Ed Fries, who built the game lineup for the original Xbox, has his own take on the game industry. He believes that the current popular game subscription system will eventually destroy the game software industry, just like Spotify changed the record industry: “This Game Pass they did. It makes me anxious because the scary thing about this thing is reminiscent of [membership music subscription service] Spotify, which has become so popular that the music industry has shrunk in half and people are not buying music anymore.”
Ed Fries is a veteran of the game industry who lived through the Atari earthquake and watched the industry self-destruct in the 1980s. He says he likes Spotify and the feeling that “all the songs are gathered here”, which is good for users, not necessarily the industry.
It’s understandable if you’re worried that Game Pass won’t last. The game subscription system is still in the stage of losing money and making a profit. Unless the big money owner keeps subsidizing it, this business model cannot be maintained. Sony claims that to support so many studios, unless there are hundreds of millions of subscribers, it will be difficult to recover the cost.
To put that in context, Game Pass has only 25 million subscribers (as of January this year), while Spotify has 182 million (as of March this year) and Netflix has 220 million. Even though Spotify has nearly 200 million subscribers, and even though Spotify’s quarterly revenue is close to $3 billion, it still loses $6.5 million—70% of its revenue goes to record companies such as Sony Music and Warner Music.
Maybe Game Pass will never be profitable, but Ed Fries’s concerns about Game Pass are unnecessary – Spotify and Apple Music have indeed changed the consumption habits of music lovers, but the music industry in North America has not shrunk but has grown in 2020 by 9.2%, a sharp increase of 23% last year. Goldman Sachs predicts that nearly 700 million people will pay for music subscription services by 2023, and more than a billion by 2030.
For the game industry, the number of subscribers to streaming video is more meaningful. If the game industry can solve the problem of development inefficiency and split large AAA games into multiple episodes for monthly or even weekly releases, maybe one-day game subscriptions can become a lucrative serious business model, rather than the current one A shit-stirrer character born only for competition.