The video game industry has relied more or less on the same commercial model since games have moved from arcade gaming rooms to the home. Video game enthusiasts buy consoles like Sonyof (NYSE: SNE) PlayStation 4 or Microsoftof (NASDAQ: MSFT) Xbox One (or a computer ready to play), then buy individual games. There have been minor changes over time – like the advent of digital downloads and markets like the PlayStation Store and Steam – but until recently, games were typically purchased at the unit . It will not be like this anymore. In fact, the first subscription streaming services for video games have already arrived.
Like movies, television and music before them, video games are disrupted by the advent of streaming subscription services. Some of these services already exist; others are still in the planning phase. It's early, but it's clear that some big companies are banking heavily on the future of the subscription-based streaming game. Who will come out at the top?
Early entries and platform-service synergies
Some technology giants are currently planning subscription streaming services, but they are already far from the first to enter the video game streaming market.
NVIDIA (NASDAQ: NVDA) has a video game streaming service called GeForce Now. This service is designed to run on the company's PCs, Macs, and streaming game device, the NVIDIA Shield TV.
There are also Microsoft and Sony, two of the three largest console game companies. The Microsoft Xbox Game Pass and Sony PlayStation Now are designed to work on the consoles of their respective companies. PlayStation Now also works on PCs.
How much does a head like this cost? This could be important, especially given connections between Sony and Microsoft between their streaming services and their consoles. Sony has sold 91.6 million PlayStation 4 consoles: the best performance among all systems of the current generation. Only PlayStation Now will work on these consoles.
The advantage of Sony in terms of hardware is translated by a benefit in terms of subscription to streaming. According to the SuperData research firm, PlayStation Now has generated a business turnover of $ 143 million in the third quarter of 2018, by far the best of all streaming video game services. There are other relevant factors (such as the larger size of the PlayStation Now library compared to the Xbox Game Pass library), but this helps to illustrate the advantage enjoyed by Sony due to the popularity of its hardware. .
With that in mind, it's worth keeping an eye on Nintendo, as well. The Switch has sold more than 32 million units since its inception less than two years ago. Along the way, it has reached 20 million units sold faster than any other game console in history. Nintendo's online gaming subscription service includes a small number of streaming games from older Nintendo consoles (NES games are available now and Super Nintendo games are expected soon). It's not hard to imagine Nintendo building a service that supports new games.
|Console||Units sold (as of December 31, 2018)|
|Playstation 4||91.6 million|
|Xbox One||40 million (estimated)|
|Nintendo Switch||32.3 million|
Other tech giants are hiding
Microsoft, Sony and Nintendo have an obvious advantage here. And it's not hard to understand why NVIDIA – which makes hardware for gaming computers – gets involved. But they are not alone.
Apple (NASDAQ: AAPL) rumored to be working on a video game edition and / or streaming service. AlphabetGoogle offers a video streaming service called Project Stream. And Amazon (NASDAQ: AMZN) is also said to develop a video game streaming service.
Amazon, Apple and Google may not have their own video game consoles, but they have other options to attack the video game streaming market. They could follow the path of NVIDIA and offer streaming devices with robust hardware specifications, up to the task of streaming video games, for example. They could also use their wireless transfer protocols to stream video games from a computer to a streaming device. For example, Apple might ask you to run the video game streaming service on a MacBook, and then send it to your Apple TV via AirPlay.
In addition, Google would be thinking of a material offer down the line. For the moment, however, Google's streaming video game service should work in the Chrome browser – which is possible because Google, like the rest of the set without a console, can use the computer in cloud to make up for its lack of gaming equipment.
The use of cloud computing to support heavy loads makes it possible to play modern games on simplified hardware. Video game company Electronic Arts introduced the first versions of a streaming service allowing users to play games on undernourished devices, such as smart TVs, while Google was working with Ubisoft get Assassin's Creed Odyssey to work on Project Stream. Cloud computing would also be key to Amazon's video game subscription service plans.
Of course, consoles can also benefit. Nintendo used cloud computing to allow Nintendo Switch owners in Japan to play games that the Switch could not run on its own hardware. At the same time, Microsoft is developing a service called Project xCloud that will allow Xbox games to be integrated with mobile devices and other less powerful platforms – and may open the door to less expensive Xbox hardware.
Who has the benefit?
Cloud computing largely erases the advantage that companies like Microsoft and Sony have in the form of their consoles. But it's not just computing power: Microsoft and Sony have built-in audiences for their existing and potential streaming services because they already have a loyal fan base of console users. In addition, both companies have internal game development teams that could reduce the cost of content. (All this is also true for Nintendo, although this company has so far flirted with serious streaming efforts only in Japan.) Combined with a length in advance, these benefits give the advantage to Microsoft and Sony, at least for the moment.
John Mackey, CEO of Whole Foods Market, an affiliate of Amazon, is a board member of The Motley Fool. Suzanne Frey, an executive member of Alphabet, is a board member of The Motley Fool. Teresa Kersten, a LinkedIn employee, a subsidiary of Microsoft, is a board member of The Motley Fool.
Stephen Lovely owns shares in Amazon, Apple and Netflix. Motley Fool owns shares and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Nvidia and Netflix. The Motley Fool owns shares in Microsoft and offers calls to $ 150 on Apple in January 2020 and calls to $ 155 on Apple in January 2020. The Motley Fool recommends Electronic Arts, Nintendo and Ubisoft. Motley Fool has a disclosure policy.