Why you should care
Tech titans are launching an arms race to shape the future of video games.
Games like Assassin’s Creed Odyssey played on a giant background screen as Google CEO Sundar Pichai and other company executives unveiled their latest products in March. Stadia, a new game-streaming platform, will allow people to smoothly stream blockbuster games to smartphones, tablets, PCs and other devices running Google’s Chrome browser or YouTube. Pichai promised a “new games experience.” But his was only the latest shot fired in a battle royal that’s brewing over the future of gaming.
Spurred by the success of online game Fortnite, tech titans like Google, Apple, Microsoft and Amazon are vying to lead a new video game era promising the ability to instantly access immersive games with stunning graphics across any device and without dedicated hardware. In 2018, Fortnite went from hit video game to cultural phenomenon with more than 200 million registered accounts globally. The game has also drawn an audience of millions watching live gameplay on game broadcasting platforms like Twitch and on YouTube.
The major tech players are seeking to use their cloud computing heft to grab the game-streaming market, expected to explode from $10 billion in 2018 to $125 billion by 2025. They’re hoping to power game-streaming free from the pricey consoles that have anchored the video game industry for decades. Broadband slaying the game box. That’s the idea, anyway. In the process, they want to marry the success of video games like Fortnite and streaming platforms like Twitch.
In October, Microsoft outlined plans for a game-streaming platform — Project xCloud — that would bring games like Halo to any device. It will begin public trials this year, with an expected launch in 2020. Apple doesn’t plan to get left behind. On the heels of Google’s Stadia announcement, the company took the wraps off Apple Arcade, a game subscription service for iOS, Mac and Apple TV devices. Analysts expect Amazon to join the game-streaming fray too, given its strength in cloud computing, expansion into digital media and ownership of popular live game broadcasting site Twitch, which it purchased in 2014.
The big tech companies see a huge opportunity … gaming is a great way to keep people engaged.
Paul Hardart, NYU Stern School of Business
The new focus by these tech giants also fits in with their broader goal of winning in the attention economy: That is, keeping consumers plugged into their competing online ecosystems across games, TV, movies, music and other digital entertainment.
“We’re in a world of peak media right now,” says Paul Hardart, director of the entertainment, media and technology program at NYU’s Stern School of Business. “The big tech companies see a huge opportunity in maintaining an ongoing relationship with audiences, and gaming is a great way to keep people engaged.”
The race to lead the future of gaming comes at a time when the industry — whether in the form of popular games like Fortnite or streaming platforms like Twitch — are increasingly demonstrating their influence as social media successes that can keep audiences engaged for stunningly long periods of time. According to one survey of 1,000 Fortnite players in the U.S., half spend 6 to 15 hours a week playing the game. And Twitch says its more than 15 million daily users spend 95 minutes a day watching live gaming and interacting on its service.
Stadia goes live later this year, and that’s when it’ll be clear whether Google can deliver on Pichai’s promise. Performance has long been a stumbling block for game-streaming efforts because of latency — the delay between a user input, like clicking a button, and something being displayed on screen. In gameplay, even latency as much as 200 milliseconds can cause a noticeable hiccup, according to Lewis Ward, a gaming and virtual reality/augmented reality research director at IDC. “In a game, especially where you’re playing against someone live, everything has to be working together the entire time throughout that stream,” he says.
Providing that kind of seamless experience is a key reason console- and PC-based gaming systems remain lucrative enterprises. IDC projects game console hardware, software and related services to reach $45.4 billion in sales globally this year, and digital PC gaming, $34.9 billion.
Still, one of the biggest players in console gaming — Microsoft — isn’t hesitating from challenging Google for supremacy in game-streaming. What about cannibalizing console sales? Experts suggest the Xbox maker’s shift to game-streaming through Project xCloud will be a gradual process that maintains its hardware business while adapting to increasing demand for streamed entertainment anytime, anywhere.
What’s more, the company’s expertise in gaming could prove an advantage in mastering a post-console future. “Microsoft has the most pieces in place to become the game-streaming market leader,” says Karol Severin, lead analyst for games research at London-based MIDiA Research. “This includes cloud infrastructure, a popular games catalog and relationships with gamers.”
Apple’s Arcade is in the race too. Launching this fall, Arcade doesn’t mark a move into game-streaming by Apple — games will be downloaded via a new tab in the App Store — but like Google and Microsoft the company is doubling down on gaming to entice people to spend time (and money) on its digital services. That’s especially crucial for Apple as it pursues new revenue sources amid a slowing market — the company unveiled potential Netflix competitor Apple TV+ at the same presentation where it announced Arcade. “To keep growing their business, they’re going to move into services, whether that’s gaming or TV-streaming services,” says NYU’s Hardart.
Amazon could be next to join the battle. Twitch boasts more than 100 million monthly users and would complement an Amazon game platform the way YouTube ties into Stadia.
For all their dazzling demos, though, tech’s top players still face a daunting task disrupting the gaming landscape. Aside from the technical challenges of providing high-quality streaming, questions remain about pricing, developer support and consumer uptake. “Even the world’s biggest companies have not fully got it figured out yet,” says Hans ten Cate, a member of the International Game Developers Association board of directors and vice president of business development at Method Studios.
For example, people have yet to embrace the subscription model for games the way they have for other digital media like movies or music, especially with a flood of free-to-play games — including Fortnite. As such, experts agree new game platforms will ideally develop their own hit titles to pull in uncertain consumers.
To that end, Google, Apple and Microsoft are all touting original gaming content as a key feature. Google, for instance, has launched Stadia Games and Entertainment, a first-party studio to create exclusive games for its new platform. Apple is touting 100 exclusive new games for Arcade from indie developers and major game studios, while Microsoft last year acquired several game studios to bolster its original offerings.
“If you don’t have good games to offer, there’s no point,” says Severin.