While not something I normally feature on this blog I figured this is topic involves both Tech and Strategy so its close enough.
It’s no understatement to say that Microsoft’s Gamepass is a behemoth in the gaming industry right now. It was recently reported that Gamepass just hit 25 million subscribers. While that 25 million doesn’t clarify if it’s talking about actively subscribed and/or full paying members (as opposed to the $1 promo members) it’s still easy to say that this is a major win for Microsoft as you can rarely go a single day reading gaming news without seeing someone mention Gamepass in some form or fashion. This widespread popularity has led many to ask the question; “what is Sony’s response to Gamepass?’
Sony has flip-flopped on Gamepass several times throughout the years. Originally their stance was that a Gamepass like service wouldn’t be sustainable (nevermind PSNow. Oh, don’t worry, we’ll talk about you in depth) and now they’re seemingly creating a competitor. While a lot of folks are discussing this, I want to talk specifically about what I believe Sony needs to do in order to not only compete but win. Doing that requires us to go back, way back, and look at Sony’s gaming strategy throughout history, analyze their current market strengths and weaknesses, and look at Microsoft’s strategy as well.
My background in Gaming
Let’s get this section out of the way upfront before anyone rages in the comments that I’m an Xbox fan boy. I’ve been playing video games for longer than most gamers today have been alive starting back with the Atari 2600 back in the 80s. I’ve owned every Playstation console (except PS5), including the PSP, PSP Go, PS Vita, and PSP phone. Here’s a breakdown of my gaming history, the year I had the console and which system I primarily played on.
- Atari 2600 (80s)
- NES/SNES (90s)
- N64 (97)/PS1 (98): N64
- Gamecube (2001)/PS2 (2002)/Xbox (2003): Gamecube until Kingdom hearts came out then Playstation 2.
- Playstation 3 (2006)/Xbox 360 (2011): PS3
- Playstation 4 (2013)/Nintendo Switch (2019): PS4; Never owned a Xbox One
- Xbox Series S (2021):
As you should be able to see with the timeline after Kingdom Hearts 1 came out, I primarily played on Sony consoles. I did pick up Xbox for the Halo and Gears series but there were extended periods of time where the only current gen console I owned was a PlayStation; 5 years with the PS3 and 6 years with the PS4.
This generation I opted for the cheaper Series S console over the more expensive Series X and extremely hard to find PS5. This was largely in part due to Gamepass.
A Gamepass competitor was born years before Gamepass was even conceptualized.
At GDC 2009 a hot new gaming company was drawing the attention of major news outlets everywhere. I’m talking of course about OnLive, the cloud streaming gaming platform which demo playing Crysis on a $200 laptop through the power of the cloud. OnLive would go on to launch their service in 2010 offering a selection of games for a low monthly payment. At the same time OnLive was released to the world publicly another competitor would enter the market; Gaikai. Gaikai was another cloud gaming platform that aimed to bring cloud gaming to the real of smart devices. Where OnLive was PC and their exclusive streaming box Gaikai attempted to get their service playable in web browsers and on smart TVs by working out a deal to load their software on Samsungs new line of Smart TVs. Gaikai would eventually impress EA with their service enough to secure a multi-year agreement to put EA titles on the service.
Unfortunately, however, Gaikai never truly left the demo phase and ultimately was acquired by Sony in 2012 to be the bedrock of their upcoming cloud streaming platform PSNow. Sony would later (2015) also acquire OnLive to use their technology for improving on the PSNow experience.
PSNow was Gamepass before Gamepass
The PSNow of today is nowhere near what it originally was. When first released it was a baffling video game rental service where the prices of renting a game were dependent on the “newness” and popularity of the game. Originally PSNow had 4 categories for rentals:
- 4 Hours: $3.99-$4.99
- 7 Days: $6.99-$7.99
- 30 Days: $12.99-$15.99
- 90 Days: $29.99-$49.99
And these prices weren’t always similar. For instance, comparing a rental of MGS4 to Deus Ex Human Revolution say changes in which one was more expensive with each category. It was cheaper to rent MGS4 for 4 hours ($3.99) than Deus Ex ($4.99) but it was more expensive to rent for 7 days ($7.99 vs. $6.99). And even then for the price of renting on PSNow I could frequently just purchase used copy of the game for the same price and not have to stream.
Couple the extreme prices of PSNow with the strange architecture of the PS3’s CPU and you had a recipe for disaster. Unlike the Cloud gaming services of today where one server Blade can run multiple computers through kernel level emulation the PSNow has to deal with the PS3’s cell architecture. Instead of being able to take one beefy but normal computer and split it into multiple smaller normal computers Sony had to make specialized hardware for every PSNow system. Sony had to specifically make large blades that held eight miniature PS3s on them, with each mini-PS3 being dedicated to a specific player at that time. Compare this to something like Google Stadia hosted in GCP or xCloud hosted in Azure where both companies can use their already existing infrastructure for Gaming or regular computing Sony’s infrastructure could only be used for the PS3.
