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It’s been a little while since we saw a glimpse of the Bad Old Sony – the company that priced the PS3 at $200 above its closest competitor and retorted to criticism by saying that consumers would get a second job to be able to afford the console. Remember those guys?
Subsequently playing catch-up to Microsoft for most of that generation injected a much-needed dose of humility into the company’s thinking, while the discovery that the PlayStation brand didn’t carry remotely enough consumer kudos to shift Nintendo from the top spot in the handheld market also helped to ground Sony’s ideas a bit more firmly in reality.
In the generations that followed, Sony has generally kept its head down, focused on its game pipeline, and avoided annoying consumers too badly. The PS4 side-stepped the DRM bear-trap that the Xbox One tumbled into, for example, and the PS5 pleasantly surprised us all by allowing storage expansion with an industry standard M.2 SSD, bucking Sony’s grim history with exorbitantly priced proprietary storage formats.
In the past couple of weeks, though, it feels like we’ve seen a couple of unwelcome flashes of the arrogant beast that Sony once was.
First there was the news that the PlayStation Portal – a curious device whose price point makes it very interesting even if its limited feature-set makes it unclear who exactly it’s designed for – has eschewed Bluetooth audio for a Sony proprietary standard, forcing users to buy forthcoming Sony earbuds or headsets to enjoy wireless audio with the device.
Even Apple hasn’t strayed from Bluetooth in its devices, instead building on and around the standard for its AirPods’ functionality; god only knows what deep-seated delusion of grandeur has made Sony think it’s in a position to force a proprietary wireless audio standard when a vastly larger and more powerful company like Apple has pointedly shied away from that disastrous idea.
If that wasn’t giving us all unwelcome flashbacks to Sony’s 2006 villain era, next came the news that only a year after launch, all of the PlayStation Plus tiers are getting price hikes – massive, inflation-busting price hikes of around 33%, which will bring the annual price for the base tier of the service to $80 (from the current $60) and raise the top ‘Premium’ tier to an eye-watering $160.
We were spared, at least, an accompanying statement suggesting that we should get second jobs to pay for it, but the statement we did get wasn’t great, offering not even a sliver of justification in terms of improved offerings for the service.
Like most people, I imagine, I initially saw the announcement’s headline and shrugged, assuming that it would be an inflationary rise – somewhat in line with the 10% price bump we saw for Game Pass earlier this summer.
That was an unwelcome hike, but in line with the rises we’ve seen to many other goods and services over the past year, so the rumbling of discontent it triggered was rather muted. It helped Microsoft’s case that Game Pass is a fairly well-loved service, many of whose users will enthuse about it at the drop of a hat.
It’s an extremely extensive library, with a notable degree of care and attention being lavished on the back catalogue, and crucially it feels active and evolving, with new titles appearing on the service regularly and the big, splashy excitement of day-and-date releases for Xbox’s major first-party titles like Starfield (admittedly still few and far between). People like Game Pass; they didn’t struggle to justify paying the 10% fee bump against a backdrop of similar price rises for so many other things.
Sony’s situation is… not that. Its price rises vastly outpace inflation, such that even ardent fans would struggle to find a justification, especially since the service itself is only a year old – and I’m unconvinced that PS Plus has all that many ardent fans to begin with.
Compared to Game Pass, Sony’s service is honestly pretty threadbare. Its lowest tier amounts to little more than charging a shockingly high rent for fundamental console services like multiplayer games and the ability to transfer save files off the device, while its higher-end tiers offer a software library that’s patchy at best, with a retro/classic game offering that’s embarrassingly poor, feeling more like someone trawled the contents of a 99 cent bargain bin at a second hand game shop in the early 2000s than like an actual library of PlayStation’s illustrious history.
Few people will come out in defence of a price rise to a service that few people find especially good to begin with, and while it’s unlikely that too many people will drop their subscription entirely (given that multiplayer gaming is held hostage behind these tiers), these price bumps may well cause a rout of higher-priced subscribers as they drop down to the lower tiers.
