Google parent Alphabet, Inc. (GOOGL) is racing to capture a share of the growing subscription streaming video game market. The tech giant recently announced a new Play Pass subscription service which provides customers ad-free access to more than 350 video games on Google Play, priced at just $4.99 per month at its lowest. But Google faces stiff competition, as the video game and streaming markets have become increasingly crowded. Below, we'll take a closer look at the new Play Pass service and compare it against new competitors like Apple Inc.'s (AAPL) Apple Arcade.
Play Pass Could Entice Users to Android
Google's Play Pass offers subscribers full and ad-free access to hundreds of games via Google Play and launches this week in the U.S. At the time of launch, the service included a number of top games in terms of popularity, including Star Wars: Knights of the Old Republic, Terraria and Risk, as well as apps like Facetune and AccuWeather. Google has stated its plans to add new games and apps to the streaming service every month. With an introductory promotion, customers may be eligible for a discounted rate of $1.99 per month for the first year of membership.
The financial impact of Play Pass may not be significant compared with Google's many other revenue streams, although the platform's model could provide an incremental revenue stream for publishers if they are able to monetize older or less-prominent titles for little added cost. However, if the video game streaming platform helps to attract customers to the Android ecosystem, it could a have far-reaching positive impact on Google's performance. For this reason, Investopedia analysts maintain a Buy recommendation on Google.
A Crowded Market
Google is not alone in expanding its offerings into video game streaming. Apple Arcade, which also launched this month, is a top competitor, although Play Pass will contain about three times as many apps as Arcade. However, Arcade may have a larger number of new and/or exclusive games on its service. Each platform will have family sharing options and a unique tab on the Play Store. One area in which Play Pass may stand out is in its non-gaming apps; this is a service Arcade does not provide. Nonetheless, neither platform may be able to overcome to consumer preference for downloading favorite games directly. Further, a changing consumer preference toward free apps could prove to be a major challenge toward adoption of either Play Pass or Apple Arcade. With about 70% of apps on the Play Store today available for free and most games built with ads or in-app purchases in mind, publishers may be forced to redesign games for subscription streaming services.
Though there is little precedent for success in moving an entire medium from a free model to a paid one, there are incentives for developers. Google's plan to license content by paying developers a fee for rights to content is an incentive for game developers to participate, as is the potential for increased exposure to a broader audience through a subscription service.