Last week I talked about how GamePass has crossed a threshold for me, where the price they’re asking is no longer justified by the value the service offers; I’ll just buy the games I want directly instead. That’s a personal choice I make regardless, based on where I want to put my dollars, but I do question if the idea of “voting with our wallets” has an impact anymore.
There were a number of economic reports this year that suggested around 10% of the US population (those making over $250k a year) are now responsible for almost half of consumer personal spending (unverified). If that’s the sort of divide we’re approaching, I wouldn’t be surprised if companies have realized it’s easier to just court that consumer instead, the one with a ton of disposable income that isn’t as picky about value. So when Microsoft makes a decision to ratchet up the price of GamePass, do you think they’ve simply done the math and determined that the amount of extra income they generate from the people that stay on, outweighs lost income from anyone who might bail on the service?
After all, why try to make a better product if you have enough people to just pay you more for the same old product, right?
I think this is called “Chasing the whales” and I know a lot of apps live off this. Haven’t seen it on something as big as Gamepass, but it’s probably a bad sign if it works out for them, as I bet nearly every other company out there would happily follow suit.
100% on the money.
I thought whale chasing is only possible if someone can purchase multiple items/DLC. Gamepass is quasi limited to one purchase per costumer, isn’t it?
Do the whales even bother with Gamepass though?
I don’t think its really the whales thing. Its signing up and having the financial security to the point where you don’t even pay attention to that monthly withdrawal or card charge. Like you have certain streaming services, your Gamepass, and a few other recurring charges that you’ve seen so many times it just blends into the background. You don’t even think about the last time you actually used the service or how much less expensive it was 5 years ago when you first signed up.
At least that’s how I imagine having that kind of income must be like.
It’s nothing to do with income and everything to do with corporations COUNTING on people forgetting to cancel stuff they’ve been suckered in to paying for.
It’s why they put up so many hoops ( burying the “cancel subscription” button, asking for feedback, throwing up surveys ) to cancelling. They deliberately make the process of cancelling a subscription more obtrusive so most people who don’t have the energy just put it off until tomorrow and then oops, another month went by another charge. Oh well, I’ll just do it tomorrow . . .
Honestly, it kindof is like that. Although I am not from the US (Netherlands), I have the same kind of economic position. I make a lot more than I need in life and it sort of just… piles up. At 37 I am paying off my mortgage at such a speed that I will be done before 40. There really isn’t anything that can knock me off balance financially, my car could die tomorrow and I would most likely shrug it of and buy a new one. So for me, it doesn’t matter if gamepass is 10, 30 or a… Read more »
Meanwhile, in the U.S. I live in constant fear that if I have a medical emergency, the ambulance ride to the emergency room, much less the hospital visit itself, could throw me into years of financial instability.
Except in the US, as long as you are on a payment plan for even $1/mo, medical debt cannot drive you to bankruptcy. And they cannot seize your home or dock your pay.
But I know it’s better to make the typical talking point about how terrible it is in the US.
Hu? What kind of payment plan is that? I’m genuinely curious. Having a medical emergency and being ruined financially is kind of my nightmare…
with you on that. im not even going to bother being worried about medical care. long as my dog is taken care of, whatever happens happens.
It’s not a bad sign if it works out for them, it’s a bad sign that they’re trying in the first place because those whales they like to chase on mobile apps . . . They’re tapped. They’re looking for whales elsewhere and the problem with that is: there’s a finite population of dehumanized marine based mammal money spending metaphors. The bubble IS going to burst, they’re just desperately trying to keep it from doing so by chasing every dollar they can from people who will pay it ( regardless of whether or not they can actually afford it because… Read more »
yeah but… I don’t think a loaded whale will buy 100 000 subscriptions simply because he can. Subs have a fixed pricetag and those with above 250k salary a year and above can not make up for the loss of all other people. THAT being said. If less than 50% of current users cancel their account. That 50% price hike will make the decission profitable. Do you believe that over half of current subscriber pool will cancel? People who never bought a single game on their console firmly believing they don’t have to because GamePass will always be there? Now… Read more »
It wouldn’t take 50% cancelling to make it unprofitable, percentages add up differently. You’d only need to lose over 33% of users. Easy explanation: You’re charging 100 per user. You have 1000 users, making 100,000. You raise the price to 150 per user, but lose 400 users. You have 600 users, making 90,000. You raise the price to 150 per user, but lose 333 users. You have 667 users, making 100,050. Only when you drop to 666 users does your total income drop to 99,900. Because of the way people are with this kind of thing, it’s really hard to… Read more »
It occurs to me that this late-game increased pressure / reduced cushion could motivate a company to use bait and switch tactics, and also make it more difficult to cancel. They could offer the first 3 months at the original (good value) rate, thereafter the new (bad value) rate. They make it difficult to cancel, and see a subsequent increase in customer retention despite the fact that the customers actually don’t want the service.
