Are subscriptions the new winning strategy for mobile game monetization?​

The subscription model for mobile game monetization has been the “talk
of the town” for a long time now, be it a single- or a multiple-game
subscription service. If it works so well for apps and various services,
why can’t it work for single-games?  It also seems reasonable that
subscription services would work for multi-game models – just look at
Netflix’s and Hulu’s success stories.
Shortly after Apple and Google announced subscription-based gaming
services, the “talk of the town” started shaping up into the “way of the
future”. Now the question is: will subscription-based models be attractive
for players and profitable for developers in the end? At the end of this
discussion, I share 3 ways to make it work.
Sources of income right now: premium, free-to-play,
ads
In a galaxy far-far away, a long-long time ago (not so long ago actually),
mobile games were mostly premium: users paid a one-time fee and
played the game as much as they wanted. Just like in a retail store – you
bought it, it was yours to have for eternity (well, nearly). Revenue graphs
for the majority of premium mobile games had a spike in the beginning,
and then quite quickly trailed off.
When free-to-play came on the scene, it posed something of a dilemma
(talk about tough choices!). On one hand, it offered no entry barriers,
empowered users to spend more money on a game if they liked it; even

non-spenders could promote the game by spreading the word of mouth.
On the other hand, free-to-play games required more development time
and constant support and improvement after release. Despite the
controversy, with careful design and implementation the free-to-play
model has become extremely popular nowadays.
In addition, ads play an important role in game monetization for a lot of
companies, comprising over 50% of total revenue for casual games and
around 30% for mid-core and strategy titles. Smart ad placement that
feels natural can be a goldmine for a publisher. The majority of players
are fine with watching a couple of ads for the possibility of playing the
game for free; some even use ads as an app discovery tool of sorts.
So why switch to a fully subscription-based model?
As with anything else, subscription-based models have positive and
negative aspects. Currently, there is only one viable example of a mobile
game that monetizes fully on subscriptions (read on to see what it is!), so
let’s look at apps in general and analyze the subscription experience. 
Subscription pros:
 Steady revenue stream.
 Creating a loyal customer base.
 Potentially improving retention of those who subscribe.
 Players have an easier time too: no need to decide which offer to buy
or how to optimally purchase in-game currency – they get premium
gameplay for a small fee.
Subscription cons:
 Lack of or significantly reduced ad revenue.
 Missing out on seasonal and offer spikes of in-app purchases.
 A need to constantly update the game, and in contrast to how free-to-
play games are maintained – you absolutely must produce more and
more content nearly all the time in order to make subscriptions
attractive for players.

 Subscriptions are an entry barrier after all, and we thought we got rid of
those with F2P.
And let me get one important point straight – reshaping existing free-to-
play games to make a complete switch to a subscription model for a
single game is unlikely to work (remember the times when publishers
tried to slap the F2P model on a premium game – did not end well).
So will subscriptions work for mobile gaming the same
way they worked out for apps?
The tricky part here is the matter of human psychology. Why does a user
subscribe to Netflix? To watch a lot of constantly updated content for a
monthly fee. When subscribing, a user usually expects to be using
Netflix for a long time.
What motivates a user to subscribe to a language-learning app like
Duolingo? A user is determined to learn a language and expects to be
utilizing the app for a significant amount of time. The same motivational
pattern works for other brain-training, fitness apps etc. A user is willing to
put in time and probably sees themselves using the app in the long-term
future. In addition, a user is expecting ever-updating content in order to
be motivated to keep using the app.
With mobile gaming, it seems to be a bit of a different context. Even after
a free trial, I have a hard time imagining many players would feel the
same level of commitment and drive to play a single mobile game for a
long time, for an established monthly fee. But am I wrong?
Actually…there is a special case!
The assumption is actually a little wrong- because the subscription-only
model did work for one game that I know of – Jagex’s Old School
Runescape. A “unicorn” case, as it is an old-school PC classic’s
adaptation for mobile. PC version was a super hit back in the day. So
why did the subscription-only model work for them? There are several
possible reasons:

–          I suspect a significant share of the mobile game’s downloaders
are former PC version fans, so they do see themselves playing Old
School Runescape on mobile for the long-term future.
–          Old School Runescape is a cross-platform title, so users can play
the same game on their PCs and on mobile devices. With subscription
established as a viable model for MMO’s on PC, this mobile version
might be thought of by players as an extension of what they’re investing
in on the PC.
–          The mobile version possibly brought a large number of lapsed
Runescape PC players that do not play PC games anymore but would
happily play their favorite title on mobile.
If you want numbers (who doesn’t): since its global launch in Oct 2018,
Old School Runescape made close to $10mln subscription revenue in
the USA alone (Source:  AppAnnie ). But I’d like to stress that it is indeed
a corner case, and I am still waiting for a totally new, non-cross-platform
game to nail the subscription-only model.
So where does that leave subscription games?
It does not mean that subscriptions will only work for mobile games once
in a blue moon! I do see them working out for a wider variety of games
but in a bit of a different way. Three different ways, to be precise:
1.   As an additional in-app purchase.
 For example, for a monthly fee of $10 a user can get a certain amount
of in-game currency every month and receive access to a special VIP
store for the subscribers with additional exclusive offers. This is a good
way of engaging loyal customers and testing the subscription model
itself. However, before you do anything like this – beware of
cannibalization. On one hand, you might convert more people, which is
great. On the other hand, the subscribers might have spent more money
per month on IAPs if it had not been for the subscription. 

A good example of this model is implemented in N3TWORK’s
Legendary: Game of Heroes. They offer VIP membership for $29.99 a
month. N3TWORK reported great results after implementing the
subscription: there is a solid number of subscribers already, D425
retention of subscribers is around 20%, and there was no cannibalization
detected. 
2.   As a part of an umbrella subscription service.
I totally see a gaming subscription service like Apple Arcade or Google
Play Pass working out well, but it is too early to say, as we do not have
enough real-life examples just yet. Rotating and adding new content will
be the key for these services to be attractive for players. And of course,
games would need to be either re-worked or developed specifically for
this service. How popular will it become ad lucrative will it be in the end
of the day for developers – time will tell.
3.   A “manual” aka non-renewing subscription.
This is a common model for trying subscriptions out. For instance, a user
can buy a 3-day VIP “pass” that gives access to certain special features
of the game and likely gives some virtual currency. The trick is that it is
not technically a subscription, as after these 30 days end, a user would
need to decide whether he would like to buy another pass or not. This
model is also great for testing different price points and bundles, as it
allows publishers to analyze users’ motivation and the potential
popularity of various subscription offers. 
A good example of this monetization technique can be found in Empires
and Puzzles – users can but 30-day and 365-day VIP passes that give
in-game currency plus several useful bonuses daily. Not only does it
offer a good bang for the buck, but it also gives additional reasons for
users to come back into the game daily to collect these prizes. The
passes seem to have gained some popularity – 30-day VIP pass is
among top IAPs for the game, according to AppAnnie.