In June 2017, Microsoft launched Game Pass for Xbox, a subscription service offering access to hundreds of games for a monthly fee. This was a major shift in their business model. Dubbed the Netflix of gaming, it moved Xbox away from only product sales, such as consoles and games, and toward a platform service that targets product usage. Today, subscription services have become central to how Xbox and PlayStation compete for players. Xbox Game Pass now generates nearly $5 billion in annual revenue. But what does the shift from selling games to engaging players mean for platforms and developers? And does such a subscription model not cannibalise sales, as it did in music and film? In two recent studies, we examined these questions.
What do players want to play?
As subscription services become the dominant business model in video games, platform success increasingly depends on whether consumers actually use the software and the platform. That raises a critical question: what drives engagement success?
A natural instinct is to look at sales data, the industry's go-to metric for decades. But sales data are fundamentally uninformative here: they reveal what consumers decided to buy, not what they decided to play. And those may be very different decisions. Our research remedies this. We tracked over 14,000 Xbox users between 2020 and 2022, comparing daily usage and monthly sales for over 2,700 game titles.
The difference is substantial: of the top ten most played games, only two appeared within the top ten most sold. Likewise, most top-selling titles display disproportionally little engagement. The drivers of engagement, it turns out, are fundamentally different from the drivers of sales. Titles with high review scores – which we call superstar titles –, exclusive games, and new intellectual properties (IP), which are traditionally the pillars of software and console success, decline sharply in relative importance.
For instance, superstar games sell about ten times more than non-superstars; in engagement, that gap almost entirely disappears. What rises instead? Non-superstars, non-exclusives, and franchises, especially when available on a subscription service like Game Pass, which emerged as the single most powerful driver of engagement. Game Pass participation matters more for a title’s engagement than its review scores, IP, or exclusivity.
Theories of consumer behaviour explain this. Buying a game is a one-time, high-stakes commitment where consumers rely on quality signals before spending $60 or more. Choosing what to play on a given evening is fundamentally different: faster, lower-stakes, and repeated daily in a far more crowded market. In that context, consumers seek variety over quality, and regress to what is familiar. Subscription services cater to both impulses.
‘Sales data reveal what consumers decided to buy, not what they decided to play’
Do subscriptions cannibalise sales?
If subscriptions are this powerful at driving engagement, the natural follow-up question is whether they are commercially sustainable. In a follow-up study, we examined the commercial consequences of Xbox Game Pass (2017) and PlayStation Plus (2022).
Four findings stand out. First, both services generated enormous subscription revenue, estimated at billions since launch.
Second, both Xbox and PlayStation saw large increases rather than decreases in hardware revenues (65.9% and 121.5%, respectively) compared to what they would have generated without subscriptions: consumers who know they have access to a large library of games have a stronger reason to buy a console.
Third, the impact on game sales was limited; unlike in music and film, gaming subscriptions did not significantly cannibalise software revenue. This is because gaming subscriptions still integrate a storefront where discovered content, as well as expansions, sequels, or other entries in the franchise or genre, can be bought for permanent ownership.
Finally, subscriptions were associated with a healthier supply of new games, with more (in the case of PlayStation) and higher quality (in the case of Xbox) titles entering the market.
Taken together, these studies show that the subscription model paid off enormously. Not just for Microsoft and Sony, who gained billions in subscription revenue without cannibalising their existing sales, but for developers too. For them, success no longer requires a $200 million bet on the next superstar title or exclusivity deal. Non-superstars and multihomed titles generate substantial engagement too, especially when released in a subscription catalogue. And unlike in music and film, this does not necessarily hurt sales.
About Michiel Van Crombrugge
Michiel Van Crombrugge is an associate professor at Erasmus School of Economics, Erasmus University Rotterdam. His research focuses on strategic marketing issues surrounding new business models in multichannel retail and platform markets.
About Stefan Stremersch
Professor Stefan Stremersch holds a chair in Market Insights and Innovation at Erasmus School of Economics. His research explores the frontiers of innovation, the commercialisation of technology and science, healthcare and pharmaceutical marketing, and international marketing.
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