Say hello to revolut burner cards. Good luck making it harder to cancel the subscription when the card you are trying to charge no longer exists
there are laws saying canceling has to be as easy as signing up and if it isnt the company is liable for some serious penalties.
The counterpoint is once you’ve begun courting the wealthiest 40% or so, the likelihood they can afford the lawyer to fight back begins to increase logarithmically.
This, but you also need to take into account those people who drop the service (because it costs more) but start buying the games it provided. When the price goes from $100 to $150… if I drop out, but I spend $120 on games that I used to get from the $100 service… who comes out ahead? I’m making the right decision: What I’m buying isn’t worth $150, so I pay $120, saving money… but what I’m buying is $20 more than what I used to buy. It’s pricing slight of hand, and I guarantee they’ve math’d it out to… Read more »
this makes me want to see the info on the cuts on the service vs game purchase. like what part of that 120 goes to microsoft and would it be greater or lesser than the share from gamepass.
I’d also point out that maximizing profit is mandatory both to remain competitive and to meet legal “fiduciary responsibilities” to the shareholders, which also makes long-term planning much less attractive than burning the house down to secure even the tiniest increase in the short term. The investors have little reason to care. They’re going to bolt to whatever investment promises the highest likelihood of the highest possible return at any given moment and whatever happens to the company after they’ve jumped ship doesn’t concern them in the least. In fact, it would actually be better for the biggest investors (the… Read more »
Your math is a bit off there. It’s a 50% price hike yes. But it goes from 20 to 30. So they would be expecting to lose less than 33% of their subscribers.
he was using those numbers as an example to make it easier to understand the basic math
It’s not about paying for more than 1 subscription, it’s about gently ratcheting up and normalizing the price of something that USED to be a good value deal. It’s guaranteed income for corporations because they’re counting on peoples’ procrastination and forgetfulness to normalize that 30$ charge a month.
Most subscription services make their money because people who don’t use them any more just forget to cancel.
Aint it a nice thing that money can buy happyness in gaming ? Pay2Win is such a nice concept for the whales (that win with their pockets) and companies (that take that money) – and everyone else, the free players and the low spenders are just “bots” for those whales to hunt for entertainment.
What a nice dystopia the gaming industry created … *blegh*
Well I’m about to make that dystopia worse: most “whales” aren’t people who can “afford” it. They’re people who have addiction issues or other neurodivergences that make them easier prey to manipulative monetary practices.
The “whales” that the industry likes to dehumanize so much, are people who are living paycheque to paycheque and doing triage with their monthly expenses. Corpos count on this kind of psychological state to normalize subscriptions and multiple small transactions that don’t seem like a big deal individually but add up rapidly over time.
I swear I don’t get the joke on the last speech ballon. I swear it!
Yepp, the whales in mobile gaming,. like in less than 1% of players spending so much that the other 99% can play it for free, or just some occasional spent.
I play as my casual timespent match3 mobile game for 5 years, and never spent a dollar (forint, actually). I try, tried other games, and when I hit a visible paywall in the game progress, delete and never look back.
not only in mobile gaming tbh
There are three types of people as far as the gaming industry is concerned. Minnows, Dolphins and Whales. Minnows are people that never pay a cent for a game ( you ). Dolphins are people who drop the occasional buck on a free to play game but don’t spend that much. Dolphins are nice but what they really want are the Whales. Whales are the customers that spend an inordinate amount of money on something because they have gambling issues or addiction issues or neurodivergence issues that make them more susceptible to manipulative monetary tactics. Whales aren’t the 1% footing… Read more »
Every product has a Laffer Curve.
They can keep incrementally increasing the price and as long as total revenue increases despite lost revenue due to lost customers, they will keep doing it.
Eventually, increasing the price WILL result in a net revenue loss, but until they hit that Price Point they will keep increasing their price.
The crazy part is where I can make more money buy charging less people more due to costs. If I can generate 100 dollars off 5 people ($20/person) my costs are lower than if I make 100 dollars off 20 people ($5/person). Say my costs are 25 cents a person to cover server usage, downloads, licensing etc in the first scenario my costs would be $1.25 vs in the second it would be $5. So a net of $98.75 vs $95 while still only generating the same $100 in gross.