I’m not being kind to Sony here, and it certainly is tempting to see this price hike purely as greedy over-reach. However, there’s probably something else at play here as well – raising the prices this much, this soon, suggests that there’s some maths that isn’t working out at the core of Sony’s subscription offerings.
Compared to Game Pass, Sony’s service is honestly pretty threadbare
It’s not just the consumer end of the equation that’s now being squeezed for more revenue, as it was suggested this week that publishers like Devolver and TinyBuild are also having a tough time financially due to pressure on payouts from subscription services.
There’s a squeeze on both sides, then – PS Plus is trying to extract more money from consumers at the same time that it’s reducing payouts to publishers (or at least some publishers). Is that an attempt by Sony to fill up some Scrooge McDuck swimming pools with subscription revenue? Or is it instead a symptom of a fairly desperate attempt to make the numbers add up in a very unforgiving commercial equation?
The latter scenario seems most likely, because both Game Pass and PS Plus’ premium tiers are in essence land grabs. They’re an attempt to establish ownership over as large a part of the game consumer market as possible, and in pursuit of that goal, both companies have been willing to treat the services as loss leaders, or to have them hover around break-even at least.
The existing model is not actually commercially viable for anyone in that pipeline – developers, publishers, platform holders – but it has been given life by hooking up a cash pipeline from the platform holders’ coffers, allowing them to offer a large library of software to consumers for a low price.
Without the subsidy, the subscription revenues are sliced up far too thinly, and while there are some winners (primarily publishers with a knack for making low-budget titles into viral hits for a month or two), most companies would lose out if platform holder bucks weren’t keeping the whole edifice afloat. That won’t last; the assumption is that once the market is established, the platform holders will be able to squeeze both ends of the pipeline and start making their money back.
This is the dirty secret – which isn’t even really a secret – behind subscription models in general, not just in video games. There isn’t a single market where they actually make commercial sense in their current form; in music, in video, even in books, there’s always someone left holding the bag.
Raising the prices this much, this soon, suggests that there’s some maths that isn’t working out at the core of Sony’s subscription offerings
The subscription provider starts out propping up the model by by subsidising the whole affair to the tune of billions, then moves on to turning the thumbscrews on the media creators (through creative accounting or dropping revenue shares precipitously), with the endgame being a sharp rise in subscription prices which consumers have minimal power to resist because during the previous steps, the media they actually want to consume become exclusively available on these services, trapping them in the only ecosystem left in town.
The Hollywood strikes that have been ongoing for months are all about this. In their desperation to start being businesses that control access to consumers rather than being businesses that merely make good stuff and sell it to consumers, almost every major media company in the world has found itself undercutting its own existing business model and then trying to claw back fractions of cents on the dollar by brutally and short-sightedly slashing costs in the creative end of their industry.
Video games aren’t at that extreme point yet, and subscription services aren’t yet established enough to threaten that scenario – if they cease to appeal, consumers can still go back to buying their games outright, for the time being at least.
Our path, however, doesn’t seem any different to any other industry, and as the industry becomes increasingly reliant on subscription revenue in the years to come, it’s not clear where the off-ramps might be if it turns out that we need them.
To some degree, Sony’s price bump probably reflects a confidence that PS5’s market position is strong enough that the company doesn’t need to heavily subsidise PS Plus as a Game Pass rival (so yes, there’s more than a little arrogance behind it), but it will go down like a lead balloon with consumers nonetheless.
If the alternative to raising prices is for platform holders to try to squeeze publishers and developers into slashing their costs, however, then perhaps this price rise is for the best; it is, at least, honest.
We should watch the consumer response closely, because ultimately, if consumers aren’t willing to pay significantly higher prices for subscription services – prices closer to the actual cost of providing these services and paying the developers who create the games – then that should raise some serious questions about why we’re barrelling so fast down the path towards this potentially unsustainable business model in the first place.
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