It’s a chaotic time in the entertainment industry and it’s seen as a new Hollywood era of “austerity” after years of unchecked spending.
We see the manifesto in a few ways, but namely with two major streaming services, Netflix and HBO Max.
Netflix is struggling to impress investors as it appears to be approaching market saturation in many regions, and content spending has soared that it can’t just automatically green-light everything now, and is starting to think about major cuts. , which have already caused a number of layoffs at the company.
HBO Max, despite being widely regarded as a pretty successful and popular streaming service, is about to be dismantled by the new WB management, which is trying to climb out of a $55 billion debt hole with at least $3 billion in cuts. , which includes entire movies and probably some shows that are about to be discontinued, regardless of their success.
This got me thinking about Xbox Game Pass, by far the most prominent subscription service in the gaming industry, and the closest to the “Netflix of gaming” we’ve gotten. In many ways, it feels like the early days of Netflix, a beloved service that millions want to sign up for, packed with instant access to major AAA games and smaller indies.
Currently, Microsoft is the nothing but major publisher that is comfortable using a subscription service to launch massive new games on day one. While we’ve seen a number of other brands play into this, such as Ubisoft and EA, although not to the same extent, while others, such as Microsoft’s direct rival Sony, have flatly rejected the model, saying it makes no sense for them to release games. that way. Here’s Jim Ryan from Sony on why they don’t do PlayStation Game Pass:
“[In terms of] putting our own games into this service, or one of our services, as soon as they are released… as you know, this is not a path we have taken in the past. And it’s not a road we’re going to take with this new service. We feel that doing that with the games we make at PlayStation Studios will break that virtuous cycle. The level of investment we have to put into our studios wouldn’t be possible, and we don’t think the knock-on effect on the quality of the games we make is something that gamers want.”
You may see the connection I’m starting to form here, where the problem is the same as that of these TV/movie streaming services. The idea of spending huge amounts of money on content to be compensated by huge numbers of subscribers is starting to seem untenable, at least at current levels, which has resulted in a huge amount of debt for both Netflix and HBO Max. It was accepted for a while, but has become untenable years later.
Here, Sony is claiming that they would rather sell tens of millions of copies of a must-have AAA game for $70 each rather than put it on a Game Pass service, which Microsoft does. It’s the equivalent of releasing a movie in theaters, or debuting on day one on streaming, which HBO Max did for most of the pandemic. And now you can see where that led to.
Even if it is hard to convince that Xbox Game Pass can grow to constantly support the budgets of all of Microsoft’s massive gaming projects like Halo Infinite, Redfall, Starfield, Gears of War, Forza, Perfect Dark, Fable and more, the situations aren’t exactly equal.
As Xbox execs have mentioned before, they are part of Microsoft, which is literally one of the largest companies in the world, and they may be better suited to the high cost of such a venture in the long run than these entertainment brands we have. it about (or Sony, which is in both markets). Microsoft has a market capitalization of $2.1 trillion. Netflix has a market capitalization of $100 billion. Warner Bros. Discovery has a market cap of $40 billion. Microsoft has a treasury that no one else in the industry can match, streaming or gaming, except maybe Apple and Amazon (see Amazon’s upcoming multi-billion dollar LOTR show).
Microsoft also gives players the ability to permanently purchase games from Game Pass and monetize the sales of DLC and microtransactions within those games, additional revenue streams that media streaming services do not have.
The fact is, it’s still quite early in this new Xbox Game Pass era, as we’ve done not had so many AAA releases on Game Pass with some of the biggest and most anticipated titles after all the new Xbox studio acquisitions to come. But I don’t think it’s unreasonable to at least look at the problems these other services have had in dumping billions in content while struggling to make subscriptions pay for everything. We’ll see what happens, but it will be years before it’s fully played out.
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