Streaming can only work if the price is right

With the announcement of subscription pricing plans for Sony's PlayStation Now streaming service, it's deja vu all over again; once more, we're seeing exactly the same set of reactions that the service has faced since it first entered open testing. "Great idea, nice technology, you've got to be joking about those prices."

To recap, Sony is offering gamers the chance to subscribe to PlayStation Now for $20 a month, or $45 per quarter; for your money, you'll get unlimited access to about a hundred PS3 games, which is somewhat less than half of the catalogue that's available on Now on a pay-per-play basis. There's no doubt that $20 a month beats the silly money being asked for in the pay-per-play stakes, which has been roundly laughed out of the house for demanding several dollars to play a game for a mere few hours, but the extremely limited list of playable titles and the high cost compared to other streaming services means that Now is still very much on the wrong side of the value curve for many customers.

This is a repeat of an unfortunate situation that has played out time and time again in the digital age; a superb piece of technology, brought low by a combination of idiocy on the part of license-holders and unrealistic price demands on the part of consumers. The potential of PlayStation Now - to put the entire library of PlayStation games, from every era, at the fingertips of any consumer with an internet connection - is incredible. The technology has proved itself; it's no replacement for dedicated hardware under the TV, but comfortably good enough to enjoy older games with good quality and decent response times. The business model, however, is an iceberg drifting towards the shiny, beautifully formed hull.

"The business model is an iceberg drifting towards the shiny, beautifully formed hull"

There are two problems here, and they need to be considered in isolation. The first problem is with the rights-holders, who have clearly made a hash out of the negotiation process for getting games onto PlayStation Now in the first place. In other industries, I can grasp the reasons for rights-holders trying to drive a tough bargain with streaming services; other industries have long-tail business models, so there's usually some residual revenue coming out of your old TV shows, movies and albums, which means you have something to leverage against whatever the streaming service offers. In games, though? Games don't have a long tail. Games don't have any damned tail at all. Games are the Manx Cat of the media industries, born with a congenital lack of tail (unless you're Nintendo, which if you're in negotiations with PlayStation Now, you're obviously not). PS3 back catalogue titles make precisely zip, so any kind of service which proposes to put them online and make any money at all out of them is a vast improvement over zip.

Yet clearly, some geniuses along the line - one assumes geniuses at the publishers involved, although I wouldn't entirely discount the involvement of some genius at Sony in the process - have decided that a tough bargain needed to be driven over PlayStation Now, and that means some games have been okayed for the subscription service, while others are only available as pay-per-play. As anyone who is either actually a consumer, or simply in possession of a functioning set of frontal lobes, can tell you, this renders the PlayStation Now service vastly more complex, annoying and unappealing than it ought to have been. "Subscribe for $20 and play all our games!" is a compelling offer, even if "all our games" is a pretty rag-tag and randomly compiled sub-set of PS3 titles to begin with. "Subscribe for $20 and play some games sometimes!", on the other hand, is not a slogan that's going to get the marketing guys breaking out the triple whiskeys all round.

"Of course, it's beholden upon consumers to always want the things they buy to be cheaper; that's pretty much how the market works, after all"

This problem is then compounded by the issue on the other side of the aisle; the consumer reaction to the $20 price tag, which is perceived as being rather too high. Of course, it's beholden upon consumers to always want the things they buy to be cheaper; that's pretty much how the market works, after all. In this instance, however, it's interesting to see the logic being employed, which is to compare the nascent PlayStation Now, with its limited set of titles (and relatively limited set of streaming devices), to much more mature and fully-featured streaming services for other media. Netflix costs $8.99 per month; Spotify is $9.99. Neither of them offer only a sub-set of their content for that price, with other stuff on pay-per-view / listen plans; both of them offer large, extensive libraries of content both old and new (in the USA, at least, Netflix UK being altogether less impressive - another example of rights-holders making a complete cock-up of their approach to streaming services).

On a technical level, I can absolutely understand and explain why a PlayStation Now subscription costs more than a Netflix subscription. Netflix is simply streaming static content to you; all it needs is cloud storage and lots of bandwidth. Spotify's job is even easier, as it requires far less bandwidth. PlayStation Now, on the other hand, needs to boot up an instance of a virtual console and keep it running while you play, using vastly more server resources than it would take to stream a movie. It's a much more expensive, complex and demanding task, both in terms of processing resources and in terms of bandwidth, than Netflix attempts, and I can logically justify the higher price in my head on those grounds.

That technical justification, however, doesn't make me any more inclined to pay that price; because as a consumer, that stuff doesn't actually matter to me. I don't care how it works, I merely care that I can pay less than $10 per month for my music, or TV and movies, and that Sony wants $20 a month for a limited selection of PS3 games. The fact that the technology required to accomplish this is basically science fiction crossed with magic doesn't count for anything; consumers, rightly, look at what they get in the end, not the complexity of the path it took to get there.

"it means that "around $10" has been established in the minds of many consumers as being the right pricing for a comprehensive streaming service"

This is a problem because it means that "around $10" has been established in the minds of many consumers as being the right pricing for a comprehensive streaming service - which may, in the final analysis, be somewhat insane. In the case of Netflix, at least, the $8.99 price point (itself a relatively recent hike from $7.99) is as much the result of a land-grab as of any economically sensible pricing; in order for rights holders to get value from video streaming, it's entirely likely that that price point will need to rise over time. In the meanwhile, everyone else trying to launch a streaming product is effectively screwed, because Netflix has established a consumer perception that streaming is a cheap, low-value service.

Granted, where videogames are concerned a tiny trickle of revenue from back catalogue titles still beats the zero revenues being received now; but nonetheless, publishers' notion of what constitutes value and consumers' notion of the same thing is clearly very different right now. Over time, it may be possible to migrate consumers towards paying more for streaming services, but this will be a slow and careful process; in the meanwhile, publishers need to be willing to grin and bear with extremely low margins in the name of establishing a streaming service that customers actually want and are willing to pay anything at all for.

Sony itself may be an unwitting barrier to this process; the firm's roots in Japan, where streaming media has simply never taken off (seriously, there is no successful equivalent of Netflix or Spotify in this territory, with physical CD and DVD rental stores still dominating the landscape), mean that many key decision-makers at the company probably have little or no conception of how consumers use and value these services. If PlayStation Now is going to survive to fulfil its promise - of becoming an archive of all PlayStation's historical titles, and a long-tail revenue provider for publishers - that's a comprehension gap that will have to be closed. As it is, the pricing is too high and the offering too unimpressive; with all the work that's gone into the technology, it would be a terrible shame to see it fail to understand its consumers and find an audience.