Microsoft's Xbox Game Pass subscription is irresistable

Microsoft launched its ground-breaking gaming subscription, Xbox Game Pass in June last year, offering unlimited downloads and play of more than 100 games for $9.99 per month. This month Microsoft announced a major enhancement to the subscription service; Xbox One games from Microsoft Studios will now be available to Game Pass subscribers on the same day they are released to a global audience; previously members had to pay separately to buy the games or wait for the games to be launched as part of their subscription plan.

Gaming subscriptions are becoming more popular as the subscription economy grows and people of all ages are becoming more comfortable paying for entertainment via subscription.  Microsoft are tapping into the trend that subscriptions are going main stream as consumer preferences shift from ownership to immediate access and specifically exploiting the GaaS (game as a service) model. Microsoft, Sony and Nintendo are all experimenting to see what works and what doesn’t. 

Microsoft will benefit in three key ways from this strategy. 1) Reach. This move immediately exposes their games to a much larger audience. While Windows Store still isn’t where it needs to be to appeal to the core PC gamer, there’s a huge untapped potential there to be unlocked (Xbox Game Pass will work on Windows 10 PC for Xbox Play Anywhere games). 2)  Recurring monthly revenues. A stable source of subscription revenues from a much larger pool of gamers who they can entice to come back when a new update drops. 3) An additional source of revenue from microtransactions and in-game purchases which are the lifeblood of GaaS and, in all likelihood how Microsoft plans to make Xbox Game Pass work.

A YouGov survey commissioned by Zuora, Inc in 2017 showed that adoption of subscriptions increased 11% last year with 9 in 10 British adults now subscribing to at least one product or service. Gaming Services represented 9% of all subscriptions vs VOD at 30% and music at 19% but innovations like this are undoubtedly going to lead to greater subscription engagement.

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Global app spending is up 35% YOY but is that good news for publishers?

Global consumer spending on apps and games reached approximately $58.6 billion in 2017, that’s up 35% from the $43.5 billion spent over 2016. This spending was across in-app purchases (IAP), subscriptions, and premium apps in both Apple’s App Store and the Google Play Store.  The growing popularity of app subscription models is partly a result of Apple and Google improving their subscription offerings in their respective app stores. For iOS developers, Apple increased the revenue cut for subscription app developers from 70/30 to 85/15 in June 2016. Paid subscribers across all Apple offerings (this includes paid subscriptions for products in the App Store as well as Apple products like Apple Music) grew 75% YoY in Q3 2017 to 210 million subscribers.

Google adjusted its own subscription revenue share model to match Apple’s and found in May that revenue from subscriptions on Google Play increased tenfold in the last three years. The prevalence of subscription-based apps will likely grow in 2018 as more developers shift to subscription models to reap the revenue benefits of such apps.  

When weighing up the opportunities of being in the App or Google store publishers need to weigh up what customer data is critical for them to create a frictionless path to engagement and subscription. Do you have access to the data you need to evaluate this as an acquisition strategy, what metrics are you using, or even how will this affect attribution modelling. 

My experience is that the customer journey from app discovery to subscription sign is not always a good one for customers.  Companies are trading reach at the expense of conversion.  The evidence is the volume and quality of prospects who convert to a paid subscription. 

http://uk.businessinsider.com/global-app-spending-continues-to-grow-2018-1