Cheaper ad-supported Xbox Game Pass, PS Plus subscriptions are likely

Ads may be coming to the dedicated video games industry in more ways than one.

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Fearful of subscriber losses, nearly every streaming service is adding lower-cost ad-supported tiers as a catch-all for consumer choice. Microsoft and Sony could follow suit and offer cheaper, value-oriented gaming subscription tiers to ad tolerant users.

Higher-priced gaming services like PlayStation Plus Premium ($17.99/month) and Xbox Game Pass Ultimate ($14.99/month) could see a price reduction in exchange for ad breaks or interstitials before gaming sessions, surveys, or perhaps specific versions of games altered to include in-game advertisements (such as product placement ads on billboards).

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According to Joost Van Dreunen, founder of analyst firm SuperData and author of games market compendium One Up, cheaper ad-supported subscription tiers are a logical step forward.

"Offering an ad-supported subscription is the next logical step for not just Sony and Microsoft but the broader digital entertainment market, whether we like it or not," van Dreunen said in a recent newsletter.

"Over the course of the next few years, we can expect to see ads appearing where they previously weren't. The time in which video games were so-called 'pure play' spaces, meaning void of any commercial messaging, is over."

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Microsoft and Sony are both working on their own specific ad tech platforms that will inject advertisements into their ecosystems. Use cases may include more expansive placement on storefronts, dashboards, and of course in the games themselves.

That's good for ad revenues, but not for conversions or retention.

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Traditionally, Sony's PlayStation Plus hasn't maximized its reach among gamers within its ecosystem. Sony still has an issue with conversion.

Most PlayStation gamers do not buy PlayStation Plus. There is a sizable disparity between Sony's gaming MAUs and its PS Plus subscribers for given periods.

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While PS Plus has indeed grown to an all-time high of 48 million, and has enjoyed consistent growth since 2016, the service isn't anywhere near as widespread as Sony may want.

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Xbox Game Pass, including its higher-priced Ultimate tier, is likewise not as popular. Microsoft has said Game Pass currently has 25 million subscribers since launching in 2017.

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That's only a quarter of the 100 million Xbox LIVE users that Microsoft reported way back in Q2 FY2020. Xbox LIVE users have likely grown quite a bit since then.

Lower-cost, ad-supported tiers would help maximize reach, convert players into paying subscribers, and also provide more choice to consumers.

The SVOD market has proven choice is strong drive for growth, and many services like HBO Max (76.8 million subscribers), Hulu (45.3 million), and Paramount+ (33 million) have all benefited from having ad-supported options.

"It gives consumers choice. Choice is always good," The Trade Desk's Ash Gangwar told Yahoo Finance in regards to ad-supported streaming options.

First gaming has learned from mobile, and now it's likely going to learn from the streaming market.