YouTube TV And Xbox Game Pass Are Bad News For Some

Convershaken Staff
March 1, 2017

Sports fans and gamers will be excited to try out YouTube TV and Xbox Game Pass. Owners of smaller cable-TV channels and video-game stores will be dreading their release.

Google-owned YouTube announced YouTube TV subscribers can watch 40-plus TV channels - including ESPN, CBS, ABC, NBC, FOX and the Disney Channel - for a monthly fee of $35. They will also be given six user accounts, unlimited cloud storage for recorded shows, and access to original programming from YouTube Red, the company's premium service.

Meanwhile, Microsoft revealed Xbox Game Pass, which allows gamers to download and play more than 100 titles for a monthly fee of $9.99. The selection includes hits such as Halo 5 and NBA 2K16, and subscribers can buy the games outright at a 20% discount and save 10% on add-ons.

Both services aim to tap into growing demand for affordable, on-demand access to entertainment - a concept pioneered by the likes of Netflix and Spotify. But there are some catches. YouTube TV subscribers, for instance, will be forced to watch adverts - an inconvenience that YouTube Red users are spared. 

Presumably, Google paid top dollar for content and couldn't cover its costs through subscriptions alone. Content producers have been loath to part with their programming, preferring to milk lucrative cable-TV bundles as long as possible. They may have agreed a palatable price from Google, but smaller, niche channels - the greatest beneficiaries of bundles - are likely to lose out.

MTV-owner Viacom and Time Warner - which counts CNN and HBO among its brands - haven't signed on to YouTube TV. The former remains committed to the pay-TV model, while the latter is working on its own on-demand offerings. Competition in the space remains intense: existing services include Dish Network's Sling TV, ATAT's DirecTV Now, Sony's PlayStation Vue and Hulu, which is owned by ABC, Comcast, Fox and Time Warner. Moreover, Apple has a rival in the works.

In contrast, Xbox Game Pass looks set to be an archive of older games rather than new titles. Microsoft could supercharge subscriptions by including its latest releases, but those are typically priced upwards of $50. Instead, the company is likely to engage in 'windowing' - initially selling something at a premium, such as hardcover books or films in cinemas, before flogging it more cheaply later on. It's safe to assume Microsoft will sell new games at their usual price, adding exclusive content and offering 'special editions' to entice early buyers, then add them to the Xbox Game Pass library once demand dwindles. 

Xbox Game Pass represents a blow to already struggling video-game stores, which earn much of their profit from reselling games that players trade in for cheap, and not sharing the proceeds with publishers. If gamers can pay a monthly fee to access older games, fewer will buy used copies from physical stores.

Netflix and Spotify have grown rapidly by satisfying consumer demand for cheap, easy access to a wide range of entertainment. YouTube TV, which has done the hard work of recruiting several major content providers, promises to do the same for live news and sport programming. However, Xbox Game Pass is reminiscent of early Netflix, before it shelled out on original content and recent blockbusters. Microsoft wants the best of both worlds: squeezing cash out of older games by selling monthly access to them, while charging a hefty premium for new titles. The video-game industry's dynamics allow that for now, but those forces could change in time.