I’ve got this shower thought hunch about why corporations are so into subscription services rather than sales.
If you look at Steam, a 60 dollar game nets Valve around 20 bucks (30%) for every sale. On the other hand a subscription like Xbox Game Pass can only get Microsoft a maximum of 16 bucks per month, not even counting how much they pay to the developers included in the program.
So at least from this shallow reading, subscriptions should be worse than sales.
But on the other hand, there are some advantages which are obvious.
First off, casual users might not even be a potential loss for more expensive games. Besides that, it further alienates consumers from specific products they might want to consume, taking away developer power. And finally lots of people might just forget to cancel it because “it’s so cheap” even when not using it.
But my shower thought was: what if this is favoured because it’s worth much more as a financial asset?
Sales percentages are unpredictable and depend too much on third-party developers. If only flop games come out for a month, Valve will only learn about their lost potential revenue that same month. It’s all a series of events.
On the other hand, subscription numbers are easy to track. If they go down, Microsoft will have at least a month of a heads up. If they go up, they can know beforehand that they’ll have more money in the future. They are much more stable. They’re financial assets.
Does this make sense? Has somebody who actually knows what they’re talking about ever written about this?
Companies like subscriptions because it’s a constant revenue stream, and they can market the subscription as a lower cost of entry.
You see the same thing in the switch from one-time purchase software licenses to SaaS. You used to be able to get, say, Microsoft Office for maybe $120 one time, or maybe it was even included when you bought your computer. Now it’s $100 a year. Adobe did the same over ten years ago.
Having predictable cash flows is great for a company’s longer term planning, and in many cases brings in more revenue than single purchases.