The rise of digital media has spawned the age of subscriptions, where the world’s biggest companies are at war for the literal hours of a consumer’s day. The video streaming industry is often at the center of this discussion, but recent events have put sony (SONY 0.91%) and Microsoft (MSFT 0.87%) at the forefront of the subscription wars – here’s why.
The rise of gaming subscriptions
Microsoft launched its Xbox Game Pass video game subscription service in June 2017, and its immense success changed the industry. For $14.99/month, the company gives its members access to a massive library of games playable with an Xbox or PC, streamed or downloaded. In a style similar to netflix Originals, Microsoft releases its internally developed titles on day one of the service, with Halo and Forza Horizon just a few Xbox exclusives immediately available to subscribers. Five years later, Xbox Game Pass continues to experience phenomenal growth. From 2020 to 2022, the platform’s subscribers grew by 150%, from 10 million to 25 million members.
Xbox Game Pass has retained its position at the top, even as tech giants such as Google’s parent company Alphabet, with its Stadia cloud gaming service, has entered the market. Stadia launched in 2019 and struggled to convince consumers to adopt its platform. Google hasn’t revealed subscriber numbers since hitting one million in 2020, but insiders reported that Stadia missed user targets by “hundreds of thousands” in 2021.
Sony now intends to give Xbox Game Pass a run for its money with its revamped PlayStation Plus service. Sony previously offered two subscriptions: PlayStation Plus, primarily for online features, and PlayStation Now, which offered subscribers a streaming library of over 700 games. The updated PlayStation Plus combined these services into one platform and launched on June 13.
PlayStation owners can now choose from three different PlayStation Plus tiers: “Essential” is primarily online access, but the second tier is titled “Extra” and brings the service much closer to Game Pass. For $14.99/month, members can download and play games from a library of popular titles, such as Marvel’s Spiderman (2018) and Ghosts of Tsushima (2020). The final tier is “Premium,” which adds the ability to stream games for $17.99/month.
A war in time
The streaming and subscription wars are often discussed in the context of video platforms such as Netflix and Disney+. However, in addition to video streaming, wrestling also involves games, sports, audio subscriptions and social media. Research has shown that households use an average of 12.5 different sources of entertainment, around half of which are considered “must-haves” and therefore less likely to be abandoned. The same study found that around 66% to 67% of consumers consider game subscriptions a must-have. While this is positive, it is imperative that these platforms offer engaging content to remain competitive.
One of the biggest draws for Xbox Game Pass subscribers over the years has been the ability to play Microsoft-exclusive games right away through the service, saving $60 or more on a new title. For this reason, Sony and Microsoft have recently acquired several game developers to increase their libraries of exclusive games.
In March 2021, Microsoft acquired ZeniMax Media, the parent company of game developers Bethesda Softworks, for $7.5 billion. The Xbox company also plans to buy Activision Blizzard, which houses the Call of Duty franchise, for a record $68.7 billion. Additionally, Sony has acquired a few developers over the past year, including the original creators of HaloBungie Inc. and Haven Studios.
Who will win?
Stadia effectively pulled out of the competition, announcing in February that it would no longer be developing exclusive games for its platform. Sony and Microsoft arguably have equally enticing game libraries, though it remains to be seen how PlayStation Plus will handle games developed in-house by Sony and whether subscribers will be able to play them on launch day. However, a PlayStation exclusive game called Wander from a third-party developer will release on day one of service at the end of July, a positive indication that other games may follow suit. If they do, PlayStation Plus would become an even closer rival to Xbox Game Pass.
Microsoft may have time on its side, as Game Pass has been around long enough to earn consumer trust, but Sony is a worthy contender. Going forward, it will be crucial to note what other developer acquisitions each company has made. For example, there’s still time for Microsoft’s Activision deal to fail, which could be an indicator of where the subscription race is headed. As with all subscriptions, consumers will flock to the service that can provide the best products at the best price.
Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. Dany Cook has no position in the stocks mentioned. The Motley Fool has positions and recommends Alphabet (A shares), Alphabet (C shares), Microsoft and Netflix. The Motley Fool has a disclosure policy.