While a leaked memo from Xbox CEO Asha Sharma merely acknowledges the failure of the current pricing policy, industry expert Joost van Dreunen goes a step further. He speculates about the integration of advertising models similar to Instacart – and sees this as the chance for survival for the entire subscription industry, including PlayStation Plus.
The Internal document by Asha Sharma is a direct admission of crisis. Demand has collapsed following the $30 price hike for the highest Game Pass tier. The memo exposes Microsoft's strategic bewilderment. One analyst suggests a provocative pivot. His thesis: The industry must ditch its reliance on raw player spending. Gaming will transform into an ad-driven media platform. The era of pure premium access is ending.
The “Instacart model” as a blueprint
Van Dreunen supports his demand via Sharma's professional background. As the former COO of Instacart, she saw advertising revenue become the primary profit driver. The analyst argues that Xbox and Sony must follow this path. Proprietary tech will pivot toward ad-driven ecosystems. Raw performance is no longer the only metric for success.
- Indirect monetization: If customers are no longer willing to pay the $30, the money must come from brands. Van Dreunen suggests that Microsoft (and, in the future, Sony) should subsidize access to content through advertising.
- The "attention gap": Gaming consumes approximately 13% of media time but attracts only 4% of advertising budgets. The analyst demonstrates how this potential can be leveraged to offset exploding development costs.
The memo originates from Xbox, but the analysis covers the entire ecosystem. PlayStation Plus faces the same reality. The industry is hitting a wall with market saturation. Van Dreunen argues that the "Netflixification" of gaming has reached a glass ceiling. His proposal is a radical break with traditional console culture. Growth has stalled.
- Ad-supported entry-level plans: An “ultra-low-tier” for approximately 6 EUR, which is cross-financed through advertising.
- Sponsored Storefronts: Publishers should pay for visibility in the store – a model that is already standard in the mobile sector and at Amazon.
Analyst vision vs. player reality
The timing of this demand is no coincidence. With the announcement of Xbox Project Helix and the rumors surrounding the next PlayStation generation, the industry needs new business models. Hardware sales alone no longer cover costs, and game subscriptions are stagnating. The logic is straightforward: Three billion people worldwide is too large a market to be reached solely through expensive premium products. Monetizing this mass can only be achieved indirectly through advertising.
A clear distinction must be made: Asha Sharma has so far only identified the problem (the price shock). The solution, "advertising," is the aggressive assessment of a market observer who draws parallels to Sharma's Instacart success.
But analyst suggestions like this tend to find an audience in the C-suite when quarterly results aren't up to par. For us gamers, this means the era of the "ad-free zone" on consoles is drawing to a close, because analysts like van Dreunen are showing corporations how much money they're missing out on due to their "cultural reluctance" to advertise.
Would you prefer more advertising in the game or in the subscription model if it makes it cheaper?
These analysts are so culturally detached, they only know Excel spreadsheets, but have no clue about actual reception and brand perception.
This industry has a completely different problem: it squanders resources on production and marketing, has unrealistic profit expectations during an economic crisis, lacks a collaborative mindset and instead relies on a hire-and-fire approach, is incapable of effectively building structures and developing ideas in a coherent way in smaller segments, while in larger organizations it drains creativity instead of fostering it. If creativity and resources were more harmoniously aligned, it would save costs, improve quality, and appeal to the target audience.
Simply bombarding the system with ads is not a strategy. That's just a primitive hotfix for a structural problem.
You have to look at it another way: A game for a console almost always costs more than one for a PC. The hardware might have been subsidized at the beginning of the current generation, but that's unlikely to be the case anymore given how much time has passed. Next, console gamers will be paying for online access. That's quite a lot of money, too.
I simply cannot understand why the servers for online gaming should be so expensive to maintain, especially considering the availability of free online gaming on PCs.
If advertising is also displayed on the console's start screen – or even in the games themselves – I might find myself a different hobby.
The last person who tried to place ads in games was kicked off the Steam store. Meanwhile, players tend to criticize those games negatively. Theoretically, if you have billboards for McDonald's or similar companies, it might work. In practice, however, it could lead to negative player feedback. The expert in the gaming industry is more of a layman. Gamers are much more negative and extreme when it comes to advertising. And if you look at the comments here, that only confirms my point. If Sony or Microsoft were aiming to force ads, they would clearly lose a lot of subscribers.
Advertising is the next level of tolerable discomfort for me. It will not be tolerated. For me, it has a similar effect and impact to paternalism or censorship, with the added element of deliberate manipulation and dumbing down.
Anyone who forces advertising on me will be avoided in all forms. For life. No discussion, no compromise. That's where the fun ends.
Short answer: I don't want any advertising and would probably avoid any platform that annoys me with ads in the medium term. And I'm really annoyed by all advertising!