That bumps it slightly upwards, but there’s a counterforce of bandwidth having a bonus for bulk too.
I do not think that checks out in the current example. It is more likely that other people have a higher point of nope. If less than 33 % of the customers go away, they will break even. So I doubt there will be a mass exodus from the GamePass, because lots of people are just lazy.
Also GamePass is, as far as I know, not pay-to-win.
Unfortunately it checks out on multiple levels. GamePass is pay-to-win and includes pay-to-win games right next to the AAA titles. GamePass’s top tier ULTimecia subscription fee in October is 150% of its September top tier subscription fee. Top tier comes with free coins / waifus / etc for people who upgrade from the base GamePass sub.
While this is true for some things, I don’t think the math works out in this specific case. When you see league of legends put out like a $500 skin, that is one of those situations.
Unfortunately, things like GamePass remain highly valuable for families with kids, as they often flick between things, aren’t necessarily all keen on the same games and often can’t play the things you might. At that point, Microsoft have parents by the short and curlies!
To be able to have a hobby will be the next rich expression
It’s that way with sports now. I haven’t been to a live professional game in decades. If you actually try playing the game? Bring your checkbook.
“Voting with our wallets” has never had a wider impact, because we’re almost always being outvoted by people who don’t agree or aren’t even aware of our gripe. One has to get comfortable with accepting that not buying a product or service is about their own personal convictions and not about making a big statement or change, because there will always be more people who are happy to hand over their money. If you’re “voting with your wallet” then so is everyone else, and if you’re voting for “this is too greedy” then you’re probably going to lose that election.… Read more »
Totally seconding this. People easily forget that in any voting system they can simply get outvoted.
Even if those other votes are made in complete blissful ignorance of any issues, it’s still a vote. It doesn’t matter how vocal your minority is, what matters is how much weight you can effectively put on the scales.
For most of us, that’s very little. Better to concern ourselves with our personal feelings on the matter and take comfort, or even pride, in doing the right thing for yourself.
Whales are usually kids with parents’ credit cards. But even with adults with addictive personalities, the strategy does not work for long. Gachas have the luxury to change often to keep whales occupied, a singular service like Disney park – not so much. Highly doubt gamepass can pull it off, too, and survive on whales only. And while corporations are trying to suck whales dry and watch their revenue go down, new services will appear for regular players.
With a 50% increase, they only need half of the subscribers to stay on for it at worst to be no loss. If anything, even losing half the subs will still get them a profit as they’d be able to use bandwidth to accommodate them….
$20 * N users > $30 * N/2 users.
There’s loss if more than 1/3 leave.
Here (UK) it’s going from £14.99 to £22.99. That’s slightly over a 50% increase…..
Fact is, they won’t care if people leave, they’ll have similar income and less expenditure.
The sad reality is less will leave that you think, many will either suck it up, move to monthly billing or downgrade their subscription as I believe the others didn’t change price?
The Xbox infrastructure looks shaky from my outside perspective of it anyways (I left after 360). Game store by me had a window full of second hand Series Ss selling for £50 each (just needing a controller) this weekend, that not a bigger worry???
They’ve definitely done that math. And, from a corporate perspective, it makes sense. It’s another reason wealth inequality is a problem. When a company only has to satisfy a small segment of consumers the vast majority lose any bargaining power.
Who cares if 70% of a customer base is unhappy when they’re a drop in the bucket compared to the remaining 30% (or 90/10 etc)?
Big thing is, how many whales actually invest in Gamepass?
Unfortunately, that’s how it works in most companies. Why fish small fry when you can hunt whales? Especially when you give said whales perks for always spending? Some online game companies do this, so it’s no surprise Microsoft is pulling a move like this. End of the day, even if we small fries don’t renew, they’ll still make plenty of profit off the big spenders that it won’t even be a dip.
Welcome to the new era of gaming…kinda…
As someone who works at a company that was bought by a capital investment company, this seems pretty accurate. They’ve done countless price increases with the understanding that volume will decrease, income will stay the same, and they now get the same amount of money with less overhead.
300k @ $20 equals 200k @ $30. They can lose a third of their Ultimate subscribers and still break even. Plus, people like me that are going to downgrade will still be giving them some money (for now). Seems many industries are doing this. Can’t see how this could go wrong.
