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[saintjules]

Shawn Layden: Consolidation is the enemy of diversity

At Gamelab last year, Shawn Layden grabbed headlines for calling out the spiralling costs of game development.Although …

www.gamesindustry.biz

"People don't buy consoles because they want more steel and plastic in the living room. People buy consoles because they want access to the content. If you can find a way to get the content into people's homes without a box, then yes, indeed. Everyone has a streaming solution of some form. Most of it is limited by whether you have a decent internet connection. And they haven't constructed the business model that works yet for that.

"With each console generation, the cost of games goes up 2x. So PS4 games were $100 to $150m, so it stands to reason that PS5 games -- when they hit their stride -- will be in excess of $200m. It's going to be very difficult for more than a handful of large players to compete in that space.

"It's very hard to launch a $120m game on a subscription service charging $9.99 a month. You pencil it out, you're going to have to have 500 million subscribers before you start to recoup your investment. That's why right now you need to take a loss-leading position to try to grow that base. But still, if you have only 250 million consoles out there, you're not going to get to half a billion subscribers. So how do you circle that square? Nobody has figured that out yet."

"The independent developer is the constant chase for funding. That's so all-consuming. It's become even harder now. On the one hand, the overall budgets for games are no longer in the $15,000 range. They require some serious capital. And the indies are going out there looking for that funding, and the ones who have real promise are just being bought out and sucked into a larger vortex filled with studios sitting under a larger hat.

"Or they're being told things like: 'why don't you start a GoFundMe, and you can get a certain amount of money, and then come back and we'll look again'. The leverage is so disproportionately in the publishing side of the business, that the creative side doesn't have the chance to move its vision forward without coming into some form of financial agreement, or trying to do something underfunded and working like crazy to then be told 'we're not interested'. And then the whole thing just crashes and burns.

 

[Dream-Knife]

Quite a lot there.

A lot of people talk about diversity, but usually it's of skin tone and not thought.

His comments about "web 3.0" are interesting. Problem is the internet is being constricted, so if anything it'll be worse than what we have now, just as what we have now is worse than pre-iphone.

 

[Trogdor1123]

Pretty ominous for the industry as a whole.

 

[Bruno_Arrais85]

I miss this guy

 

[reksveks]

Interested to see his maths on why half a billion subscribers just breaks even for a 120m game.

Lets assume even a low arpu. 5 usd equals 2.5bn a month.

 

[Kagey K]

"It's very hard to launch a $120m game on a subscription service charging $9.99 a month. You pencil it out, you're going to have to have 500 million subscribers before you start to recoup your investment. That's why right now you need to take a loss-leading position to try to grow that base. But still, if you have only 250 million consoles out there, you're not going to get to half a billion subscribers. So how do you circle that square? Nobody has figured that out yet."

Math is hard.


Why do you need 5 billion a month to recoup a 120m multi year investment?

Also is the subscription the only revenue for said 120m game or does it also sell for full price and have a season pass or in game purchases?

I don’t think he thought this all the way through.

 

[KAL2006]

I'm not so sure I agree with the Gamepass part. Doesn't Gamepass allow diversity due to not relying on game sales. It's great for developers who need that extra funding, take Euyenden Forgot that name of the game but basically a Suikdoen successor. That's gonna be on Gamepass, thanks to that extra money Microsoft has given them it allows them to make a better game and have a viggr audience to try out the game as it will be on Gamepass, this could lead to a sequel if successful due to the extra Gamepass audience and extra funding form Microsoft.

 

[Interfectum]

I'm not seeing it... gaming is more diverse than it's ever been between Indies, PC, mobile, AAA, online, VR, streaming, etc. The only true threat to gaming is the total collapse of AAA as we know it (epic single player games that span 40+ hours at a one time cost).

Sounds to me like he's just pushing that new company he just joined.

 

[SlimySnake]

Gonna have to disagree with this bit.