PSNow could easily be categorized as a failure to launch until Sony reinvented it to be the Gamepass before Gamepass.
PSGamepass? (PSNow 2016-2019)
In 2016 after about a year of struggling to find people willing to pay exuberant prices for cloud rentals Sony wisely decided to roll out a “Netflix style” all you can play subscription model. With this new model for the Price of $19.99 you could play as many games on the service for as long as you want. This included the scant PS4 games on the service. This was a welcome change as $19.99 a month, while still expensive, was a lot easier for people to cope with vs. $49.99 for 90 days for 1 game. Bear in mind however that this was still streaming only. Downloading of games would not come until 2018.
In 2017 Microsoft announced Gamepass in beta testing for Xbox Live Gold members and then open to the general population in late 2017. Gamepass offered huge value by giving a vast selection of games without requiring users to stream them as well as Microsoft’s commitment to backwards compatibility support.
In 2018 Sony offered the ability to download PSNow games; however, due to the architecture issues of the PS3 CPU those games could only be streamed. Downloading the games was also the only way to play anything on PSNow at a resolution above 720P as Sony had that capped until 2020. Despite PSNow’s moderate success Sony still treated it like somewhat of an afterthought, keeping most of their exclusive AAA titles off the service. Although in fairness Microsoft did the same thing.
In January 2018 Microsoft announced that Gamepass would receive first-party day-and-date releases, meaning future heavy hitters like Halo and Gears of War would be available to everyone paying $9.99 a month. Microsoft fulfilled this promise in March of that year when they released Sea of Thieves.
Sony responded, over a year later, by decreasing the price of PSNow and putting a few of their AAA titles on the service for a limited time. Sony referred to this as their “marquee games” and every month they would add a few more while taking others off in a rotating selection. While this was certainly a welcome change it came out as somewhat of a half measure. The first lineup of games featured GTAV (2015), Uncharted 4 (2016), Infamous Second Son (2014), and God of War (2018).
While you would be right to argue this is a lineup of quality games, I would argue that it was not in fact a quality line-up. The games are all good no doubt, but they were also old with God of War being the most recent at around a year old. These games had already seen and passed their glory days. Yes, there were probably a few people who hadn’t played them yet, but by and large if you were interested in them, you’ve probably already had plenty of chances to pick them up on sale. And that brings us to the crux of Sony’s problem and what they need to do to win the Gamepass fight.
No more half measures
I mention the history of PSNow because it shines a painful light into how Sony has completely bungled this race. By all accounts they should be crushing the competition in this space; they had cloud streaming before anyone else, they had a huge catalog of games available for a single monthly price, but they took too many half measures and didn’t capitalize on their offering.
Sony treated PSNow as a side project that was there, but not important. Let’s look at some of the issues PSNow had along the way.
- Awful rental concept
- No download options initially, limited
- Streaming capped at 720P until late 2020
- Stadia was pushing 4K streaming in 2019 but it took Sony until 2020 to support 1080P
- Lack of First party title until 2019
- Even when Sony finally added marquee titles the fact that they rotate out hurts the overall appeal of the service. Meanwhile Microsoft has been putting all their first party titles on Gamepass and leaving them there permanently since 2018
- Older generation games
- Many of the AAAs on PSNow are the PS3 versions instead of the remastered PS4 versions. Two prime examples are The Last of Us and Battlefield 4.
Sony took too many half measures with PSNow and lost their incredible lead, and unfortunately this seems to line up directly with Sony’s strategy. Sony seems to still believe, somewhat mistakenly, that the primary product they’re selling is games. It’s well known in the gaming markets that if you want quality exclusives you go to Sony. At least that was before Microsoft bought Bethesda and Activision. We’ll see how perspectives changes when Bethesda studio games are only on Xbox and/when CoD becomes Xbox only eventually (but that’s a topic for another day).
In a 2020 interview Playstation Boss Jim Ryan stated that a “Gamepass business model was unsustainable for triple-A budgets.” Despite this Sony does seem to realize that a Gamepass like service is needed (apparently, they forgot about PSNow) when the announced project Spartacus which could include PS1, PS2, PS3, PSP, PS4, PS5, and PS+.
Even with the rebranding of PSNow into whatever Spartacus will be Sony is still taking half measures. While Spartacus will offer multiple tiers of gaming similar to Gamepass it is reported that Sony will still be keeping their heavy hitters off the service. Jim Ryan is quoted as saying;
We are not going to go down the road of putting new release titles into a subscription model. We want to expand and grow our existing ecosystem, and putting new games into a subscription model just doesn’t sit with that. It’s like getting a PS4 free with a PS5 for nothing more than the price of a monthly PS Plus subscription.gamesindustry.biz
This lack of new releases is what’s really going to hurt project Spartacus. One of Gamepass’s major claims to fame is the fact that Microsoft appears to be going all in on the service. Every Microsoft owned publisher is on Gamepass; from Microsoft to Bethesda to Rare, they’re all there. Microsoft isn’t taking half measures, and with good reason.
