Microsoft's Xbox is already crushing Sony's PlayStation when it comes to creating the 'Netflix of gaming' — and it has huge implications for next-gen consoles

• Like movies, TV, and music before it, the video game industry is currently going through a paradigm shift toward subscription services.
• Microsoft's Xbox has Xbox Game Pass, and Sony's PlayStation has PlayStation Now — subscription services that offer access to an evolving library of games.
• Despite the massive success of Sony's PlayStation 4, with over 100 million sold, just 2.2 million people are using PlayStation Now. Microsoft's Xbox Game Pass service has over 10 million users, and estimates put Xbox One console sales at around half of PS4.
• It's an especially notable metric as Sony and Microsoft compete to build the "Netflix for games" — a primary component of the next-generation of PlayStation and Xbox consoles scheduled to arrive this holiday season.

In the summer of 2017, Microsoft made an ambitious bet on a new Xbox service: Game Pass.

The service would offer a curated library of over 100 games, and it cost just $10 per month. Moreover, every major Xbox game published by Microsoft, from "Halo" to "Gears of War" to "Forza Motorsport," would be published to the service at launch as part of the library.

If you're thinking, "That sounds sort of like Netflix," you'd be right, although with Game Pass you download titles instead of streaming them.

In the years since, Xbox Game Pass has become one of the best deals in gaming — a coup from Microsoft's Xbox division in a console cycle dominated by Sony's PlayStation 4. Game Pass now boasts over 10 million users, as of late April.

Sony's equivalent service, PlayStation Now, hasn't had quite the same trajectory.

The service launched way back in 2014 on the PlayStation 3 before heading to the PlayStation 4, and Sony says just 2.2 million people are paying for the service as of late April.

Notably, it's a huge increase over user numbers from last year — from around 1 million in March 2019 to over 2.2 million in April 2020 — no doubt due to pricing changes with the service, coupled with a more competitive library that takes advantage of Sony's first-party exclusives, such as "Marvel's Spider-Man" and "God of War," among others.

Even with that major increase, less than 2% of PlayStation 4 owners are paying for PlayStation Now.

It's impossible to know exactly what percentage of Xbox One owners are paying for Game Pass, but that's less important than ever to Microsoft — the company has intentionally moved its attention away from which console you buy and toward subscriptions services like Game Pass. As long as you're paying for its services, Microsoft doesn't mind if you're doing it on an Xbox, a PC, or a smartphone.

In the long term, Microsoft says it's more worried about competition from companies like Amazon and Google rather than the so-called console wars.

"When you talk about Nintendo and Sony, we have a ton of respect for them," Xbox leader Phil Spencer told Protocol in an interview published this past February. "But we see Amazon and Google as the main competitors going forward."

Microsoft's Xbox division, which makes the Xbox game console line, feels the threat from Google and Amazon because of one word: streaming.

In the case of Google, the service is named Stadia — a Netflix-like game service that streams games to a variety of devices, no game console required. In the case of Amazon, there's no service just yet; one codenamed "Project Tempo" is said to be in the works. And Amazon already has a robust cloud infrastructure in Amazon Web Services (AWS) to compete with Microsoft's similarly robust Azure cloud infrastructure.

"Amazon and Google are focusing on how to get gaming to 7 billion people around the world," Spencer said. "Ultimately, that's the goal."

With over 10 million Game Pass subscribers to PlayStation Now's 2.2 million, Microsoft is still a long way from 7 billion — but it's got a critical lead over the competition.