This is something I am seeing in one outdoor sport I participate in as well, Skiing. It always was a sport for people who had some disposable cash, but now it is quickly changing to a sport for the rich or for people who can game the system. In the past you paid a set fee (reasonable price) for a day pass to a mountain or bought a season pass to your local mountain if you were a serious skier, now the day price changes per day based on the time, date, and number of tickets already sold and can… Read more »
“Voting with your wallet” never worked because that puts more value on people with bigger wallets. I’m someone that can buy 3-4 games per year. Assuming full price and maybe some random splurge, let’s say it means I have a $300 budget per year to spend exclusively on gaming. There are people out there spending more than that in ONE DAY in a random mobile gacha game. They do not care about my $300. If they can keep the people spending a grand every week on a new virtual piece of gear for their avatar, that is the wallet talking.… Read more »
Someone like Target or small business reliant on tourism is vulnerable to boycotts
But a business model of “pay to win” is far easier to focus on those with the most money and boycotts only work if that demographic gets involved
I mean, pragmatically, it kind of makes sense. Say you raise your prices by 50% and lose 33% of your customer base – well, that’s also 33% less service you have to provide, while generating the same income from subscription, and “better” since servers etc aren’t as strained. And with the remaining subscribers being the ones with more disposable income, they’ll be more likely to make MTX purchases for the AAA titles you insist on having on your subscription service, right? On top of all that many of the people who unsubscribe are still likely to purchase games they’re interested… Read more »
Voting with your wallet does work for subscription models. Plenty of examples of companies backtracking on a decision in response to mass subscription cancellations, such as the Hasbro’s OGL fiasco and the recent political controversy over the Jimmy Kimmel Show. For reasons illustrated in this comic, it does not work with “recurrent user spending” models, like gambling lootboxes and microtransactions. The difference is that subscriptions rely mostly on a high volume of static spending. Microtransactions rely on a low volume of high dynamic spending. The most disgusting part of this? A vast majority of “whales” (ick, hate that term) are… Read more »
It’s weird. Everything is getting more expensive and the quality is dropping.
I could understand if both increased at the same time… hell even if the quality remained the same, but degrading?!?
better believe they’ve calculated out how many people they expect to lose and those people are considered “expendable to maintain future profitability at the new price point”
For most things I can’t really see that being true. They might incorporate 50 percent of total discretionary spending, but thats actuated by going on expensive trips and pricy cars that buffs that number up. Look at the recent Kimmel controversy as an example. Rich people don’t consume 50% of DisneyPlus revenue. They represent a tiny percentage. Consequently when the masses cancelled DisneyPlus it had a 130 million dollar effect on the company and they revised their stance very quickly. Likewise I dont think Game Pass is being driven by rich spending. Sure you might buy the most expensive pass,… Read more »
The difference there is that people weren’t just dropping Disney+, they were also dropping Hulu, and canceling reservations for Disney theme parks and resorts.
If it had just been Disney+ cancellations, it might have just been a drop in the bucket. But those cancelled family getaways probably hurt Disney way more.
Actually I’d suggest that the difference there is that those cancellations were in response to a social issue. There was no price-hike involved that would directly offset the effect of some of the cancellations, so even if it had been just tv service getting dropped, they represented a total loss of that revenue.
As a member of that 10%, I’m still voting with my wallet. I got the email notice about the increase literally as I made my last 19.99 payment. That’ll be getting canceled this week. I’m also part of the problem in that I consume a limited number of IPs and mostly from studios that have become trash anyway.
I think the hope is that most people won’t notice and will just stay subscribed. This is especially helpful for the people who forget they have a subscription.
You’d be amazed to see the numbers of people that applies to.
Well, iphone is overpriced. How offen do you see android phone in the us? @ My country 90% android.
Absolutely… and tbh, it’s the least dirty trick in their arsenal… but does fit the general pattern I saw as a pricing consultant at my last job. The company I worked for provided software for maintaining inventory/pricing structures for a specific industry – and as part of that package, they’d also offer consulting on how to increase profits without customers noticing. The biggest single trick in our arsenal amounted to slight of hand. Cut prices where consumers are watching, while you rob them elsewhere. The average consumer knows – off the top of their head – what a good price… Read more »
The wealth disparity is getting really rough, where you’re priced out of so much content and goods from companies chasing a smaller number of people willing to pay more. Who will also likely be more sustainable, purchasing lengthier terms and not alternating between subscribing and unsubscribing. But, really, if the gamepass is too good then people won’t buy the games. It’s the Netflix model where people don’t go to threatres or buy the blu-ray because they can just stream it. If the game will be on a pass in <12 months it’s easier to wait. But the games are only… Read more »
You seem to be talking about whales, like with gacha games and other microtransaction-based systems, but I think this is more about people being willing to tolerate higher prices on average. Food is more expensive, housing is more expensive, and it seems totally sane to many folks that games are more expensive too. Life is just more expensive. People have accepted it; it’s normalized, for better or worse (mostly worse).
