PARIS: The netflization of the video game sector, lessons to be learned – Presse Agence

Theodore Jowett, Master of International Business, KEDGE Business School and Neva Bozovic, PhD, Associate Professor of Strategy at KEDGE Business School.

Digitalization has led to the emergence of new business models that can transform entire business sectors. The media and entertainment sectors have changed over the past ten years with the rise of digital subscription platforms such as Netflix, Amazon Prime and Disney+ for movies and series, or Spotify and Deezer for music, among other examples. Building on the success of these platforms, a similar movement is now affecting the video game sector. Theodore Jowett and Neva Bozovic analyze this trend.

The emergence of a new model

If we compare subscription models in the field of video games and films and series, the first big difference is the time spent. The player devotes a lot of time to a video game, broken up into several long sessions, while a movie usually mobilizes the viewer for one session lasting two to three hours. The second difference is that in video games, the subscription model competes with many other established models, such as the free-to-play model. This has appealed to many players who prefer to pay for in-game items and services via microtransactions rather than making a one-time €60 payment to purchase the game or pay a €15/month subscription to access it. For example, in 2020, mobile games, which are the natural medium for free-to-play games, generated $86.4 billion (Statista, 2021), or about half of the gaming industry’s revenue.

Consequences for the video game industry

The adoption of this model will have major implications for the video game sector. This will force publishers to rethink their strategy and thus offer many new opportunities, especially in terms of game life extension and player engagement. Thus, the video game will move from being a “linear” product to being a “live” product, allowing publishers to stabilize, control, and increase their revenue. With the live model, publishers are moving away from game as a product to game as a service, constantly investing in new features, new content, new events, and new updates to drive player participation and maximize revenue generation. by game or franchise.

Microsoft’s vision for the subscription model

Under the influence of GAFAM (Google, Amazon, Facebook, Apple and Microsoft) as well as “traditional” publishers such as Ubisoft or Electronic Arts, or even console manufacturers, new distribution services began to emerge. The growth of the subscription business model has also led to interesting changes in the configuration of the video game market, revealing new leaders. One of them is Microsoft, which recently became the third largest player in the sector right after Tencent and Sony.

Xbox Game Pass is a subscription platform offered by Microsoft. Launched in 2017, originally for Xbox, it now has over 300 downloadable games that can be accessed across multiple platforms including PC and mobile. “We are building a platform that can reach billions of gamers,” said Microsoft Gaming CEO Phil Spencer. “Whether on console, on PC or streaming on the Xbox cloud, gamers should be able to access the game they love, no matter what device they use. »

This new way of distribution and consumption is gaining popularity, and games are much more accessible and cheaper than the old store system. In January 2022, according to Statista, Xbox Game Pass had 25 million subscribers who paid an average of over $10 per month per plan. This figure has increased significantly since the platform only had about 10 million subscribers in April 2020.

Microsoft has succeeded in this feat by launching a massive campaign to buy out publishers such as ZeniMax Media ($7.5 billion in 2021) or Activision Blizzard (nearly $68.7 billion in January 2022). Microsoft wants to provide the best possible service and experience for its Xbox brand to offer the most competitive and widely used platform on the market, with the goal of adding new iconic franchises and thus increasing its appeal to the gamer community. These acquisitions also reflect Microsoft’s strategy to increase subscriptions to its Xbox Game Pass platform. As such, the acquisition of Activision Blizzard, which has approximately 400 million monthly active players in 190 countries, will help establish Xbox Game Pass as the number one subscription gaming platform.

Microsoft’s recent initiatives confirm its vision for the subscription model. So, in June 2022, Microsoft and Samsung announced a partnership that will allow you to access Xbox games on Samsung smart TVs without having to own a console, allowing you to stream video games as smoothly as you would on any TV streaming platform.

As video game netflixization advances, Netflix is ​​spinning out

After years of steady growth, Netflix is ​​starting to lose subscribers. In May 2022, the company reported a loss of subscribers for the first time in ten years, indicating that the number will continue to decline. Similar trends are being seen with other video streaming companies. The reasons for this evolution are many – such as the loss of Russian subscribers, password sharing, and increased competition or “streaming wars” – and naturally, other sectors that have adopted the subscription model also have some concerns.

However, streaming wars in the video game sector seem less likely because relationships between different players are much more complex than in video streaming. In fact, video game players tend to collaborate to increase the number of games available in their catalog and thus attract more players. For example, Microsoft and EA have teamed up to combine their offerings on the Xbox Game Pass Ultimate platform. In the same context, PlayStation recently added Ubisoft+ to its catalog. Therefore, the streaming war is off the agenda, and through streaming, we can hope to see promising new partnerships synonymous with exhilarating gaming experiences.

About Neva Bozovic:

Neva Bozovic has been Associate Professor of Strategy at KEDGE Business School since September 2019. She completed her doctoral dissertation at the Grenoble Ecole de Management and at the IREGE laboratory of the Savoie-Mont-Blanc University in France. His research focuses on how organizations cope with the emergence of new technologies, especially the commercialization of new technologies and business models. She is also interested in strategic experiments and their impact on the internal and external processes of organizations.

About KEDGE Business School:

KEDGE Business School is a reference French management school, represented on 4 campuses in France (Paris, Bordeaux, Marseille and Toulon), 4 abroad (2 in China in Shanghai and Suzhou and 2 in Africa in Dakar and Abidjan) and 3 associated campuses ( Avignon, Bastia and Bayonne). The KEDGE community consists of 14,800 students (including 23% international students), 207 full-time professors (including 43% international students), 300 international academic partners, and 75,000 alumni worldwide. KEDGE offers 38 management and design training courses for students and professionals, as well as individual training courses for companies nationally and internationally. Since 2020, KEDGE has created its own learning center for students. KEDGE Business School, member of the Conférence des Grandes Ecoles, accredited by AACSB, EQUIS and AMBA, marked by EESPIG and certified by Qualiopi, is an institution recognized by the French state with targeted programs. KEDGE is ranked by the Financial Times as the 40th best business school in Europe and 45th in the world for its Executive MBA program.

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