Whether you like it or not, the Netflix for gaming era is here but at what cost?
Up until now, the model for paying game dev to be on a streaming platform has remained a mystery. Xbox boss Phil Spencer has finally given a rare insight into how the business model of Xbox Game Pass works for developers.
In an interview with The Verge, Phil said the subscription service originally pay studios based on the usage of their game, but now deals have been tailored to several different models to accommodate different types of games.
“That sounds unmanaged, but it’s really based on the developer’s
need,” he said. “A smaller to mid-sized developer might be starting a game and say, ‘Hey, we’re willing to put this in Game Pass on our launch day if you guys will give us X dollars now.’ We’ll create a floor for them in terms of the success of their game. They know they’re going to get this return.”
Another example, the exec shared was that in some cases, Microsoft would pay the full production cost of a game’s development, but still allows developers to get more revenue by taking their game to retail. Even for competing platforms, including Playstation, Steam, and Nintendo Switch.
“For them, they’ve protected themselves from any downside risk,” Spencer explained. “The game is going to get made. Then they have all the retail upside, we have the opportunity for day and date. That would be a flat fee payment to a developer.”
He continued: “Others want [agreements] more based on usage and monetization in whether it’s a store monetization that gets created through transactions, or usage. We’re open [to] experimenting with many different partners, because we don’t think we have it figured out.
“When we started, we had a model that was all based on usage. Most of the partners said, ‘Yeah, yeah, we understand that, but we don’t believe it, so just give us the money upfront.”
Spencer adds that one day he hopes there would be a hybrid approach that is based on both usage and upfront payments.
Game pass and other similar streaming services marks a new era and pricing model on how developers can fund and market their game. The exec reiterated that Game Pass has allowed titles to be greenlit where historically that wouldn’t have been the case.
Netflix has been a pioneer in this space, and content-creators have been relatively happy with upfront production cost paid for by the company. The marketing power and exclusivity helps non-traditionally projects have a chance against the reigning Marvel blockbusters in the theaters.
Overall, game devs have been slightly hesitant about this new way to experience games and are cautiously curious on what the bottom line cost and risk is for game devs. Because for every Netflix, there is Spotify and other services that have been taking advantage of content-creators for years. I, for one, found this news to be refreshing, that the XBOX team is experimenting and looking to satisfy multiple outlets and finding at least a middle-ground that makes sense business-wise.
Spencer have routinely been an advocate for the industry to be more collaborative for growth. That we all are essentially want to see everyone succeed to carry forward innovative ideas and welcome competition in a more healthy, productive way.
“I just really despise it. I don’t think we have to see others fail in order for us to achieve the goals. We’re in the entertainment business. The biggest competitor we have is apathy over the products and services [and] games that we build.
“We see that today. Everybody is doing well in the industry right now for the most part with the stay-at-home and the surge. That’s what we should be focused on as an industry. We’ve done it with things like cross-play and other things that we focused on breaking some of those tropes. But there is a core that just really hates the other consumer product. Man, that’s just so off-putting to me. Again, maybe that word is probably too light.
“To me, it’s one of the worst things about our industry.”