"It's very hard to launch a $120m game on a subscription service charging $9.99 a month. You pencil it out, you're going to have to have 500 million subscribers before you start to recoup your investment. That's why right now you need to take a loss-leading position to try to grow that base. But still, if you have only 250 million consoles out there, you're not going to get to half a billion subscribers. So how do you circle that square? Nobody has figured that out yet."

500 million * $10 a month = $5 Billion a month in revenue. a $120 million game only needs 12 million monthly subscribers. MS has 24 million. His math doesnt add up.

Netflix has 200 million subscribers. They spent $19 billion on content every year and make profit. That's almost $2 billion in content every month for just 200 million subscribers. Even they dont have 500 million.

Microsoft's end game is definitely in the hundreds of millions. But if MS can get 50 million a month, their revenue will be $500 million a month. You can literally put out FOUR $120 million games every month and break even.

 

[reksveks]

Quite a lot there.

A lot of people talk about diversity, but usually it's of skin tone and not thought.

I would also say that he is kinda referring to cultural diversity.

They speak 27 different languages throughout their studios and have people from 47 different countries. It is an incredibly multi-cultural workforce, and that is where the future of breaking gaming into a wider audience beyond the 240 to 260 million.

 

[M1chl]

Pretty brave from the guy who greenlight only TPS games

/s, but not really

 

[a multicultural team of v]

Math is hard.


Why do you need 5 billion a month to recoup a 120m multi year investment?

Also is the subscription the only revenue for said 120m game or does it also sell for full price and have a season pass or in game purchases?

I don’t think he thought this all the way through.

Do you think a single game gets 100% of the sub revenue? That revenue needs to be split across 100+ games.

 

[Bo_Hazem]

Experience is talking here.

 

[reksveks]

Do you think a single game gets 100% of the sub revenue? That revenue needs to be split across 100+ games.

As a platform holder, the maths isnt that simple.

As a platform holder for a single game, you are basically looking at something like

Budget vs (number of new users to the subscription+number of users you retain*) multiplied by average subscription cost + additional revenue via other sales.

 

[dotnotbot]

Math is hard.


Why do you need 5 billion a month to recoup a 120m multi year investment?

Also is the subscription the only revenue for said 120m game or does it also sell for full price and have a season pass or in game purchases?

I don’t think he thought this all the way through.

Gonna have to disagree with this bit.



500 million * $10 a month = $5 Billion a month in revenue. a $120 million game only needs 12 million monthly subscribers. MS has 24 million. His math doesnt add up.

Netflix has 200 million subscribers. They spent $19 billion on content every year and make profit. That's almost $2 billion in content every month for just 200 million subscribers. Even they dont have 500 million.

Microsoft's end game is definitely in the hundreds of millions. But if MS can get 50 million a month, their revenue will be $500 million a month. You can literally put out FOUR $120 million games every month and break even.

Might sound a bit surprising but there's more than 1 game included in a subscription.

 

[lh032]

I agree on everything he says, especially on the subscription model part.
Lets just say Sony just launched a Gamepass similar model , they are not going to release NEW AAA single player games such as Spiderman 2 on the subscription platform, that would be stupid as well.

I personally still believes a subscription model doesn't make sense, if you factored in the inflation cost of game development and the cheap monthly subscription fees.
And don't forget not every user will continue renew their subscription....
This is also the reason why Microsoft have yet to show the financial report on Gamepass alone, you would think they have release one by now to take a shot at Sony.

Speaking about quality content (physical/digital single player games), the cost of game development is also the reason why Playstation still exist thanks to high budget blockbuster single player games, you just don't get games like this often, even from other platforms.
Sony is willing to spend big on their blockbuster IP and it pays, no subscription modal, 60/70 dollars price, it just works.

 

[Interfectum]

Might sound a bit surprising but there's more than 1 game included in a subscription.

This may sound more surprising but not every game on the service is released at the same time.

 

[Indyblue]

It’s seems more like he’s mostly saying the massive budgets for these AAA games is the enemy of diversity, but I guess the shot at Microsoft’s strategy is the bigger headline.

 

[ZywyPL]

Nobody has figured that out yet.

