Paid music subscriptions are rocketing in the US, hitting 50 million in 2018, and gaming is set to follow suit as the tech giants explore ways of tapping into this lucrative market.
New figures from the Recording Industry Association of America (RIAA) show that streaming now comprises 75% of total music industry revenues of $9.8bn, far ahead of digital downloads (11%) and physical product (12%).
Subscriptions to such services are the biggest driver of increasing revenue and these now account for more than half of total annual revenues.
Total 2018 subscription revenues increased 32% to $5.4bn, the trade body reported, or 73% of overall streaming revenues of $7.4bn, including subscription, ad-supported and digital radio services. Revenues from on-demand streaming services supported by advertising (including YouTube, Vevo, and the free version of Spotify) grew half as fast, at 15%, to $760m.
With the subscription model having proved successful in both SVOD and music, gaming is the next sector in line to be disrupted. Google, Microsoft, Apple and Amazon are each reportedly working on their own versions of a “Netflix for games”, Axios reported.
It noted recent news reports detailing how Google is set to unveil a video game service next month and that Apple may announce a game subscription offering later this month.
At the same time, Amazon is building a subscription streaming service for games, while Microsoft may be on the verge of letting users play high-end video games anytime on any device, not just on its own Xbox console.
All this entails a major shift, according to Axios, as the tech giants’ new streaming services will move both the software and the processing for games into the cloud – so players will no longer have to buy individual copies of games and may no longer require specialized hardware required to play them.
Where the subscription model may struggle in a gaming context, however, is that there is little demand for back catalogue. “This means that tech companies need to come up with lots of cash to convince game makers to license them their newer stuff,” said Axios.
Initially, at least, that could mean licensing and selling individual games, according to Michael Pachter, a research analyst at Wedbush Securities, who suggested they copy what Apple do in music: “A la carte sales first (iTunes), and a subscription option later (Apple Music).”
Sourced from RIAA, Axios; additional content by WARC staff