The video game business is finally adopting the Netflix model

In most ways, the video game business exists on the bleeding edge of technology.

Detroit (game)Quantic DreamIt’s cutting-edge technology that powers visuals like those in upcoming PlayStation 4 game ‘Detroit: Become Human.’

The processors powering modern games are the most powerful processors available. The display technology for games is the screen technology powering tomorrow’s phones and TVs. The list goes on.

In one major respect, though, the video game business is behind that of other mediums: subscription services.

The Netflixes and Hulu Pluses of the world have become such big hits with customers not only because of their original and licensed content libraries, but because of their business model. Paying a flat fee monthly for a massive library of available content is quite appealing for consumers, it turns out.

Netflix chartBusiness Insider/Jeff DunnAs of January 2017, Netflix had just short of 100 million paying users.

In 2017, the game console makers are finally realising how important subscription services are.

In the past few months, both Microsoft and Nintendo introduced subscription services that resemble Netflix in direct ways. Microsoft’s is known as the “Xbox Game Pass”; Nintendo’s is (tentatively) called the “Classic Games Selection.” Both offer access to a library of games for a fixed monthly (or annual) subscription price.

Microsoft’s Xbox Game Pass

Microsoft is offering access to an ever-expanding library of Xbox 360 and Xbox One games through Game Pass.

Pay $US10 per month month, and immediately gain the ability to download over 100 games. Unlike Netflix, you’re not streaming games — you outright download them. As long as you remain subscribed, you retain access to those games.

Xbox Game PassMicrosoftSome of the over 100 games offered through Xbox Game Pass.

The library includes a healthy selection of games that Microsoft published for the two game consoles, as well as a smattering of third-party games. “Halo 5: Guardians” and the “Gears of War” series are there, for instance, as well as third-party classics like “Spelunky” and the “BioShock” series.

Like the ever-changing Netflix library, the Game Pass library is expected to evolve over time — stuff from Microsoft will likely remain permanently, while third-party stuff could swap out over time (much like Netflix originals never leaving the service).

It’s a major change for Microsoft — and the games business in general — to move to the subscription model.

Video game development is wildly expensive, which makes it unlikely that we’ll see brand-new games show up on Xbox Game Pass (at least for now). The majority of the library, like early Netflix days, is made up of recent classics. It’s a killer deal if you’re not the type of person who needs to play the latest and greatest games.

Nintendo’s “Classic Games Selection”

Nintendo’s taking a different approach with its subscription service.

For $US20 per year, you’ll gain access to what Nintendo is tentatively calling its “Classic Games Selection.” Thus far, that selection only includes three games: “Super Mario Bros. 3,” “Dr. Mario,” and “Balloon Fight.” You’ll download each game (rather than stream it), and you own them as long as you remain a subscriber. It’s nearly identical to the Xbox Game Pass service, but the difference here is in the library. Nintendo is offering its oldest, most “classic” games. It’s a nostalgia play, where Microsoft’s is a sheer numbers play.

Super marioNintendoExpect the original ‘Super Mario Bros.’ to make an appearance on Nintendo’s service.

While the first three games announced are NES classics, Nintendo’s going to need a much larger selection of games before it can call its service worthwhile. For years, Nintendo fans have dreamed of a subscription service that offered access to Nintendo’s vast classic games library. This is the company that created the NES, the Super NES, the Nintendo 64, the GameCube, and the Game Boy. There are dozens of classic games to choose from in Nintendo’s history.

With the “Classic Games Selection” service, Nintendo is taking a step in that direction. Whether the company will go all-in is another question. Nintendo is notorious for moving carefully. The Japanese game-maker’s first smartphone game, for instance, was only released in the last few years.

The determining factor in both Nintendo and Microsoft’s cases will be how consumers respond. Will these services cannibalise the digital storefront sales of a la carte games? Will the content libraries attract enough people to sustain the subscription business model? Only time will tell, but the 100 million-ish Netflix subscribers are assuredly bolstering Microsoft and Nintendo’s hopes.

Get the latest Microsoft stock price here.

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