DLC and MTX are a thing for quite some time you know, maybe Layder should ask Sweeney how his company stays afloat with a single title that's F2P... That's why IMO consolidation is the key for all of this to work out - you have a few MP behemoths that earn billions of dollars every single year, and then that money funds other projects that may not be as profitable, if at all, but add value to your lineup.

Because if everyone fights for themselves then we have scenario where all those huge titles that are baing played by half of the planet like Fortnite, Minecraft, Fifa, GTA5, CoD etc. cannibalize the smaller developers, who have to fight for every single penny for survival, because people have only so much money and time to spend.

Now take MS as example - they can afford getting a ton of independent devs onto GP, pay them upfront, fund their development, or let their 1st party studios experiment - because they have a ton of money from Minecraft, Gears, Halo, Forza etc., and that money goes back to the company and all studios under its umbrella.

 

[Evilms]

"It's very hard to launch a $120m game on a subscription service charging $9.99 a month. You pencil it out, you're going to have to have 500 million subscribers before you start to recoup your investment. That's why right now you need to take a loss-leading position to try to grow that base. But still, if you have only 250 million consoles out there, you're not going to get to half a billion subscribers. So how do you circle that square? Nobody has figured that out yet."

this

 

[reksveks]

We need to do something like this for gamepass but also include mtx in the fold

 

[Marcus Aurelius]

this

Let's see how our Xbox Game Pass friends try to counter that uppercut...

 

[Oddvintagechap]

Gonna have to disagree with this bit.



500 million * $10 a month = $5 Billion a month in revenue. a $120 million game only needs 12 million monthly subscribers. MS has 24 million. His math doesnt add up.

Netflix has 200 million subscribers. They spent $19 billion on content every year and make profit. That's almost $2 billion in content every month for just 200 million subscribers. Even they dont have 500 million.

Microsoft's end game is definitely in the hundreds of millions. But if MS can get 50 million a month, their revenue will be $500 million a month. You can literally put out FOUR $120 million games every month and break even.

First time I ever heard Netflix was profitable.

 

[martino]

And how do the math works when also you add hardware/ physical /digital sales, mtx and others service revenues....
because they exists...
Why think with a non existing context ?

 

[Rossco EZ]

Gonna have to disagree with this bit.



500 million * $10 a month = $5 Billion a month in revenue. a $120 million game only needs 12 million monthly subscribers. MS has 24 million. His math doesnt add up.

Netflix has 200 million subscribers. They spent $19 billion on content every year and make profit. That's almost $2 billion in content every month for just 200 million subscribers. Even they dont have 500 million.

Microsoft's end game is definitely in the hundreds of millions. But if MS can get 50 million a month, their revenue will be $500 million a month. You can literally put out FOUR $120 million games every month and break even.

there’s more than just 1 game though, all that money isn’t just recouping 1 game you’ve got others too,

 

[Banjo64]

I’d counter and say that success is actually the adversary of diversity.

 

[Punished Miku]

Nintendo found a way to not overspend on ever-increasing budgets. They don't chase the newest hardware immediately, and they prioritize gameplay over graphics. They also carefully nurture the value of their IP so that they don't have to cut the price of their games by 90% to keep selling them for years.

MS is trying new models for content and payment that could potentially fund whatever they want to do. As people have already pointed out, his math honestly doesn't make a ton of sense. If MS was getting $14 a month at their current subscriber level, that would be $336 million every month. You'd obviously have to then factor in all the cost for everything and see what's left, but it's not like it's as impossible as he says. And MS does really well with lots of AA and indie games too, which cost a ton less and work really well with a subscription. Not every game has to be some $250 million behemoth.

Sony is really the main one on this budget ballooning train, with the traditional pricing model. Their trademark is massive budget graphical showcase games. And they raised the price of games as well.

 

[reksveks]

DLC and MTX are a thing for quite some time you know, maybe Layder should ask Sweeney how his company stays afloat with a single title that's F2P...

Surely he is smart enough to see that's the strategy though

 

[reksveks]

Quite a lot there.

A lot of people talk about diversity, but usually it's of skin tone and not thought.

