On Game Streaming Services: The Future
Game streaming services will prove a strategic inflection point for incumbent companies in the gaming industry, changing not just one aspect of the field but the entire nature of the business. By turning the cost structure on its head the basis of competition has changed and for incumbent companies to fight or ignore this disruptive change would be akin to someone trying to negate the effects of gravity: you could try however much you want, but in the end you’ll lose out. At the end of the day, end users will choose which product they want to spend their money based on Functionality (Does the product cater to my every need?), Reliability (Does the product have frequent issues that stop me from using it?), Convenience (Is it easy to use the product?) and Price. In that order.
Let the Streaming Wars begin!!
Five is the number of significant roadblocks we’ve previously identified stand in front of any GSSP (Game Streaming Service Provider) looking to launch a successful product in the next 12 months: Quality -latency & picture quality-, Internet speeds, Availability, Accessibility and Library size.
From this list of challenges, a few basic requirements start to materialize for game streaming services of the future to succeed:
- Presenting a high-quality playing experience, up to the standards that users are accustomed to when playing AAA games on consoles today;
- Reducing the upfront cost of the console, by requiring minimal processing power inside the user-owned device or eliminating the need for a console completely;
- Offering device-agnostic access to a high-quality game library from anywhere in the world;
- Providing a more flexible and cost-effective solution for playing games.
Seeing the specificity of these requirements, it’s no surprise that the top contenders for the game streaming crown are indistinguishable from the top cloud infrastructure owners at the time of this writing.
Amazon, Microsoft and Google all have plans of launching a streaming service at some point in the next 18 months. The motivation for investing in the space is split: Amazon and Google have ‘big company problems’¹ at the moment, ever-seeking markets with high growth potential in order to satisfy the growth demanded by their stockholders, whilst Microsoft vies to protect their existing Xbox user base from the attackers. Looking at a recent study by Newzoo forecasting that the gaming market will exhibit a compound annual growth rate of 10.3% up until 2021, it’s easy to see why developing a technology that will lead the gaming market in years to come would be attractive to any company.
Amazon is the stealthiest of the bunch, having no public position on the technology as yet. According to reports from individuals inside the company, Amazon is having discussions with multiple game publishers and plans to launch its service ‘no earlier than 2020’. From the outside looking in, there are several reasons why this move would make sense for Amazon. First, Amazon’s teams have the task-relevant maturity for the job considering that the most important knowledge needed to pull off such a service revolves around cloud server technology. Secondly, Amazon owns Twitch, the largest service for live-streaming and eSports broadcasting. Third, they developed Lumberyard, their own game engine that leverages both AWS’s robust cloud infrastructure and has built-in Twitch integration for live-streaming.
Microsoft revealed its hand in October 2018 by announcing Project xCloud and updated us with small details several times since then. While a solid release date has yet to be announced, public trials are set to start sometime in 2019 with more details to come in Microsoft’s GDC talk on March 21st.
On the hardware front, xCloud will run on purpose-built server blades inside one of Azure’s 54 data center locations around the world. As far as the user-owned console is concerned, multiple reports have claimed that the company intends to launch two consoles at E3 this year, one of which is cheaper than the other. Let’s see if this is just an Xbox One with lesser hardware or a streaming-focused Console 2.0.
One thought-provoking aspect with the announced Redmond-based initiative is that in their PR videos they underline a mobile-focused service, portraying streaming as more of a fill-in-the-cracks kind of entertainment in regards to its scope, something that’s meant to fill up free time. Whether this is a power move from their side, an if-it-can-run-on-mobile-it-can-run-on-anything sort of message, or the true intended focus for the future service it’s impossible to tell. One possibility we can’t ignore in this regard is that the mobile devices advertised could serve as a proxy for a potential 5G-enabled portable gaming console that Microsoft is going to develop in the future.
Google announced their Project Stream product in late 2018 and, to this date, this is the only contender that has offered public access to its service. Stream allowed users over 17 years old located in the United States to play Assassin’s Creed Odyssey in a web browser, free of charge. The experiment was greeted by overwhelmingly positive reviews coming from professional gaming outlets.
Google is now expected to reveal its hand in game streaming at GDC tomorrow via a keynote that was teased with the phrase ‘unveiling Google’s vision for the future of gaming’.
Soon after the keynote, Google scheduled multiple ‘Google Reveal: Developer Sessions’ involving studios focused on developing AAA titles. idSoftware -developer of DOOM-, Ubisoft and, last but not least, Cristal Dynamics, who are expected to talk about their future Avengers IP game licensed from Marvel. From the names and scarceness of information on these sessions, we can only assume that Google collaborated with these companies to bring one or more products to their service either as launch titles or in the near future. This makes sense since one would expect initial games to be very console-centered in terms of genre, think more Action-Adventure gameplay styles and less hardcore, reaction-critical FPSs.
In the hardware department, based on a recently submitted patent by Google, everyone expects at least a game controller reveal. Unfounded rumors have been circulated around the internet about the possible reveal of a streaming-focused game console but at this point it’s all speculation. While, in theory, a technologically outstanding software streaming solution would allow the hardware to be as minimal as an existing Chromecast equipped with the best Wi-Fi antenna, I don’t see this happening on March 19th. In part because of the recent personnel shifts in Google’s hardware department but also because, traditionally, tech companies prefer to avoid making their own hardware as much as possible. That said, a Switch-esque device based on Google Pixel hardware, streaming high-quality gameplay from the cloud is not completely unrealistic at some point in the future.
