Someday we may look back on 2020 as the “year of screens,” when even more of our lives moved to a digital setting. We are collectively staying home for long stretches of time during the pandemic, and while our normal social activities are on hold, we’re looking for alternative sources of entertainment and connection.
The video game industry, which was thriving even before the pandemic, is one of the few entertainment sectors expected to grow this year. One-third of U.S. consumers have started a video gaming subscription, used a cloud gaming service or watched esports or a virtual sporting event for the first time during the pandemic, according to a 2020 Deloitte survey. A third of consumers and almost half of millennials and Gen Z reported that video games have helped them make it through a tough time, and 27% said they play to socially connect with others.
Gaming has been big business for decades, with two of the largest players being Microsoft and Sony (Full disclosure: a number of Microsoft’s B2B divisions are clients of Vertic). Both companies just released highly anticipated new consoles, the Microsoft Xbox Series X and the Sony PlayStation 5 — and their timing could not have been better.
What I find most interesting about this competition is not the consoles themselves. In terms of price and hardware capabilities, the two consoles are comparable. The brands have to differentiate themselves through the overall gaming experience they create for customers. Microsoft and Sony are both moving to subscription service models — similar to Netflix, Amazon Prime or Spotify — where players pay a monthly fee and get access to hundreds of games.
But creating a subscription model alone isn’t enough to create a committed relationship with customers. The brand that succeeds in deepening and expanding the connection it has with customers will ultimately stand out among competitors.
Two Different Business Models
Sony has historically had an edge over Microsoft on the content side, offering a large library of exclusive games from its network of studios, including popular titles like Marvel’s Spider-Man and God of War. Sony’s PlayStation 4 console had huge commercial success, selling more than 100 million units.
Microsoft’s Xbox One console sales reached only about half that number, but the brand is now leading in subscription services. Xbox Game Pass has more than 10 million subscribers, while PlayStation Now has 2.2 million. Microsoft is also planning to acquire additional video game studios, in an apparent effort to invest in more exclusive games and bolster its own library.
What is obvious is that the war between the two consoles is not about the hardware, but the content. The two companies are competing to provide many compelling games that connect with users and reinforce their relationship with the brand. Both companies have the opportunity to do so, if they start adopting a Share of Life business model: rethinking how they can connect and continue to enrich the gaming content and experience.
Creating Meaning And Mutual Benefit
For the gaming subscription model to really take off and retain users for a lasting, mutually beneficial relationship, it has to be propelled by the following principles of the C.R.E.E.D. framework:
• Commitment: What is enticing customers to subscribe? How is this particular gaming ecosystem different from others?
• Reinforcement: How often do new games and add-ons come out? What continues to add value to customers’ gaming experience?
• Excitement: How does being a subscriber spark anticipation and enthusiasm? What adds fun and novelty to the relationship (for example: virtual events, gifts or free access to exclusive material)?
• Empowerment: How are subscribers empowered to develop their skills, expand their experiences or connect with social game communities?
• Development: What’s next? Can customers count on ongoing developments in hardware, services and games?
In short, brands can’t just sell a device or service and declare victory. The purely transactional business model is of the past. Microsoft and Sony have to develop gaming ecosystems that empower players to have more engaging and meaningful experiences, where success is measured by how deeply they are inserted into their customers’ lives. Video games provide more than just entertainment, especially in the context of the pandemic. Gaming offers the opportunity to spend time with friends when in-person gatherings aren’t possible.
The competition is nowhere near finished, but the company that demonstrates continuous commitment, reinforcement, excitement, empowerment and development will eventually come out on top. I believe the winner of the gaming war will be the brand that puts players’ interests at the heart of its long-term strategy.
Lessons From The Gaming War
Here are three important lessons from Microsoft and Sony’s battle for gamer loyalty that can be applied to any business and any industry:
1. Develop a Share of Life / C.R.E.E.D. Business Model
Close the distance between you and your customers to the point where they can’t imagine life without your brand. How can you insert yourself into more parts of their daily lives? How are you enhancing their experiences? How do you both benefit?
2. Understand Your Relationship
What kind of relationship do you have right now with your customer, and what do you want to build in the future? What do your customers most value, and are you providing it?
A lot of companies rush to create a subscription service without thinking about C.R.E.E.D. principles first. If you don’t want your customers to “buy and say goodbye,” how can you continue to surprise and delight them over time?
3. Create A Meaningful Business Model
Build your business around helping your customers create rewarding experiences. How can you support them in living their best lives? Can you combine a physical asset (a game console, an exercise bike, a bottle of wine) with an ongoing element (a subscription to online games, virtual exercise classes or tasting events) to nurture your connection?
Keep looking for new ways to rekindle excitement and renew commitment within your customer base.
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