The North America and Europe games content and cloud gaming PC subscription market was worth $3.7 billion in 2021, growing 57% from $2.3 billion in 2020, according to Ampere Analysis’ latest data. The segment is dominated by download-only offerings or services that employ a mixed model of distribution across both download and streaming. Streaming-only services make up just 5% of total spending, although that share is expected to steadily increase over the next five years, and will be 10% by 2027.
The market’s biggest service, Microsoft’s Xbox Game Pass Ultimate, adopted streaming distribution towards the end of 2020 following extensive trials of Project xCloud, but in 2022, Xbox Game Pass Ultimate remains primarily a games download subscription platform. Streaming functionality is geographically limited, and for most subscribers, streaming is a value-add to the core offering of the service, which is focused on access to a quality games catalogue to download and play on consoles and gaming PC. Indeed, part of the strength of Microsoft’s service is its flexible approach to distribution, recently reinforced by its decision to bring streaming to Xbox One and Xbox Series consoles, enabling new ways to access content more rapidly in support of its core download functionality. Sony has already pioneered this approach through its own service, PlayStation Now.
Download distribution dominance is clearly illustrated by Ampere’s consumer research which asks Xbox Game Pass Ultimate users how they access their games. “Most usage is download-focused. As such, bucketing hybrid services such as Xbox Game Pass Ultimate and PlayStation Now into a cloud gaming market sizing is misleading and over-estimates the impact of this distribution technology in the near-term,” said Piers Harding-Rolls, Research Director at Ampere Analysis and the author of the report.
However, streaming distribution will gradually become more important to the games content subscription market over the next five years, Ampere Analysis assures. While console users represent the core of Microsoft's service, for example, its future growth will increasingly rely on converting non-console users through its streaming functionality. As such, Ampere expects Microsoft to bring Game Pass to additional mobile-first markets in the near-term, possibly with a mobile-only lower priced subscription. These new adopters will gradually shift the overall usage of the service more towards streaming.
● GAME PASS LEADS THE WAY AND SONY’S EXPECTED RESPONSE
Xbox Game Pass (all versions) had 60% share of the total Western market in 2021. Microsoft’s dominance of the games content subscription opportunity is driven to a large extent by its catalogue strategy and its inclusion of all new first-party releases and increasing amounts of third-party “day one” releases. According to Ampere, the release schedule of Xbox Game Studios coupled with increasing amounts of new third-party releases will drive growth of Game Pass in 2022. “Eventually, we'll get one or more big third-party franchise releases going straight into Game Pass; we could see that happen this year,” Harding-Rolls commented.
On the other hand, Sony’s competing service, PlayStation Now, has failed to have the impact of Xbox Game Pass. Recent rumours of a re-focusing of its console subscription services make sense in the context of Microsoft's success. Ampere expects PlayStation's subscription business to be overhauled in 2022 to position it more strongly for the future. It is less likely that Sony’s new first-party games releases will be added to PS Plus/PS Now anytime soon, so in this respect a rebooted service will still differ from Xbox Game Pass. However, new release third-party titles are on the table and the window for adding first-party games may be shortened.