His comments about "web 3.0" are interesting. Problem is the internet is being constricted, so if anything it'll be worse than what we have now, just as what we have now is worse than pre-iphone.

Should listen to the Zuckerberg interview about their vision of the metaverse as well.

 

[M16]

No wonder this guy got bounced from playstation

 

[Kagey K]

Might sound a bit surprising but there's more than 1 game included in a subscription.

Yeah math still doesn't work though.

Lets say that 120m game takes 2 years to make from greenlight to release, thats only 5m/month needed towards that game. Meaning you only need 500K subscribers to cover the cost of the 1 game being referred to. If the game takes 3 years to make the cost/month and subscribers needed goes down.

Again this only takes into account pure subscriber revenue, not additional revenue from selling the game, season passes, or DLC, which would all drive the cost down even further but unknown how much until release day.

 

[anthony2690]

I think he is being WAY OTT with the need for 500 million £11.99 subs needed to make it work and you know people are going to run wild with that now....

As that would be £6billion+ a month...

And then that would cover 30 triple a titles development costs in a single month (using his 200 million estimate per title)

I could be really wrong as I am not even sure how many millions are in a billion, I think it is a thousand? I am sure I could be wrong though.

 

[kingfey]

"People don't buy consoles because they want more steel and plastic in the living room. People buy consoles because they want access to the content. If you can find a way to get the content into people's homes without a box, then yes, indeed. Everyone has a streaming solution of some form. Most of it is limited by whether you have a decent internet connection. And they haven't constructed the business model that works yet for that.

Gamepass bypasses this part easily. Considering the service is on PC, and the console. While the streaming is the future, its not the priority for MS. Its why the service is still on beta. It need more time on the oven to baked correctly. Once they do it, Consoles wont be an issue at all.

"It's very hard to launch a $120m game on a subscription service charging $9.99 a month. You pencil it out, you're going to have to have 500 million subscribers before you start to recoup your investment. That's why right now you need to take a loss-leading position to try to grow that base. But still, if you have only 250 million consoles out there, you're not going to get to half a billion subscribers. So how do you circle that square? Nobody has figured that out yet."

As people stated, gamepass lets you buy games. You can buy games. The subscription doesn't make you not buy the game like luna. You can buy the game you like. Its why gamepass is growing. You have the option to keep your games.

For example, Forza4, sea of thieves, halo mcc are on gamepass pc. Yet people go a head and buy the game.

Subscription models have 2 years lost revenue. after that, the service gets up and bring more revenue. Your past content is there, which means, the value of your service grows. If we only focus on current games, yes. Its not profitable. But if we add the past content, with current content, it will make people stay on the service, since those contents arent leaving the service.

 

[kingfey]

Do you think a single game gets 100% of the sub revenue? That revenue needs to be split across 100+ games.

How long do you think this content will stay?
If you are a service platform, your profits isnt immediately. You need the game to make money as much as possible.

Your idea only works on short term profit.

 

[fatmarco]

Consoles sell Gamepass, Gamepass sells consoles, both sell micro transactions, both ultimately get people into the ecosystem.

It's not as if Gamepass users all don't buy games or spend money on mtx or accessories etc. , so it's just the hook to get consumers into the ecosystem and their multitude of revenue streams.

So even if Gamepass doesn't work on its own, it is working when in conjunction with everything else.

 

[Greggy]

Quite a lot there.

A lot of people talk about diversity, but usually it's of skin tone and not thought.

His comments about "web 3.0" are interesting. Problem is the internet is being constricted, so if anything it'll be worse than what we have now, just as what we have now is worse than pre-iphone.

What is diversity of thought? How do you evaluate and measure it?

 

[kingfey]

Consoles sell Gamepass, Gamepass sells consoles, both sell micro transactions, both ultimately get people into the ecosystem.

It's not as if Gamepass users all don't buy games or spend money on mtx or accessories etc. , so it's just the hook to get consumers into the ecosystem and their multitude of revenue streams.

So even if Gamepass doesn't work on its own, it is working when in conjunction with everything else.

