If you pay for YouTube (premium) you get no ads. 

I'm not sure what current game you pay for that incorporates ads? 

https://www.hollywoodreporter.com/business/digital/xbox-testing-ad-supported-cloud-streaming-1236654453/

It starts this way, with ads to support a free service, then over time the ads creep their way into paid tiers to further monetise the base. It already happened across streaming services.

That horse armor dlc really ended up killing gaming.

I'm aware of Xbox tests but this is exactly as I said, free tiers & subsidised tiers well below the regular asking price.

Some services are initially offered below a break even price in order to grow the market. Spotify for example only made it's first profit in 2024 after like 20 years.

For me, ad subsidised tiers isn't an inherent issue and actually more options & entry points are generally better. I get the apprehension though... 

But do people prefer flat out price rises without any lower cost entry options? I think it has to be dissected on a case by case basis & whether you're happy paying the price you're paying for a service/good. Just as with the $70-80 price rises we've seen on games like Mario Kart & GTA. I personally refuse to pay that.

For me, day one DLC or content locked behind premium pre orders are the worst. And don't even get me started on Amiibo's which is essentially day one content locked behind a toy 

The truth though is gaming software is probably amongst the most affordable it's ever been, so I actually don't buy into the doom & gloom, although some practices are irkesome. 

I remember only being able to rent N64 games because they were so expensive in the 90s. Literally the equivalent of £100 today 

A free tier with ads on its own isn't the worst thing, but we've seen in other cases like Amazon and Netflix how these ads can creep into paid services. Like the horse armor in Oblivion, the first step towards a hellscape often seems innocuous on its own, what people are wary of is that companies almost always start making such things worse and worse over time. 

Put a frog in hot water and it jumps right out, put a frog in cold water and heat it up gradually, etc.

It's the last I'll say on the topic but there are ad free tiers on Netflix/Amazon, it's just a case of whether you agree with their pricing. 

All services are gradually having price increases, even before the ad-supported tiers come into play, some small part is inflation & costs and the rest is monetisation. So that is the primary point of friction imo (increasingly upping prices) and the center point of monetising the audience (again looking at $80 Mario Kart & GTA).

Did you read (and understood) the article?

• You can still play your own Xbox games ad-free rendered on compatible hardware (Xbox consoles or PC)
• You can still stream your own Xbox games ad-free with a subscription which includes the streaming option (on compatible and incompatible hardware)

Now they are adding a third option: stream your Xbox games (on compatible and incompatible hardware) without paying for a subscription

The alternative before was: don't play your Xbox games if you don't have the compatible hardware anymore. 

Again you try to connect the ad-problem to the physical <> digital debate, while the distinction ain't between physical and digital games but between locally computing/rendering on own hardware and streaming (computing/rendering on a server).

That's the thing, the ad free tiers are overpriced and extortionary because the whole strategy is a matter of them deliberately creating an annoyance to customers so they can demand even more money to "fix" it.

It's like saying "I'm gonna flick popcorn at you while you watch your movie, pay me $20 and I'll stop".

Regarding subscription plans, I think episode 1 from season 7 of Black Mirror (Common People) is pretty much spot on how subscription services operate, just cranked up to 300% for dramatic purposes (though I'm pretty sure many CEOs are salivating over prospect of similar things become reality in some form).