Google also displayed its strong commitment towards the game streaming model with its recent hires, bringing onboard VPs from established publishers like EA and console makers like PlayStation and Xbox and showing that they seriously intend to create a solid game library and leverage the knowledge that comes from traditional console makers’ experiences.
One thing that is disturbing to me, personally, in the context of Google as a gaming platform is its dismal track record when it comes to any social-related product. The latest generation consoles have been accompanied by platforms that were developed with a social-first mindset, the PSN+PS4 combo being the gold standard at the moment. If Google can’t pull off a decent experience in this regard, they’ll have a tough, uphill battle on their hands. Last time I checked, Discord was still up for grabs.
From the business perspective, all new-entrants appear to follow the same structure for their future game streaming solutions: The robust cloud-enabled streaming service, the user-facing platform that comes with it and basic user-owned hardware².
The complexity -and price- of the user-owned hardware will vary based on the GSSP’s software architecture strength. The more robust the cloud architecture, the weaker -and potentially cheaper³- the local hardware will need to be. As a result, the bulk of profits will shift from the big up-front console investment to an As-A-Service model, with a lower barrier to entry. This gives subscribers access to games without the pain of the big initial commitment and the possibility to cancel their membership at any time.
As a result, the most profitable solution for all GSSPs can be reached by taking a page from the handbook of existing music and OTT video streamers and just BE UBIQUITOUS. That means freedom for users to stream a game on any device without restriction as long as you pay a subscription fee to the service.
Price tiers based on the amount of devices one uses and the desired quality of the gaming experience would also translate well to game streaming. It would also be easy to offer a ‘family’ plan from the very beginning along some common sense restrictions, but I don’t think anyone will do it. Not out of fear of fraudulent behavior but rather due to the undoubtedly low maximum compute capacity to be offered in the beginning when compared to the expectations generated by the hype surrounding the topic.
Game streaming looks like a business that will rely on the economy of scale, requiring legions of subscribers in order to recover the massive initial investment in server infrastructure and the recurring cost of improving that hardware as new games require increasing amounts of processing power to run smoothly. GSSs will profit from significant network effects, as users will be more interested in joining a service that already lists a lot of their acquaintances as subscribers. For this reason the user acquisition strategy at launch can influence the success of a service considerably.
Retention will be another essential pillar in holding up a game streaming service. The success of traditional consoles has been relying on the quality of exclusive titles it supports, games that are not available on competitor’s devices. Console manufacturers have always been using exclusives as a marketing technique to get their consoles into people’s homes. With a subscription-based streaming service that can be canceled at any time, GSSPs will have to continuously fork over money to publishers and/or developers for exclusives if they want to retain their subscribers in the long run.
Consequences, in the long term, will be many and all of the ripples are impossible to predict at this point. This is an attribute of disruptive technology. Here are a few that come to mind:
More gamers. This is an obvious one, as the barrier to entry changes when switching from buying a $400 console to buying a $50 controller, the total addressable market will increase with the addition of new users, admittedly in an incremental way rather than exponentially.
Better games. Currently, game developers are somewhat limited in terms of how much processing power they require from the user-owned hardware. This is due to the ‘non-upgradable’ nature and long life cycles in the console market while, in the PC market, developers limit performance due to the high costs of new processing power-providing hardware. These limitations will be considerably reduced in a world of streaming but will not vanish, since GSSPs will charge a higher fee for different quality tiers.
Publishers and Developers. Game publishers will profit in the short term from faster, wider and cheaper distribution of their products to consumers. On medium and long term, it all depends on the direction each GSSP will take with their business model, presumably they’ll want to go with the option that yields more profits for them. As owners of both the streaming service and the user-facing platform, GSSPs could optimize a lot of the existing publishing process, making it transparent and easy to use, rendering existing publishers that do not own any development studios obsolete. I expect the acquisition rate of game development studios by big publishers will accelerate after the slightest hint of such a shift.
Micro-transactions. Just because you’re paying for a service that allows you to access a certain game doesn’t mean that game publishers and developers are willing to give up their existing micro-transaction cash cow just yet. Publishers will be reluctant to completely eliminate their in-APP purchases models, at least until they can confirm the model is profitable and sustainable.
Mobile gaming. While current 4G connections could provide the minimum speeds of 10 Mbps needed for game streaming at low quality, the arrival of ubiquitous 5G connections can make streaming top-notch experiences a reality. We’re gonna have am adjusting period when developers tweak the experiences as they go, but sooner or later control schemes will become more intuitive and easy to use. At this point current mobile developers will be feel obligated to pivot their products to take advantage of these new technology invading their market in a similar way AAA developers are trying to figure out mobile gaming to this day.
Institutional game reviewers, the likes of Kotaku, Polygon or Eurogamer, who’s main business relies on offering potential buyers a professional opinion about the quality of any given game, will become maybe more important than they are now. In a world where subscribers of a game streaming service get access to a new game as soon as it’s released for a fee they already pay, it will become more difficult for end users to figure out which game is worth their time. Reviewers will act as a filtering system that separates signal from noise.
Player behavior. This is an unpredictable one. I’d be interested to know your thoughts on this, let me know with a comment!
If you enjoyed this article follow us on Twitter.
¹ ¨While a $40 million company needs to find just $8 million in revenues to grow at 20 percent in the subsequent year, a $4 billion company needs to find $800 million in new sales¨- Clayton Christensen
²Even if Google does not release a hardware solution on March 19th, they could develop one in the medium term
³The final price of any hardware device is severely influenced by the level of optimization achieved in a company’s operational pipeline. A company with more experience in the space would be able to negotiate better deals with its providers..
⁴A new console generation comes out only once every 6 years while blockbuster games improve their graphics on a yearly basis.
