Google plans to launch a video game streaming platform called Stadia, positioning itself to take on traditional video game business. (March 19)
Video games are following data and video into the cloud.
Google, which has already announced its Stadia game streaming service will be available in November, will be showing that off at his year’s Electronic Entertainment Expo (E3), which begins Saturday in Los Angeles.
Microsoft is expected Sunday to reveal more about its own xCloud game platform, also being developed to deliver games via the cloud. Sony is partnering with Microsoft to augment its own cloud gaming strategy. Amazon and Apple are also developing online game services, too.
Cloud gaming is about to get super-sized with these multiple entrants jockeying to deliver pristine 4K-quality games on broadband networks, without the need of a set-top box tricked out with all the workings of a PC to store the game.
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That’s where much of the attention is headed into this year’s E3. Now in its 25th year and expected to draw as many as 65,000, E3 is the largest video game showcase in the U.S. and is globally influential in forecasting what is to come in video games.
Cloud hosting of video games could massively expand the market, which already includes more than half of all U.S. adults (164 million), according to the Entertainment Software Association, the trade group that conducts E3. Another 21% of the U.S. gaming audience is under the age of 13 and three-fourths of homes have a child who plays games, the ESA says.
While the smartphone has become the most common device to play games (60% of adults play on one), more than half (52%) play on a computer and nearly half of U.S. adult gamers (49%) play on a console video game system, the ESA’s recent survey of more than 4,000 Americans found.
Many people “don’t have a console today or don’t have a gaming PC today,” says Chris Early, vice president for partnerships & revenue at Ubisoft, which has several games that will be available on Google’s Stadia service. “Streaming makes it possible for them to play our games on older PCs or Macs or smart TVs or a whole variety of things.”
Can Google disrupt the console wars?
The current generation of video game consoles – the Microsoft Xbox One, Nintendo Switch and Sony PlayStation 4 – have sold more than 165 million units globally, with Sony accounting for more than half those sales with more than 91 million PS4s sold.
All three of the major video game hardware makers – Microsoft, Nintendo and Sony – are developing their next console system. But it’s unlikely much, if any, news about new hardware will come out of E3.
For the first time, Sony is not participating in the event – although news landed last week when Kojima Productions revealed that its PlayStation 4 exclusive “Death Stranding” would be out Nov. 8.
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“Sony is not there and Nintendo has said they are not announcing anything hardware this E3 and Microsoft will probably talk about Project xCloud, but I doubt it’s a hardware thing,” said Michael Pachter, analyst for Wedbush Securities. Microsoft last month brought to market a new $249.99 disc-less Xbox One S console, which has a 1 Terabyte hard drive to store downloaded games.
There could be some price reductions announced at E3. But, Pachter said, “my guess it’s zero hardware (news at E3) and probably a lot of streaming and obviously a lot of games. That’s what I think we are going to see.”
With the next generation of consoles not likely until at least 2020, that leaves an opening for Google to woo gamers with its streaming service. To do so, it needs more exclusive games, says Piers Harding-Rolls, head of games research at IHS Markit. “I believe major exclusives will be key to driving consumer awareness of and desire to adopt cloud gaming services,” he said.
Is cloud gaming the future of video games?
Some of the biggest tech companies in the world evidently think so. Each of the major video game console makers already deal in online games.
Microsoft and Sony both also have subscription services, Xbox Game Pass and PlayStation Now, respectively, that let you play games stored in the cloud – and Nintendo uses the cloud to offer classic NES games such as Donkey Kong on the Nintendo Switch and, with some newer games, to save your progress and play with other players, too.
And Amazon, which owns the Twitch video game streaming platform and is reportedly developing its own cloud gaming service as well, is at E3, too. Earlier this week, Apple revealed that players can use a PlayStation or Xbox controller with its Apple Arcade subscription service, due later this year, with more than 100 games played on Apple TV, Macs and iOS devices (iPhone, iPad).
Games delivered via the cloud – and 5G networks – will democratize video games, says QueeNiki, an Israel-based pro gamer who also streams on Twitch. “It will give the option to a lot of people who cannot afford gaming gear, so it will open it to a bigger audience,” she said. “They will now be able to play the most hard-core game on their cellphone or tablet or smart TV. … And I will get a bigger audience and they can watch and interact.”
That potential market will lead to “the Comcasts and AT&Ts of the world, a lot of service providers, getting into these streaming-type gaming systems,” said Anthony Goonetilleke, group president for Amdocs Technology, an Israel-based company that handles online payments for games and other content. Amdocs is also a sponsor of QueeNiki.
Moving games to the cloud and delivering them over broadband and, eventually, super-fast 5G wireless networks makes sense. “The role of the consoles is going to become diminished,” McNealy said.
But to be truly disruptive, Google and others should be devising “a creative and business model solution (for) … the Netflix for video games,” he said.
Success is not a given because, “you have to have the right content in volume beyond a subscription pay wall and the companies that need to work together for a subscription haven’t worked well together historically,” McNealy said.
However, creating a Netflix-like “all you can eat” cloud video game service that has brand-new releases available the same date as a game on disc or digital download is unlikely, Pachter said, “because that is not a winner for the content guys.”
However, online multiplayer games such as “Call of Duty” and massive open world games like “Grand Theft Auto” and “The Elder Scrolls” could be offered on release date, and billed by the hour similar to online games in China, Pachter says. “That is the smartest thing Google should do and streaming is a huge winner for everyone.”
The evolution of video games
Some of the most anticipated updates from E3 involve hot games in development including “Star Wars Jedi: Fallen Order,” “Borderlands 3” and “Doom Eternal” and new updates for “Fortnite” challenger “Apex Legends.”
Ubisoft has some unannounced games to reveal, possibly a new “Assassin’s Creed” or “Far Cry” game, Pachter says.
And there will be scores of new mobile games on display. Many of which let you play for free and buy additional content or features, or have subscription features.
“Fundamentally, E3 is about getting consumers excited about the fall lineups. You will still see plenty of news about big titles. That purpose hasn’t changed,” said McNealy said. “The question is whether the game is a free-to-play game, a subscription game or a standalone title or some combination.”
As physical video game sales decline — they will still generate more than $3 billion in 2023 in the U.S. — digital sales of console games will eventually surpass physical sales as they increase from $3.9 billion in 2019 to about $5.3 billion in 2023, according to PricewaterhouseCoopers. Spending in online games with microtransactions on consoles and PCs will grow from $5.1 billion to about $6.7 billion.
Dwarfing that is social and casual games played on mobile apps, which will account for about $10.4 billion in 2019, PwC estimates, increasing to $13.6 billion in 2023. “Smartphones are now powerful enough to provide console-quality experiences and almost all revenue comes through mobile” versus browsers, said PwC’s Mark McCaffrey.
With growth in mobile games, virtual reality and augmented reality, along with the move to the cloud, ESA CEO Stanley Pierre-Louis said, “there is a game for everyone and it’s reaching everyone.”
Follow USA TODAY reporter Mike Snider on Twitter: @MikeSnider.
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