Big name exclusive hit video games are essential to any platform or ecosystem. But are they the most important determinant of the success of a console, like the next PlayStation 5 or Xbox Series X? The common wisdom is that they indeed have the greatest effect on profitability and popularity. The PlayStation 4 had better exclusives and therefore beat the Xbox One – the case is closed. But I am not convinced. Let me explain why.
To be clear, I absolutely recognize that exclusive content is important. This is obvious. Watch what’s going on in all media. HBO Max bought friends away from Netflix. Spotify has acquired the exclusive rights to the Joe Rogan podcast. Mixer pays livestreamers millions of dollars to keep them away from Twitch. These agreements happen because “content is king”. Nintendo wouldn’t matter without exclusive Nintendo games.
So if content is important, what do I mean when I say that we overestimate the value of the exclusive console. Well, what I mean is that video games are slightly different from television, podcasts and live streaming. And it is often closer to recreational sports in the way that people view it as a leisure activity. While exclusives are crucial, they are not the only way to succeed in the video game space.
“How can you say that exclusives don’t matter?”
I’m not saying that. I repeat myself, but I know what’s going to happen. Most people will touch that and then come to me with arguments to explain why exclusives are important. They matter, but I think most people overestimate their value.
I will never deny that exclusives are the reason why many people choose one console over another. What I’m going to question is the inherent value of this type of player for Microsoft, Sony and Nintendo.
Suppose you bought a PlayStation 4 for exclusive Sony exclusive games. And these are the games that you mainly play and buy. It’s a big win for Sony, right? Not really. I’m going to let The Era EatChildren poster explains this:
“People who buy platforms only for exclusives and only buy exclusives are a bad source of income. The customer sees himself as supporting platform support, buying a console perceived as expensive and a good batch of games. But compared to the costs of the business and the revenue generated by a single customer, these people are of low value. Someone who largely prefers Xbox One for whatever reason, but also buys a PlayStation 4 and over the course of seven whole years, only 10 software have given Sony very, very little money. It seems that they supported Sony, but they are a terrible source of income because they have not joined the ecosystem. “
Let us emphasize this last point again. Console customers have little value for manufacturers buy in the ecosystem.
And I don’t think I’m taking this KPI out of my ass. “Buying in the ecosystem” also has another name: commitment. How much time do people spend playing games on the platform? This is what Microsoft and Sony care about. If you read their quarterly reports, they don’t talk about equipment sales. The focus is on total income from games and services. That is what matters.
More engagement means that players are more likely to spend money on games or buy new games. An engaged player is also more likely to bring friends. In cold terms, this player’s lifetime value is worth more to Sony and Microsoft than to someone who mainly plays exclusives and nothing else.
“But the exclusives are the way you build an ecosystem!”
I’m sure many of you are screaming that you are fully engaged with the console of your choice, and the exclusives were a major factor in how you made this decision. Or, in other words, the exclusives are the pillars that hold the Sony or Microsoft platforms. Sure, you bought a PlayStation 4 for God of War, but now you’ve spent over $ 200 on Fortnite and Apex Legends.
And again, I’m not trying to erase this experience. Exclusives are an important way to build a base of loyal and committed players. But unlike HBO Max, Spotify and Mixer, exclusive content is not the only way to develop this commitment.
Indeed, video games are more social than television or a podcast. And while exclusives can bring many people into an ecosystem, do they really contribute to a significant increase in engagement? If that is the yardstick, then perhaps the services that gather friends or provide legacy support for games on future consoles are almost as important.
How video games are like sport
This is what I mean when I say that video games have a lot in common with recreational sports. Sport is something we usually do with our friends and family. And it doesn’t matter if it’s the same 100 year old game. It’s fun because it’s a way to socialize. Video games have similar elements. Many people return to Call of Duty night after night (and year after year) because that is where their friends are. Again, that is not a factor in why people subscribe to Netflix beyond perhaps colder conversations at work.
And basketball and tennis are still popular despite a notable shortage of exclusive content. Of course, each golf course is different, but most players prefer to go somewhere close and affordable. And game fans are the same way.
Many players want services that make games more affordable and easier to play with friends.
What does value really look like for Microsoft and Sony?
Think about the book / film Moneyball. This story explored how Oakland Athletics was able to compete with the wealthiest teams in Major League Baseball by rethinking the conventional wisdom of player value. Instead of buying stars, the management of A concentrated on buying series.
I suggest something similar is true with video games. When Microsoft or Sony spend their money, they shouldn’t just try to spend it on successful games. They should spend their money to increase engagement that really contributes to the health of their platform.
Sometimes it means spending money to create high-budget branded games. But most of the time, those same dollars will see a better return if they invest in creating a service like the Xbox Game Pass or backward compatibility.
And that’s because these services often have ripple effects that directly increase engagement.
Backward compatibility guarantees that players feel more secure in their purchases. A game I buy today will work on the next Xbox in the future. Therefore, I feel better about buying an Xbox game today. I also feel better spending time in these games because I know progress will stay with me.
Game pass, meanwhile, has an extreme network effect. If all my friends have Game Pass, low monthly fees are a reasonable price to pay for always having new content to keep playing with them. Then, while my friends and I get used to playing together, we’re all more likely to spend $ 60 on a non-Game Pass version because we don’t want to break up the team.
Video game companies do not provide details on the performance of games and services. But I think it makes sense that a dollar spent on extending a subscription service could go further than a dollar spent on a 20 hour lonely blockbuster outing that people play for a week and then put on shelf.
An exclusivity can convince you to buy a certain system. But you are not as valuable as a network of friends who collectively buy the same console because of a particular service.
Content is always king
So yes, I think we are slightly exaggerating the value of exclusives. Or perhaps it is better to say that we underestimate the value of everything else. But I think it’s also obvious that the video game blockbuster is not going anywhere.
Even Microsoft is investing in its own proprietary versions. The company regularly makes gestures towards its 15 internal studios all working on Xbox games. But it should be noted that Microsoft has not really started to believe in the exclusivity of the console until its subscription service is operational. Each proprietary version of Xbox also helps to increase engagement across this ecosystem.
And that may be the best way to look at it. Microsoft has exclusives because it wants to strengthen its Games Pass service. Exclusivities are important, but their value largely depends on their impact on engagement. It is a complementary relationship and one feeds on the other.