Sony's (SONY 0.94%) PlayStation has been the dominant gaming console over the years when compared to Microsoft's (MSFT -0.83%) Xbox offerings, but there have been signs of the American giant turning the tide against its Japanese rival.
Microsoft is reportedly selling more units of its Xbox Series X and Series S consoles, and the latest data out of Japan indicates that it is winning in Sony's home market as well. According to video game magazine Famitsu, the Xbox Series S alone outsold Sony's PlayStation 5 (PS5) and PS5 digital consoles in the second week of May by a ratio of more than two-to-one.
Additionally, Microsoft's consoles outpaced Sony's PS5 sales in the U.S. in May. It is worth noting that Microsoft's resurgence in the gaming console market is translating into impressive growth in the company's gaming subscription business, an area where Sony is losing ground. However, Sony has rejigged its gaming subscription plans as it tries to arrest the slide in its user base. But will its latest moves help put Microsoft under pressure? Let's find out.
Sony tries to arrest subscriber losses with new PlayStation Plus plans
Sony's PlayStation Plus game subscription service had 47.4 million users in March this year, a slight drop from 47.4 million subscribers in March 2021. The service has lost subscribers in 2022 -- PlayStation Plus had 48 million users at the end of December 2021.
On the other hand, Microsoft's Xbox Game Pass, a cross-platform video game subscription service that allows users to play games for a monthly subscription on both personal computers (PCs) and Xbox consoles, had 25 million subscribers in January this year, a 39% year-over-year increase. So Microsoft's resurgent console sales are helping it attract more subscribers and helping the company build a sustainable stream of revenue, while Sony's game subscription service has stagnated.
Not surprisingly, Sony is looking to make the PlayStation Plus service more attractive with the addition of additional subscription tiers. The service is now available in three tiers -- essential, extra, and premium. The price of the essential tier is equal to the subscription plans of the erstwhile PlayStation Plus at $9.99 per month, $24.99 per quarter, and $59.99 yearly. Sony, however, is offering additional benefits in the extra and the premium tiers.
For instance, PlayStation Plus Extra subscribers will get additional access to a catalog of 400 PS4 and PS5 games, which members of the essential tier will miss out on. This service is priced at $14.99 monthly, $39.99 quarterly, or $99.99 yearly in the U.S. The premium tier will give users access to an additional 340 games, in addition to the ones available in PlayStation Plus Extra.
The premium tier also allows users to play classic games from the original PlayStation, PS2, PS3, and PlayStation Portable generations, in addition to cloud streaming capabilities in markets where the PlayStation Now streaming service is available. Sony has priced this tier at $17.99 monthly, $49.99 quarterly, and $119.99 yearly.
Sony claims that the additional tiers present a "major evolution for PlayStation Plus," as gamers will now get access to more games, including popular titles such as God of War, Death Stranding, Marvel's Spider-Man, and Returnal, among others. Sony also says that its gaming library will be regularly updated, which means that PlayStation users could get access to more titles in the future.
Should Microsoft start worrying?
One of the reasons why Microsoft's game subscription service has gained subscribers at an impressive pace is because of an aggressive pricing model. The top-tier Xbox Game Pass Ultimate service can be subscribed to for $14.99 per month. It gives users access to more than 300 games that can be played across phones, PCs, tablets, and consoles.
The service also allows users to stream their games directly from the cloud, while Microsoft also allows gamers to get same-day access to new titles released by Xbox Game Studios. Additionally, Xbox Game Pass Ultimate throws in an EA Play membership as well for consoles and PCs. So Microsoft could hold its advantage over Sony in terms of pricing, especially considering that gamers have the option to buy a lower-priced plan at $9.99 a month in case they want a PC or a console-specific Game Pass.
So Microsoft should continue to enjoy an advantage over Sony on the pricing front. It is also worth noting that Microsoft's acquisition of major game publishers should allow the company to maintain a strong library of titles to offer its subscribers. For instance, the acquisition of Activision Blizzard will help Microsoft get its hands on popular gaming titles that it could eventually make exclusive for its own console platform.
It remains to be seen if Sony's new plans could upset Microsoft's gaming juggernaut. The company reportedly generated $16.3 billion in revenue from selling Xbox consoles and video gaming content in 2021, which was a 17% increase over the prior year. As it turns out, 77% of Microsoft's Xbox division revenue last year came from selling content and services, with analysts pointing out that the segment's overall growth was driven by an increase in the adoption of the Xbox Game Pass.
With Microsoft expected to sell $4.2 billion worth of consoles in 2022 as compared to $4 billion last year, it wouldn't be surprising to see the Game Pass subscriber base improve further as the installed base of the Xbox Series X and Series S improves. In all, Microsoft could continue to win big from the video gaming market at Sony's expense by selling more consoles and cornering more subscribers, and this could supercharge the company's growth over the next five years.
