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Gaming the System: How Microsoft is leading the subscription-fication of games

Over the past few years, gamers have had their long held conceptions about what it means to “own” a game completely upended. And when you consider the size of the gaming industry, it’s a seismic shift.

Check these stats out: There are currently over two billion people playing video games, and experts expect that number to increase to over four billion by 2030, which would be just under half of the entire global population. And gaming has long since left Hollywood and the music industry in the dust in terms of total revenue: the gaming industry clocks in at roughly $150 billion annually versus $42 billion for the global box office and $20 billion for the music industry.

And one of the forces behind the transition from game ownership to gaming membership is Sarah Bond. As the corporate vice president for Microsoft’s gaming ecosystem, Bond is set on bringing gaming into the modern age. And she’s got the background to do it. She went from Yale undergrad to Harvard MBA and then was smartly snapped up by McKinsey where she focused on consumer digital businesses. She then went on T-Mobile, where she held a variety of senior roles and was part of the team that led that company’s transformational turnaround.

From titles to tribes

When Microsoft approached her with an offer to come be a senior VP for their gaming division, she knew she’d found her sweet spot: her love of gaming goes back to evenings playing King’s Quest II with her dad, and she knew her expertise in consumer digital and subscriptions could be a game changer (pun intended) for Xbox, what some call “the Netflix of gaming.” “At the time, subscriptions were still a very new concept for Xbox,” says Bond. “When I joined, the company’s DNA was still very transaction-oriented: stand-alone title sales, as well as in-app purchases. They brought me on board because they were looking for someone with additional perspective around concepts like customer lifetime value, churn rates, and member engagement.”

There’s one big reason for the continued and growing appeal of gaming, and it isn’t improved animation quality or other technical advances. It’s community. “Gaming is fundamentally a community activity now,” says Bond. “People are constantly chatting with each other, even when they’re playing single-player games like Red Dead Redemption. Multiplayer games have essentially become places for people to hang out in: you have a persona, you have currency, there’s a culture, you do things together.”

And Bond has been instrumental in helping the company shift to this community and membership model. After joining Microsoft just a few months after they launched Xbox Game Pass, their monthly gaming subscription service, and currently, the service has over 15 million members across 41 countries.

Taking the plunge

But the journey has had its ups and downs. “When we launched Game Pass, we had a great catalog, but was skewed toward older games,” says Bond. “When we looked at bringing in new games, there was a fear that it would erode single-title sales, but we knew we had to try. So on the very day we were doing a global release of a new game, we made it available as part of the subscription, too. It had never been done before, and we were nervous. But what we saw was when we dropped the game into the subscription, it had the highest number of players than for any launch of a game of that type—ever. That’s when we realized that subscription was way more than the business model. It’s a way to give people membership in a community and an experience they want to share.”

Bond says they’ve seen that when someone subscribes to Game Pass, their behavior actually evolves. “It makes people more open to trying new experiences,” she says. “And it’s also opening up our demographics, and we’re seeing greater racial diversity and greater income diversity.”

And that’s good for business.“Subscribers spend 20% more time gaming; they will try 30% more types of games; and they will play 40% more absolute numbers of games,” Bond says. “As a result, they actually spend 20% more outside the subscription, because they’re able to try games they might not have otherwise wanted to spend $60 or $70 on. Subscriptions bring all these little moments of joy that they wouldn’t otherwise have had.”

The pandemic effect

And like many things during Covid-19, the isolation of the pandemic has only accelerated gaming’s shift from title sales to membership. Between March, 2020 and September, 2020, Bond has seen a 70% growth in Xbox Game Pass members adding online friends on Xbox Live. “Once the pandemic hit, we saw our ‘connection’ numbers—the number of people who play with friends—skyrocket,” Bond says. “Gaming provided one of the few ways people could stay connected at an affordable price point.”

The pandemic has also taught Bond’s teams the importance of flexibility. “We’ve had to toss out a whole bunch of conceptions about the way we thought we had to work,” she says. “At times we were fighting just to keep systems up, to keep Xbox live and running reliably so we could be there for our players. To be honest, it was a very intense transition those first couple of weeks for us as a team, and since then, we’ve gotten way better at flexing up—and flexing down.”

Bigger than boxes

 One of those flexes involved Minecraft, one of the jewels in Microsoft’s gaming crown. Once the pandemic hit, Bond says they started thinking about what role they could play to help bring people together and provide much-needed connection during the lockdown. “We thought about all those kids at home—and all those parents working from home—and wanted to do something tangible to help,” she says. “We felt an obligation as this source of social connection to lend a hand, so we made our Minecraft content free.”

And this flex really fits into the global ethos at Microsoft, which has a mission to “empower every person and every organization on the planet to achieve more.” As the world struggles to find its way through—and out of—this disconnected time, Bond sees the company’s commitment to social responsibility become deeper and extend way beyond the bottom line. “Since the pandemic, this is now part of virtually every conversation at Microsoft,” she says. “We’re all asking: What are we doing for healthcare workers? What are we doing for educators? What are we doing to support pharmaceutical companies? And I think our conversations really represent a more global shift in the expectations customers have of the companies they interact with, especially very large tech companies like ours.”

As the pandemic stretches on, Bond hopes these important conversations continue. “It resonates with me so deeply. It’s like you are seeking meaning in work that is beyond what you’re paid,” she concludes.

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