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Game subscriptions draw in millions, but will all developers get on board?

Subscriptions will not dominate video games in the same way as OTT video or music over the next five years, but subscriptions will nevertheless play an important role in user retention and engagement

Having witnessed the rapid domination of subscription services in music and OTT video, leading technology and gaming companies continue to make significant steps toward this business model. Subscription services giving users access to a library of games is not a new concept; for example, EA Access and Sony PlayStation Now services have existed since 2014. The uptake of these types of services have, however, been slow. Key reasons for this have been limited availability of Triple-A game titles and low consumer awareness. According to Omdia’s end-user consumer research, only about one in five consumers in developed markets have some form of game subscription service. 

Last year saw the launches of Apple Arcade, Google Stadia, and Google Play Pass, while Microsoft’s xCloud will be integrated into its Xbox Game Pass subscription service this year. With their immense network infrastructure, compelling consumer offerings, and vast marketing budgets, the tech giants are accelerating this shift to subscriptions. Ubisoft has also recently launched its own Uplay Plus service, while EA Access will become available to PC gamers this summer via Steam.

By 2024, game subscriptions will represent only 13% of total video games revenue, but subscriptions will nevertheless play an important role in gamer retention. The reality is that PC and console single-copy game sales will remain lucrative for games makers, dissuading them from including their latest flagship titles in subscriptions, even on proprietary services. Attention will therefore turn to back catalogs, with games publishers including older titles in their own subscription services or licensing games to third parties. This will not only serve as a way of monetizing their older content but will also drive engagement and interest in enduring game franchises.

There are early signs of companies reaping benefits from this approach. Microsoft recently revealed that, on average, Xbox Game Pass subscribers play 40% more games and 30% more genres than they did before becoming members, including games outside the subscription. Based on our conversations with several game publishers, others are also seeing similar positive results. Meanwhile, the number of subscribers is ramping up. EA reported 5 million subscribers at the end of 2019, up from 3.5 million at the start of the year. PS Now also saw a dramatic increase of subscribers—from 700,000 in April 2019 to 2.2 million by mid-2020. In April this year, Microsoft announced that Xbox Game Pass had passed 10 million members.

It’s undeniable that gamers are warming to the idea of game subscription services. However, small and medium-sized game developers remain largely unconvinced—according to the GDC 2020 State of the Industry Survey, 74% of developers believe that subscription services could devalue individual games. The long-term success of these services is heavily reliant on wide developer support, so platform holders must better communicate how subscriptions can complement their existing monetization methods in order to bring those developers round to this new model.

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