Michael Pachter: Sony Hasn't Done Something Like Game Pass Because 'It Doesn't Make Much Economic Sense' - News
by William D'Angelo , posted on 02 April 2021 / 5,097 Views
Microsoft has been aggressively trying to grow its Netflix-like subscription service, Xbox Game Pass, by releasing all first-party games on the service on day one. The service has grown to over 15 million subscribers.
Some have wondered if Sony will start to push its PlayStation Now service as much as Microsoft with Xbox Game Pass. Wedbush Securities analyst Michael Pachter speaking in an interview with GamingBolt says it doesn't make much "economic sense" for Sony, which is why they haven't started to put new releases on the service.
"Well they have it, they just don’t market it very well," said Pachter. "They have PS Now, they just don’t have as many games and they haven’t been putting their new releases on there. And that’s the problem, that their subscription doesn’t have new releases, and Microsoft does.
"So question is, will Sony walk down the Microsoft path? I’m not sure Microsoft makes money off that model, so I think that may be a bad business decision. I mean Microsoft has a lot of money in the bank, so they can do whatever they want, but Sony doesn’t have as much.
"So to give Sony credit, I think they are very good business people, and they make intelligent business decisions. So there has to be a reason for why they haven’t done this yet, and that reason is probably that it doesn’t make as much economic sense."
A life-long and avid gamer, William D'Angelo was first introduced to VGChartz in 2007. After years of supporting the site, he was brought on in 2010 as a junior analyst, working his way up to lead analyst in 2012. He has expanded his involvement in the gaming community by producing content on his own YouTube channel and Twitch channel dedicated to gaming Let's Plays and tutorials. You can contact the author at wdangelo@vgchartz.com or on Twitter @TrunksWD.
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15 million subs on console/pc for 10$ month is $150 million per month meaning 1.8 billion per year and I guarantee that once Xcloud launches and hits mobile in numerous countries around the world those subs will outnumber those who use PC/Console. So yes if they can retain subs then it will be more than sustainable especially if they just remove XBL Gold and make Gamepass 15$ per month.
It’s all a guessing game right now really. Mobile games make money from candy crush. Are those same people going to want to stream elder scrolls? No one knows. I’m very excited to see how it all works though. Understand though all that money you’re calculating sounds impressive. The cost for all us of this is going to be a lot as well. The price will need to go up eventually. Right now they just want people on the service. Also most people do not pay $10 a month with the deals they’ve had on this service.
15 million people buying 2 full priced games in a year = 1.8 billion and then they're spending 900 million for PS Plus for a year, so that's 2.7 billion. That's if they buy 2 games a year. 2.
Even if Sony sweeten the deal and do Game pass + PS Plus for lets say $15 a month that's 2.7 billion So that's equal so far so pretty good? No.
In order to get 15 million people or more to pay that amount per month they need more than just the handful of PS Exclusives every year, look at game pass, there's a lot of third party games on there too. And those wouldn't be free for Sony, you need to pay publishers a lot of money to put their games on a game pass. So that 2.7 billion number just keeps getting lower and lower in order to get the numbers you need to even make money.
Game Pass is at 15 million users and it doesn't make money Microsoft themselves see it as a long term investment that will make money in the future, they need to be everywhere to do that and they don't care how much money they lose trying to get there, Sony does as their money pit isn't any where near as deep as Microsofts.
They can't spend $7.5 billion just to give games away for 'free'.
That is what a lot of us think, but if Patcher said then I'm worried I have been wrong all this time.
"A loss leader strategy involves selling a product or service at a price that is not profitable but is sold to attract new customers or to sell additional products and services to those customers."
Microsoft has enough money. When they're sure Game Pass becomes the leading service, they'll begin making it profitable by e.g. cutting expenses, increasing price, etc.
Exactly, most GP subs are currently free. So no matter what it's not a viable business in current form. That doesn't mean just raising to "normal" price for all the free sub people, but could also mean changing the offering. Currently it's very generous, but that doesn't need to be permanent. They can datamine all the current users and see what is popular and subtract out enough costs (games) to where their model says they will keep the largest part of subs AND not lose profits from un-necessarily incuding games they don't need to to meet optimal sub volume. Clearly they are in datamine and promotional mode now.