Its like a parasitic relationship.
Both benefit each other.

 

[Zeroing]

I’m not good at math and I’m not going to pretend I know how business works ( unlike most comments here ) but Shawn Layden was in charge of PlayStation and PS Now, maybe he has a more inside view of what really happens, deals etc.

Let me point out that Shawn and Jim have are totally opposed views on the gaming industry . Everyone can notice the clear difference when Jim because the boss.

with that said, just because Shawn doesn’t seem the service will be sustainable doesn’t mean Jim will have the same opinion.

Also most of the comments here are defending something without truly knowing how the future will turn. I say let’s chill and see.

 

[ResilientBanana]

Experience is talking here.

Experience? This whole thing is still in it's infancy. Chances are he's not had much "experience" with the business model as a whole as it's still fresh to the industry. Also, the services that are currently in place are indeed loss leaders, but the goal is continued investment to get the numbers where they need to be. With so many gamers and the billions the industry is making it's a no brainer to do subscriptions and reach out to as many people as possible.

Funny thing is, these games still go on sale, so it's not like people only go to subscriptions, people are still inclined buy things and are encouraged to do so. If people like the game so much, then they will buy it for the platform where they can play it the most. With Xbox that would be console, PC, and xCloud. As you build up a library and have enough cloud saves, you'll be less likely to leave the platform.

 

[Bernkastel]

this

Posts in tech threads, doesn't understand.

Experience is talking here.

Yeah I can see the guy who always has nightmares about a console he does not own has experience in using every chance he can get to talk about his insecurities. Its like all the console war stuff you always dream about have received some form of validation.

 

[SlimySnake]

First time I ever heard Netflix was profitable.

They started making profit last year.

Netflix Will No Longer Borrow, Ending Its Run of Debt (Published 2021)

The streaming giant borrowed over $16 billion in less than a decade as it built out its content library. The strategy prompted criticism that the company was unsustainable.

www.nytimes.com

Last year they made roughly $2.5 billion in profits.

there’s more than just 1 game though, all that money isn’t just recouping 1 game you’ve got others too,

Not if you pay up front like Netflix does. They buy movies and shows every month because they are guaranteed to make $2 billion a month. The money for those shows comes from that budget of $2 billion.

Now the trick with these streaming services is that you cannot have a bad month. you have to make sure you keep the subscribers subbed every month. Which means you have to continually go out and buy new shit every month. So for MS's 24 million subscribers, MS needs to ensure they have at least one $120 million game like TLOU2 and then use the other $120 million on smaller games like a Plauges Tale. They dont need to worry about games that were included in a previous month because they were already paid for last month.

Halo infinite might be the month where MS will lose money. That's a game made by around 700 developers on a 6 year dev cycle. Probably somewhere around $300 million. MS will need to make sure they hit 30 million to recoup the costs. Then they need to make sure they sell around 2-3 million digital copies which will be pure profit. But games that expensive typically dont show up on the XSX. The biggest third party games they have received so far are Outriders and MLB The Show. And they are probably $50 million max. Easily affordable when you have a 20+ million subscriber base.

You DEFINITELY definitely dont need 500 million subscribers like shawn layden is saying. you dont even need 50 million.

 

[Salty Popsicle]

Good thing Xbox Game Pass isn't limited by the amount of consoles that are sold. The subscription is available to anyone who owns a PC or an internet connection good enough to stream games.

 

[ResilientBanana]

Good thing Xbox Game Pass isn't limited by the amount of consoles that are sold. The subscription is available to anyone who owns a PC or an internet connection good enough to stream games.

Yeah, these doom and gloom subscription threads are mis-informed, small pictured, and typically led by those that don't believe in it to begin with. Meanwhile, the rest of the industry is proving them wrong.

 

[DarkMage619]

Gonna have to disagree with this bit.



500 million * $10 a month = $5 Billion a month in revenue. a $120 million game only needs 12 million monthly subscribers. MS has 24 million. His math doesnt add up.

Netflix has 200 million subscribers. They spent $19 billion on content every year and make profit. That's almost $2 billion in content every month for just 200 million subscribers. Even they dont have 500 million.

