game Pass is very cost-effective for the customers that can get the most out of them. But the former Microsoft executive’s worries still lie in what could happen to the video game industry as a whole if it takes a huge hit in total revenue from the growing popularity of subscription services.
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