It all comes down to money
Microsoft doesn’t publish their profits from Gamepass but we can make some educated guesses. Microsoft recently reported 25 million members. They didn’t say how many of those 25 million were actively paying members so let’s take an overly conservative estimate and say half of that number are actively paying and not simply accounts that were made at one point. Microsoft also didn’t say how many of its 25 million were paying more than the introductory $1, so let’s assume that 25% of our “actively paying” subscribers are on the $1 plan. That brings us to 9.375 million actively paying members. Gamepass has two tiers: $9.99 and $14.99. Microsoft doesn’t state what percentage of their 25 million is on each tier, so we’ll go conservative again and claim everyone is only paying $9.99. Finally, we don’t know exactly how Microsoft is paying all the publishers who have games on Gamepass but let’s assume that it’s the standard 70/30 split and works like Spotify, Stadia, and YouTube where membership fees are split based on hours consumed. If we assume that everyone on Gamepass is ONLY playing third party games and Microsoft only gets to keep their 30% of that $9.99 a month we are still looking at around $281 million in profits EVERY MONTH.
Now I know those numbers were pretty loose, but I feel like they were still very conservative and significantly cut down on the maximum theoretical profits Microsoft could be making of around $3.8 billion a month. Even with our significantly reduced profits margins it’s still well beyond what Sony claims their top titles cost to develop. In the same interview with gameindustry.biz Ryan states that Playstation’s top titles cost more than $100 million to develop. Gamepass is theoretically making twice the budget of Sony’s top titles every month.
This is why I say that Sony still sees the primary product as games, rather than a service which supports the delivery of games. Unfortunately, Sony has one major weakness compared to Microsoft: size.
Microsoft is a massive company with a huge budget. They can afford a potential loss in revenue from people who only subscribe to Gamepass for a month to play a new first party game. However, Gamepass’s consistently growing subscriber numbers suggest that people are sticking around.
Sony’s strength is in the quality of their exclusives; they’re among the best in the industry. While Sony may take an initial hit in their profit margins they also stand to gain significantly.
What does Sony need to do to win?
Sony had an early opportunity to crush Gamepass but their trepidation cost them; however, their exclusives are quality enough that Sony could use that to their advantage. So, what do they need to do?
Exclusives on Spartacus
This should be obvious, but Sony needs to put their exclusives on Spartacus and keep them there. No more marquee rotating catalogue, no more putting old games up and calling them marquee. Put your exclusives up on Spartacus day one and leave them there forever. This includes PS5 exclusives the same way Microsoft is placing Series S|X exclusives on Gamepass.
Invest in streaming (again)
Microsoft made waves when it announced that everything powering xCloud would be upgraded to Series X blades. Now everyone, including the folks paying on older Xbox Ones could play Series X games at 60FPS. That said xCloud still has a big issue, it’s still locked at 1080P even on a Series X blade. Sony needs to capitalize here and offer Spartacus streaming at PS5 quality and 4K/60FPS.
Stadia showed us that 4K streaming was possible at relatively small bandwidth requirements (35Mbps) but while Stadia had the streaming tech down its missing the AAA quality games and true 4K for many games. Sony has the games, and we know Spartacus will include streaming, but will Sony go all in and offer true 4K?
Current Gen versions only please
If a game has been remastered, then Sony should put the newest version of the game on Spartacus. PSNow was plagued by last-gen versions of games, Spartacus can’t do this.
Throw in Free-DLC
Gamepass rarely includes free DLC for games. This is a place where Sony can capitalize. Even if it’s only free DLC for the first party titles it still provides a major benefit that Gamepass doesn’t have.
Partner with EA or Ubisoft
Gamepass Ultimate (the more expensive tier) also gives gamers access to EA Play. Spartacus needs a service like this.
Leverage Sony Pictures
Another major place Sony could provide content is by leveraging their Sony Pictures division and Anime divisions. Sony was testing a PS+ Video Pass in Poland which offered access to 15 movies and 6 series published by Sony Pictures. They claimed this would be refreshed quarterly but it appears Sony dropped this idea as I haven’t seen any updates since Apr 2021. Sony could offer Spartacus subscribers the ability to stream a few movies, 1 or 2, a month as added benefits.
The game subscription wars are kicking off with Microsoft taking an early lead. While Sony appears to be readying something as a response, everything I’ve read suggests that Sony isn’t truly invested in this idea. They can compete, but it requires them to come in with no reservations (something Sony isn’t known to do). If they don’t invest heavily in Spartacus upfront, then it might be too late for them to overthrow a firmly entrenched Gamepass.