The rise of the subscription model in the video game console industry: Unveiling the commercial consequences for platform owners and video game sellers

Prior research in the video game console industry empirically examined the interdependence of hardware (i.e., console) sales, software (i.e., video game) sales and software supply. Recently, we have witnessed the rise of the subscription model (such as Microsoft's Xbox Game Pass and Sony's PlayStation Plus) as a new business model among platform owners. The impact of this new business model on platform owner revenues, video game seller revenues, and video game supply are unknown to date. Does this new model fuel growth for all sides of the market or does it come at the expense of console and/or video game sales revenue? We study the past launches of Microsoft's Xbox Game Pass and Sony's PlayStation Plus on which now the dust has settled enough to examine the commercial consequences thereof. Our research provides first evidence that the introduction of the respective subscription models in proprietary video game console markets: (1) enhanced console revenue, (2) had limited impact on video game revenue (contrary to the cannibalizing effects observed in the music, movie and TV industry), and (3) created a healthier video game supply, either by increasing the quantity of video game introductions (i.e., for PlayStation) or increasing their average quality (i.e., for Xbox).