February 15, 2021 | Authored by: Vindicia Team Blogs
Growth hacks that subscription video-game services need
The subscription economy is thriving – and now video game companies are getting in on the action. Subscriptions and video games work seamlessly together, offering OTT access and the pay-as-you-play standard that allows gamers to broaden their variety of games without committing to fully purchasing a game.
Gaming monetization has constantly evolved, from cartridges to cloud to subscription sales. Yet while the market is most certainly there, success won’t come without strategic operations that address the challenges these subscription services may face in customer acquisition, billing and retention.
Let's take a closer look at the trends in the gaming space, and what tools these businesses depend on to drive subscription growth.
Video game subscriptions take many different forms
Subscription gaming is a massive opportunity. A 2020 study from consulting firm Simon-Kucher & Partners found 35% of gamers had at least one subscription. Of that group owning at least one subscription, 80% were either interested in another subscription or were already paying for multiple. A recent survey conducted by Vanson Bourne found that 49% of consumers surveyed in the US, played more games during 2020. Juniper Research estimates that global subscription video game revenue will grow to $11 billion by 2025.
The term "subscription gaming" is an umbrella under which several different video game business models exist. Those include:
- A service subscription for access to multiple games via a cloud
- A membership subscription for single or multiple game access, exclusive content, and other perks (both publisher and console)
- A subscription to a gaming-related service for social reasons
To date, there are several players in this space, ranging from video game royalty to startup disruptors:
- The old school: Sony PlayStation Now, Microsoft Xbox Game Pass, Nintendo Switch Online
- New tech giants: Google Stadia, Apple Arcade
- Publishers: EA Play, Ubisoft+
- Console-less library of games: Blacknut Cloud Gaming, NVIDIA GeForce NOW
- Single-game titles: Wargaming, World of Warcraft, Elder Scrolls Online
- "More than just a game:" Fortnite double as social/events spaces whilst Twitch operates as a platform for community building and viewing
- Wider games/gamer ecosystems and communities: Twitch Prime, Discord Nitro
Overcoming hurdles in the market
While many opportunities exist, gaming services will need to overcome a diverse set of challenges including, but not limited to:
Competition and service value
The market is quickly becoming crowded. Old names and new disruptors are launching, or considering launching services, at a rapid pace. This comes at a time when gaming has been an economic bright spot amid the greater COVID-19 pandemic. Nintendo Switch Online, for example, is a big driver for the game maker's 2020 success. In fact, over the next five years, the global cloud gaming subscription market is expected to grow at a CAGR of 63%, with global revenues growing to $9.5 billion.
If your business is in this fight for market share, or about to enter, a focus on bundling may pay off. As more services populate the picture, customers will be increasingly enticed by other offerings that give them something different or align more with their values.
Bundling can help you build a highly competitive offer by increasing the value of your service. This can either be done through bundling your own products and services, joining up with a subscription aggregator, or striking a strategic partnership.
In partnership with Vindicia, Omdia recently published an analyst report entitled “Subscriptions provide a wealth of opportunities in a brave new gaming world.” According to Omdia, "Game developers and publishers of all sizes should be confident in exploring routes to offering subscriptions, as they can be used to provide a better value-for-money proposition to players, keeping them better engaged and even driving additional in-game purchases."
Customer acquisition and retention
Market saturation impacts subscription gaming companies by forcing them to acquire customers rapidly, and then just as quickly retain them to build loyalty.
Businesses face dueling priorities, but they can help manage these objectives through a laser focus on engagement. Customers are spending more time than ever gaming due to stay-at-home directives and a glut of free time: The Simon-Kucher study found that 71% of gamers reported playing longer when on a subscription.
But time spent playing does not automatically equal engagement. Players may be at risk of churn, and you'll need to track their engagement through various metrics in order to personalize their experience, fuel recommendations, up/cross-sell and eliminate friction.
With these insights, you can better market your game to potential customers, while also driving strategic retention campaigns that nurture long-term relationships based on customer preferences, behaviors, and motivations.
Paying for games and experiences
Passive churn can often fly under the radar. Failed transactions get retried a couple of times and then forgotten, but such failed payments can account for up to 30% of all churn. And every time it occurs, that means one customer who wanted to stay is lost.
Subscription billing and recurring revenue are an entirely different game than the single transaction of buying a game copy. Businesses in this space will need to orient their strategy around capturing this lost revenue by adhering to best practices and at the very least using account updaters and retry logic.
Gaming businesses also face the added challenge of dealing with rights and entitlements to license AAA titles (e.g., Rocket League, FIFA) and other games with a niche audience to build robust content libraries.
Vindicia helps gaming subscriptions excel
So, what's the solution to hurdling these challenges and driving growth and success? It's at least two-fold:
- A comprehensive subscription management platform for all the tools needed to secure recurring revenue, retain customers, personalize experiences, and much more
- Bundles that increase the value of your service and which can also improve retention
Vindicia can offer gaming services the best of both these worlds with Vindicia Subscribe, Retain, and MarketONE. Our product suite provides:
- An ecosystem of knowledge and partners for gaming subscriptions to leverage with potential bundles
- The ability to manage in-app purchases end-to-end, including rights and entitlements, while also being able to merge revenues with existing platforms for robust revenue recognition
- Subscription intelligence tools to monitor engagement metrics and generate insights to guide strategic decision-making in customer acquisition and retention.
Want to learn more about how Vindicia and how Subscribe, Retain and MarketONE can benefit your gaming business? Contact us today.
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