So I think it’s more that you here are less tolerant of price increases overall than the average consumer.
they don’t care, they can afford to lose subscribers.
what they want is everything on gamepass and all within their ecosystem. they want full control. and when they’ll get it they will start charging for benefits on their platform.
I still think people, including Tim, aren’t really taking the EA acquisition into account when it comes to the price increase. As I said on the last comic, the first thing that EA’s new owners said to Microsoft was “We’re going to be jacking the price to keep EA Play as part of Gamepass as soon as the ink is dry on the agreement.” Having been on both sides of a corporate acquisition and seen how these things work, they probably even told them that months ago before the deal was finalized. This doesn’t absolve Microsoft of all responsibility but… Read more »
Then, they should not cry if we go full yarr.
Not only the loaded people though. I know quite a few people who are on maybe a quarter of that yearly income who still spend big on stupid stuff. Two friends of mine got caught up with some free to play mobile game a while ago. They are both super competitive and at the same time have quite low impulse control, so to beat one another they basically went on a spending frenzy over a weekend and each sunk around €4000 into that game. A game they literally downloaded the day before and didn’t continue to play afterward. Both of… Read more »
In the end it’s all whale hunting and the small spenders don’t play a big role in strategic decisions.
They might regret it in the long run as the amount of people is what spreads knowledge about a product.
But with the avrg. top level manager changing companies within 3 years I doubt they care for the long run
Strictly from a marketing/sales perspective, for any given product or service, >>> as a rule of thumb <<<, 10% of all customers would be willing to pay 10x the regular price, and 1% are willing to pay 100x the price. Not catering to these audiences means to leave a lot of cash on the table, something that the shareholders of any company might see with a critical eye. Insofar as company management is incentivized by stock market performance, one should not be surprised to see those points factored in. The traditional formula is to offer the same product in three… Read more »
And the best part, they have to support a much smaller user base and make the same amount of money! Yay capitalism! This is the same model that Vegas is moving toward. They said they would rather make $1mil off 1 person that $1 off a million people.
It’ll depend on the context. For a subscription it probably does matter, because that’s all about the number of people. Richer people don’t necessarily buy more subscriptions, even if they are less likely to cancel theirs due to price hikes. To answer the question: I’m nearly certain they’ve done the math, or rather, paid one of those Excel-producing high profile consultant companies (the ones that employ the people who make over 250k per year) do it for them. I imagine the process involves calculating how many people they need to retain at various prices and break even points, and then… Read more »
“do you think they’ve simply done the math and determined that the amount of extra income they generate from the people that stay on, outweighs lost income from anyone who might bail on the service?” I mean. Yes. Of course I do. Do you think there’s any possibility that they didn’t? Whether gamepass is being supported by whales who are buying dozens of subscriptions or there’s simply a majority of people who prefer the convenience of paying two fast food combos’ worth of money for entertainment per month on their $500 consoles, they’re a billion dollar company. Every choice they… Read more »
That’s why the invisible hand of the market doesn’t work
Sure it does, it slaps me in the face on a regular basis.
Pareto principle in action. 20% of customers being responsible for 80% of revenues…
This is incredibly depressing.
Cancelled my Game Pass, and instead of giving me the month I paid for and then ending it. My “benefits” expire today. That’s UNACCEPTABLE. Time to purge Microsoft…
its a vicious cycle yes, but one that has an destined end. they can feed on those with high volume for now, but those will get fewer and fewer and more and more of them will join the not anymore crowd. they will look higher and higher, and those who said no will look to those who listen and stay low and valuable. those that stay low and valuable will see the good times for much longer and with greater ease.
I think to some point you are right, and you see that a lot with games that focus on microtransactions. But with subscriptions, a whale isn’t going to get you enough from just the subscription to make it worth catering to them unless they are paying for tons of accounts. The idea of a subscription is to get a bunch of people to put in a relatively small amount Like wow.. 13-16 bucks a month for the content you get makes it an easy thing to buy into.. but you jump that to 20? 30 a month? You would lose… Read more »
Take a look at the whole rent price fixing scandal. The math works out, raising rent increases profits more than heads in beds.
Yeah heard it yesterday on a conversation about modern gaming’s monetitzation system, about how now there are way more expensive packs that less people will buy. There will always be a group of people who are willing to spend 200-300 euro on packs on their favourite game, so devs add more expensive packs since they’ll buy them anyways.