Last I checked, Pachter doesn't have actual access to MS data on gamepass's future, let alone plans not yet discussed, so I'ma go ahead and call bs on his usual spiel
Gamepass isn’t profitable much by itself, for sure. But by giving games like this every months, allowing people to build a game library instantly by spending what amounts to two roughly the price of two games yearly, Microsoft is giving people and incentive to subscribe to XBL to play all those games online with their friends, and XBL IS profitable.
Xbox Canada has been emailing me for the last month to sign up for Gamepass for $1.00.
MS is pretty agressive about getting people to try it. But people are under the illusion it only cost a dollar to keep usimg it.
Sony has already stated they have a different approach to Microsoft this generation. Sony doesn't need a Gamepass model as their games already sell enough well physically/digitally. Sony doesn't want to invest 50+ million on certain game developments only to not recoupe it on a $12 game service.
$12 x million of subscribers + sales between console(s) and PC = $12+.
It's a long term investment that may or may not work. It's just like Netflix and Amazon back then.
In my opinion from what we're seeing it may work.
Gamepass is a long term investment on MS' part. Microsoft's marketing boss Aaron Greenberg has admitted in the past the "Gamepass is not that profitable". This could either mean that Gamepass is slightly profitable, or it could mean that Gamepass isn't profitable at all. Usually when people say "not that X" they mean the opposite of X. Example: A snail is not that fast.
Phil himself said that it loses money and the amount is increasing but is sustainable
Source on Phil saying that? It's been pointed out for a couple months now that Gamepass probably doesn't turn a profit, but a lot of people are in denial.
The quote was from one of Trunk's news articles on the front page but I haven't gone looking for it.
Ms doesn’t make money they’ve already said so. It’s an investment and will see if it works.
It doesnt make economic sense for sony for the type of games they create.
The thing is, if MS could get every Xbox purchase t also sub for gamepass that would be a huge win for what they want to do. Its not that they are losing money by putting their first party games day one on Gamepass, its a strategic move to get subs. Its also a way to keep your customers tied to your eco system which MS value even more. You are using their services which means if successful you will be willing to use their other services. Once subs get to a certain level, lets say something like Amazon prime, as long as you continue to see or feel good things you continue to pay 15 bucks a month. Most gamers only purchase so many games per year anyway. Its the reason Amazon has join the fray because they are trying to do the same thing as MS as well as google. If Sony did the same thing, they would get 150 million subs in no time which would pretty much pay for all their development cost but Sony isn't a service oriented company like MS, Google or Amazon so its not their strength and it doesn't sell their other services like Amazon, Google and MS want to do.
Everybody understands that giving away a bunch of brand new games for 15 bucks a month is not very profitable in the short term. MS is hoping that in the long run, when they reach a critical mass of subscriptions, they can recoup their losses by hiking the price upwards. They certainly have the pockets to go this route.
Not in the extent of Microsoft’s day and date releases for every first-party studio they own, but they could keep many of their old PS4 exclusives on PS Now permanently and give some titles of smaller devs (Pixelopus, Sony Japan, Sony London, Media Molecule) available on PS Now day one
The future for MSFT isn't xbox....its gamepass.
If its a service that generate $100+ million a year, then it can fund AAA games. That's also before profits of actual sales.
Insert Steve Carrell/Michael Scott THANK YOU GIF!
I am pretty sure PS Now has more games than Gamepass though. 700 vs. 400 or so. So yeah, Pachter is still full of $*@%
I'd argue that PS Now has Gamepass beat in both quality and quantity at the moment. The PS3 (and PS4) exclusives on the service are stellar. You say they are only available for streaming like its a bad thing. Streaming is kind of the point of the service. Gamepass touts streaming as a beneficial feature through xcloud as well. One day MS recent acquisitions will probably pay off once those 1st party games hit Gamepass day 1 but for now their first party offerings aren't exactly considered cream of the crop.
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