Are console platforms about to adopt smartphone-style subscription plans?

Diminishing returns on console generations, cash-strapped consumers, and increasing console prices might just open up a new pricing model for consoles – one in which consoles look increasingly like smartphones.

Diminishing returns between console generations

The generational leap between console generations is closing. It is getting harder for the jump to new consoles to look meaningful to many players – especially more casual ones unconcerned with frame rates and owning the highest-end hardware.

Live-service juggernauts like Fortnite and Roblox are also available across console generations. Publishers need their products to be where players are to maximise their total addressable markets. The same is true for the yearly big hitters like Call of Duty and popular sports games.

Publishers are even going back to release latest-gen games on the previous generation. EA launched Star Wars Jedi: Survivor on PS4 and Xbox One, 17 months after the PS5 and Series X|S versions.

New-gen-only releases from third parties are only now starting to become the norm too, with the likes of Assassin’s Creed Shadows, Monster Hunter Wilds, College Football, and – the big one – Grand Theft Auto 6.

Another canary in the coal mine is that half of PlayStation monthly active users were on the previous generation at the end of Q1 2024:

There will likely be even more holdouts towards the PlayStation 6 generation, unless something drastically changes.

Console game makers are already creating different versions of their games to run on  different devices and configurations, due to the:

• Growing popularity of PC gaming (and consoles porting to PC)
• Inevitable success of the Switch 2, which will likely resemble a PS4 in terms of processing power
• The emerging trend of native portable companion devices

Furthermore, the macroeconomic situation is dire right now, with a cost-of-living crisis that does not look to be solved any time soon. At the same time, console prices are increasing, as shown with the PlayStation 5 Pro’s $700 price point.

If the next generation of consoles hits this pricing floor – which seems likely, as the PS5’s $500 launch price exceeded the PS4 Pro’s $400 – consoles could become prohibitively expensive for consumers.

This would limit the total addressable market of new consoles.

Are smartphone-style plans a solution?

PlayStation and especially Xbox have been hedging their bets against this seeming inevitability, with off-platform games, cloud gaming experiments, and setting their eyes on new markets. Smartphone-like plans could be another push here.

Microsoft already piloted one with its Xbox All Access initiative.

• It partners with retailers Target, GameStop, and Verizon, offering an Xbox Series X with two years of Xbox Game Pass Ultimate for $37 a month
• The bundled cost over the two years would be roughly $888, around $92 cheaper than buying these products now at their current price
• There is also a cheaper Series S version, costing $648 overall, $132 cheaper than the usual price

These savings, and the lower psychological burden of paying monthly, could make such offerings more attractive for consumers in the current macroeconomic environment.

It is the same psychological tactic smartphone carriers use to make pricey iPhones feel accessible to price-constrained consumers.

However, Xbox would need to market this properly without confusing consumers – something its campaigns have arguably struggled with in the past.

PlayStation might also be experimenting with similar pricing offerings. Nishino Hideaki, the CEO of Sony Interactive Entertainment’s Platform Business Group, said the following in an interview with Famitsu (Japanese article):

“There are some customers who are not willing to purchase the PS5 at its current price range, so we are considering various methods, such as changing the way we sell the console.”

Meanwhile, Nintendo operates in its own orbit, more of a toy and Disney-like entertainment company than its technologically and trend-driven counterparts. Its IP alone is enough to attract consumers. Nintendo is also less concerned with high-fidelity hardware, so its offerings are often more affordable.

What are the benefits of smartphone-like plans for consoles?

Gamers would feel more empowered to upgrade, and Sony and Microsoft would lock them into multi-year commitments – a win-win.

But there are other advantages:

• A new hook for multi-game subscriptions, where user growth is stagnating and most revenues would come from pricing increases. If the messaging is clear, hardware could become a perk of subscribing –  not a separate, painful expense
• More predictable revenue in a boom-and-bust console market: A phone-like plan could increase cash flow stability, with steady, recurring monthly income
• Encouraging ecosystem buy-in: Phone carriers are experts at locking customers into their ecosystems. A subscription-based console hardware model could include bonuses like free game credits, discounts on first-party titles
• Easier transitions to new consoles: Buying a new $700 console outright comes with sticker shock. Signing a new contract after the current one runs out? Less so
• An easier transition to cloud gaming: While consoles are not going anywhere in the short and medium term, the long-term vision for Xbox and PlayStation leans heavily on cloud gaming. Subscription can edge consumers towards this

Of course, there are challenges. Upfront financial risk is a big one, as platform holders would need to eat the upfront cost of consoles. This could backfire if customers default or churn early.

There is also competition from firms like Affirm or Klarna, who already let consumers pay off consoles over time without tying consumers to specific ecosystems. Of course, platform holders can –  and are in Xbox’s case – offer better features and interest rates.

The gaming landscape is changing fast, and PlayStation and Xbox need to adapt to a world where players expect more options and less financial friction.

A smartphone-like-plan-style subscription is not just a gimmick – it is a natural evolution that could lower the barrier to entry, ensure steady revenue, and unlock much needed growth in the mature games market.