"Call of Duty would have a notable impact on subscriber numbers"

Microsoft's proposed acquisition of Activision Blizzard has the potential to rejuvenate games subscriptions, says a leading industry analyst.

It's been a tough year for the subscriptions business model. Microsoft says that it has around 25 million subscribers to Game Pass, which is ten million fewer than it had forecast for the financial year ending March 2022.

PlayStation has simplified and combined its PlayStation Plus and PlayStation Now offerings, but a drop of engagement over the summer saw its subscribers drop by 4% (roughly two million people).

It remains a viable and lucrative model for certain games, of course. Yet third-party AAA publishers have been reluctant to undermine the premium business model (selling games at $60 - $70), and have largely restricted their activity to older, legacy games. Big new AAA titles, outside of Microsoft's own games, have not been launching in subscription services at launch.

"As we know, the games sector is not like other entertainment markets," begins Piers Harding-Rolls, research director of Ampere Games. "In-game and DLC monetisation dominates the wider sector and is the largest part of the console market, although the monetisation share is much more even than, say, the mobile games market. The ability to deploy hybrid monetisation, for example subscriptions and in-game monetisation or advertising, adds to the commercial viability of services such as Game Pass. I’m not expecting subscriptions to dominate the games sector, but I do believe that adding new releases into these services gradually undermines the commercial robustness of the premium business model for console games."

Harding-Rolls adds, however, that new release premium games are needed to drive the subscription business. It can’t rely on legacy games alone. So Microsoft has been busy acquiring developers, such as Bethesda, to provide these titles.

"Call of Duty is regular and big enough to provide a meaningful bump to the subscription opportunity"

"Premium games will continue to exist of course, especially the biggest titles, but I do think there is an inherent tension between these monetisation models, which is really only strongly evident in the AAA games market, centred on console," he explains.

Microsoft's acquisition of Activision Blizzard is a move that could significantly accelerate the stalling subscriptions business. There are a series of huge titles under the Activision Blizzard banner -- most notably Call of Duty -- that could drive people to these services. In fact, Harding-Rolls says that if Call of Duty ends up in Game Pass (and even PS Plus) it might change how publishers approach funding and releasing games.

"If Call of Duty is added day-and-date to Game Pass, it will have a notable impact on subscriber numbers," he says. "Additionally, the inclusion of Warzone with added Game Pass perks will help with engagement and retention. Call of Duty is regular and big enough to provide a meaningful bump to the subscription opportunity, which in turn may result in publishers reviewing their AAA budgets, product, and monetisation strategies."

Potential, however, is the word. There are uncertainties around the impact of subscriptions. Outside of the most hardcore gamers, do people play enough games to justify a subscription? Considering the popularity of free-to-play and titles like Fortnite, what is the true market potential for these services? And although Call of Duty will have a positive impact on subscriptions, is it enough to change publisher attitudes? These are all unknowns.

"Activision Blizzard has been inactive in terms of bringing its games to content services so far, so the extent of positive impact is not really known," Harding-Rolls concludes. "It is difficult to say whether this would amount to a tipping point in publisher attitudes towards subscription services. Commercially, there are still lots of question marks in terms of balancing the books for many publishers and the service catalogues are small compared to the broader platform game collections."