The Ripples of Game Streaming
As we draw closer to the release of the next generations of video games consoles this holiday season and with relentless news of more companies developing their own game streaming services, we can’t help but contemplate the future of video games going forward.
Let’s start by imagining the world several years in the future — how many exactly is impossible to tell — in which the distribution of video games is drastically disrupted. From the existing model that mixes physical copies dispersed by online or brick-and-mortar shops with digital downloads provided via storefronts like Steam and the Epic Games Store, to a reality where we buy our games from the same company that also makes the hardware your run them on. These would effectively make GSSPs into the new end-to-end gatekeepers of gaming and will likely make the above-mentioned storefronts obsolete.
At the moment game streaming services like GeForceNow look to have a very attractive business model, one that benefits both developers and publishers as their product is purchased at a price set and cashed in entirely by them, while consumers pay a monthly subscription on top in order to run the game not on their machine, but Nvidia’s servers in the cloud. This is likely an intermediary situation where all parties are attempting to figure things out as they go with the new model, a situation that’s bound to change sooner rather than later. Here are some common-sense questions we should all, as video game enthusiasts, ask ourselves in the coming months.
What will the world look like when video games distribution is made primarily through streaming platforms and no one has a powerful-enough machine to run a game locally anymore?
In two words, ‘not good’, but hopefully we’ll never get there. Once it will become apparent that game streaming services are amassing too much power to the detriment of the consumer, I trust that hardware manufacturers will be quick to spot the opportunity and spring back into producing powerful machines in order to disrupt the streaming business model. Like the natural ecosystems they so closely resemble, free-market business environments hate a void and aim to fill it ASAP. Unfortunately, relying on legislators is not an option since they’ve historically proven incompetent in protecting consumers from any abuse that involves a technological component above a certain degree of complexity and this situation will only get worse in the future as technology grows increasingly more convoluted.
Can\Will this business model, of an upfront monthly payment and zero revenue tax on developers, continue forever?
If history is any proof, my best guess right now is no. As each GSSP will make considerable efforts in offering a more compelling product overall, the business model will shift along many different axes. We shouldn’t be surprised if at some point in the future, as these streaming services gain increasingly more market share, the model switches through multiple other iterations and eventually lands on the complete removal of the monthly service fee for the consumer. In this new reality publishers will be worse off than they currently are since they depend on the GSSPs not only in the distribution of their product, but also in running it, and will thus have no choice but to relinquish some of their profits.
How will mobile gaming platform owners react to this new circumvention of their cut?
With gaming now generating two-thirds of all the revenue on mobile platforms, I doubt Apple and Google will be cool about it. The leniency offered now to the likes of Spotify and Netflix will likely disappear in the case of game streaming APPs that could severely cut into time currently taken over by games in their respective stores. An outright ban of such products from their stores will buy them some time until the inevitable lawsuit on anti-competitive practicescomes to an end, after which the guerrilla warfare of soft bans, limiting the visibility of such products by leveraging search algorithms, will start. Google will obviously allow and promote the use of Stadia as much as they can but Apple has no obvious move here considering that building such a service requires massive investments of time and money, and that companies that have such solutions in place are reluctant to sell at this point due to the enormous future potential.
How will this impact the gaming console space in the future?
At the time of this writing, the technical specs of both the flagship Xbox Series X and the Playstation 5 models are known even to the general public, but we’re none the wiser on whether any of them will also release much-rumored cheaper models focused on streaming donning lower hardware specs. If we look past the upcoming generation of consoles, things could get a lot more interesting with the value network of these devices switches from built-in hardware performance to just ‘networking quality’.
Portable, Nintendo Switch-style designs, whether from the Japanese company or other manufacturers, could become even more successful with the arrival of game streaming. A future version of such a device with an improved display, networking capabilities —the fastest WiFi and 5G technologies — and paired with a solid infrastructure solution, could satisfy all of the previously-mentioned requirements needed to succeed in the space andbe portable at the same time. The biggest obstacle for Nintendo in particular at the moment is that they neither own the robust infrastructure needed to achieve this feat or have the task-relevant experience or the financial strength to build one within an acceptable time frame.
Still, like most other problems, this one too has a solution. After the cloud partnership between Microsoft and Sony announced last year, there’s no reason why Nintendo couldn’t close a similar deal in the future. With almost their entire games catalogue exclusive to their own hardware at the moment, Microsoft, Google or potentially Amazon won’t have to fear the cannibalization of their own streaming services by the Japanese company; also, the oversized bill they send Nintendo will do well to recoup the price of their hardware initial investment faster. One could argue that all entertainment products compete, at least to a certain degree, for the limited free time consumers have at their disposal. However, considering that GSSPs can charge an arm and a leg for their service since they own the silicon, in the short term it might prove more profitable for them to just provide infrastructure for other companies. There’s no doubt that worldwide-deployed infrastructure is both the most important and costly component of a game streaming service but creating a polished UX, implementing billing services, doing the necessary marketing and dealing with individual studios to build a solid library of games cannot be underestimated.
Now, this drastic change won’t happen over night, and there’s no guarantee it will even happen at all. As of yet game streaming is at the beginning of the road as an innovative technology, struggling to make its way into the lives of early adopters, but the early signs coming from the likes of Google’s Stadia and Nvidia’s GeforceNow products are extremely promising. Once these, and other future competitive services, spread into more territories consumers will start to see the the price advantage brought on by the innate flexibility of monthly payments and migrate in droves. Publishers and developers will have no choice but to follow the users if they want to sell their products and recoup their investment and maybe make a profit.
In the short term the best experience is for GSSPs to leverage the vast libraries of existing digital storefronts, with a gradual takeover bound to happen over a longer period of time. As things stand now, it looks like the game streaming space will be dominated by several services—somewhere between three and five is my best guess — so we can rely on competition to yield experiences that only increase in quality over time from the perspective of the gamer.