Microsoft's end game is definitely in the hundreds of millions. But if MS can get 50 million a month, their revenue will be $500 million a month. You can literally put out FOUR $120 million games every month and break even.

I also didn't see in his calculations where the traditional retail purchase of the games are. Why do people continuously forget that Game Pass is just an option and you don't need the service to play the games and even if you have the service you can buy whatever you want at a discount. Any money the subscription doesn't cover could be covered by normal purchases.

 

[Salty Popsicle]

I agree on everything he says, especially on the subscription model part.
Lets just say Sony just launched a Gamepass similar model , they are not going to release NEW AAA single player games such as Spiderman 2 on the subscription platform, that would be stupid as well.

I personally still believes a subscription model doesn't make sense, if you factored in the inflation cost of game development and the cheap monthly subscription fees.
And don't forget not every user will continue renew their subscription....
This is also the reason why Microsoft have yet to show the financial report on Gamepass alone, you would think they have release one by now to take a shot at Sony.

Speaking about quality content (physical/digital single player games), the cost of game development is also the reason why Playstation still exist thanks to high budget blockbuster single player games, you just don't get games like this often, even from other platforms.
Sony is willing to spend big on their blockbuster IP and it pays, no subscription modal, 60/70 dollars price, it just works.

This is why Microsoft purchased Zenimax and Sony didn't. Sony can't afford to play in the game that Microsoft, Amazon, and Google play in.

 

[recursive]

Yeah math still doesn't work though.

Lets say that 120m game takes 2 years to make from greenlight to release, thats only 5m/month needed towards that game. Meaning you only need 500K subscribers to cover the cost of the 1 game being referred to. If the game takes 3 years to make the cost/month and subscribers needed goes down.

Again this only takes into account pure subscriber revenue, not additional revenue from selling the game, season passes, or DLC, which would all drive the cost down even further but unknown how much until release day.

I think the point the other guy was making is the $10 a month would not necessarily be allocated to offsetting costs of the one game. It may only be $0.1 for example.

 

[kingfey]

I’m not good at math and I’m not going to pretend I know how business works ( unlike most comments here ) but Shawn Layden was in charge of PlayStation and PS Now, maybe he has a more inside view of what really happens, deals etc.

Let me point out that Shawn and Jim have are totally opposed views on the gaming industry . Everyone can notice the clear difference when Jim because the boss.

with that said, just because Shawn doesn’t seem the service will be sustainable doesn’t mean Jim will have the same opinion.

Also most of the comments here are defending something without truly knowing how the future will turn. I say let’s chill and see.

Shawn has no clue how these service works. Just because you are in charge of something, doesnt mean you know everything about it.
We arent in the past anymore. These services dont only have subs fees as a revenue. There is the MTX, Dlcs, and game sales. When a service does all 3 of them, plus the subs fees, you are getting more revenue, and not bound by sub count at all.

People need to understand this point. Netflix doesn't have those 3 extra revenue like games have. You arent getting extra content for you movies. You arent buying movies from Netflix. You arent buying songs from Netflix.. You are only paying for sub fees. So people compare it to game services. which these service has those, and netflix doesnt.

EA got billions from fifa mtx alone. Think how much gamepass or any other servce that allows will get it from. Especially when they have tons of games on the service. Gamepass has 475+ games. How many dlc, mtx, and game sales does it do monthly or yearly?

 

[Liamario]

Gamepass can't exist without playstation. Playstation game sales are subsidising Gamepass. Discuss

 

[Hobbygaming]

First time I ever heard Netflix was profitable.

Even with 200 million subscribers they are still billions in debt, they should start seeing profits soon though after a decade

 

[reksveks]

People need to understand this point. Netflix doesn't have those 3 extra revenue like games have. You arent getting extra content for you movies. You arent buying movies from Netflix. You arent buying songs from Netflix.. You are only paying for sub fees. So people compare it to game services. which these service has those, and netflix doesnt.

I keep telling people that the better comparison is amazon prime and prime video if you want.