Why the Gaming Industry is Moving Towards a Subscription Model
By Movieguide® Contributor
Gaming remains the last entertainment sector to rely primarily on sales, but the industry has been undergoing a massive shift as companies and consumers eye a subscription model for video games.
“We’ve seen this huge transition in the games industry of moving away from the traditional, what I would call ‘unit-sales-based’ business model, towards an ‘engagement-based’ model,” said Karol Severin, MIDia Research’s senior games analyst and VP of data. “I would dare to say that the number of game subscriptions is going to grow much faster than the number of games sold for the next decade.”
This trend is in line with the music and entertainment industry, which have gone from primarily sales-based to nearly entirely subscription-based in roughly a decade. The streaming wars for gaming are now heating up as even non-gaming companies look to join the fight.
Netflix launched the gaming leg of its business at the end of 2020 and has since amassed over 70 titles as an add-on to its entertainment library. Though the service remains largely unused roughly three years later, the company still views gaming as a key component of its future.
While Netflix is the premiere streaming service for shows and movies, it remains one among many in the gaming industry. The three primary gaming systems – Nintendo, Xbox and PlayStation – all have their own gaming subscription services, as do other gaming companies like Apple and EA Sports.
While most of these services have only appeared within roughly the past five years, they represent a longer trend as more games look to other monetization methods beyond a one-time purchase.
“The whole games industry used to be about buying games, or downloads – convincing customers that a game is good enough to buy as an individual unit. You’re seeing that model shift largely to being engagement-based, where the games are financially dependent on the amount of time consumers spend in those games, because they’re increasingly monetized through in-game purchases,” Severin said.
This is why games like Fortnite are free – they can still generate tens of millions of dollars through cosmetic purchases despite being initially free to play. Severin believes the popularity of cosmetic purchases comes from a shift in where people spend their time.
“Now, we are seeing games developed with the aspiration of never being finished – it’s not necessarily something to ‘beat,’ but something to ‘exist’ in,” he explained. “Twenty, thirty years ago, defining one’s image was about what clothes you wore, what music you listened to, where you worked and what car you had. Now we’re spending so much time in the digital world that self-expression becomes part of people’s digital lives.”
Movieguide® previously reported:
During the pandemic, gaming saw a stark rise in popularity. As people were forced to stay home, many gravitated towards gaming as a way to fight boredom and stay connected with friends. In the three years since, gaming has maintained its high popularity, a trend that is likely to continue for a long time.
Despite its popularity, gaming is often still viewed as a fringe interest rather than a robust, global industry. However, a look into the industry reveals just how popular video games are in the world of entertainment.
In 2020, the gaming industry grossed $180 billion in revenues. That was more than the global movie industry from the previous year ($100 billion) and all North American sports ($75 billion) combined. The high industry numbers continued in 2021 and 2022 with gaming grossing $192.3 billion and $184.4 billion respectively. Roughly half of 2022’s revenue came from mobile gaming, while PC and console games brought in the rest.
A large component of the high revenue comes from the structure of the industry being heavily based on a buy-to-own model rather than the subscription renting models used by other types of media industries. However, gaming console leaders Nintendo, Xbox and PlayStation do offer subscription services that provide players access to a content library with hundreds of games.
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