Deeper Dive—How Amazon, Verizon and others can differentiate in a crowded cloud gaming market

Assassin's Creed
Gameplay capture of "Assassin's Creed Odyssey" on Google Stream. (Ubisoft/Google)

Amazon, Verizon and others are preparing to launch cloud-based streaming video game services. With the market already getting crowded, differentiation will be necessary to stand out.

Verizon is reportedly recruiting testers for Verizon Gaming, a platform that runs on the Nvidia Shield set-top box paired with an Xbox controller. The service will eventually launch on Android devices as well.

Amazon is also reportedly working on a video game streaming service. And Charter Communications recently made a strategic investment in startup Blade, which approximately one year ago launched Shadow, a cloud-based PC available in the U.S. and Europe.

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Last year, Google and Microsoft both began testing for cloud-gaming platforms, Stream and Project xCloud, respectively. And Sony’s PlayStation Now streaming service has already been in the market for years.

With so many companies vying for space in an up-and-coming service niche, how can they set themselves apart from their competitors?

Mike Milligan, senior director at Limelight Networks, said a top priority will be providing smooth streaming with minimal latency. He said his company’s State of Online Gaming report found that gamers’ top priority is fast performance.

“Providing the fastest online game performance will require cloud-based gaming companies to utilize edge computing capabilities that are located close to gamers, rather than relying on centralized gaming infrastructures. By moving game elements closer to the players, gamers will enjoy engaging experiences that keep them playing longer,” Milligan said.

All the companies mentioned above have expertise that can help them deliver reliable game streaming. Both Charter and Verizon are massive ISPs focused on delivering faster network performance with technologies including DOCSIS 3.1 and 5G. Amazon, Google, Microsoft and Verizon are all scaled cloud service providers with an eye on the type of network edge computing architectures that might be needed to serve the ultralow-latency needs of cloud gaming. And Microsoft and Sony are already established platform providers for high-end console gaming.

Mike Fischer, senior adviser for digital entertainment, AR/VR, esports and gaming for the Diffusion Group, agreed that low latency is going to be key for these platforms but admitted that not all the early entrants in cloud gaming will succeed.

“There’s no way the ecosystem can support so many players,” Fischer said.

He said that the best cloud network will be a big factor in determining the early success stories for streaming games and that, in those terms, Amazon and Google may have an edge.

But Fischer said that Amazon, Google and Verizon will need to buy their way in with developers, which will create a feeding frenzy as bids roll in for platform exclusive rights to AAA game titles.

Fischer said that platforms will need to secure the best selection of games and launch ahead of competitors. He said there will be enormous competition to get out early this year.

Launching ahead of competitors could give cloud gaming platforms an advantage in attracting developers, Fischer said, since a lot of effort goes into putting games on certain platforms, so developers will tend to optimize for the ones that are doing the best or have a head start.

Fischer said that there are essentially two ways to get the best games: build them yourself or have the best relationships with developers. In terms of developer relationships, he said Sony and Microsoft—both of which make well-known gaming consoles—have the advantage there.

“I give Microsoft the slight advantage because they have Xbox plus they have their cloud platform,” Fischer said.

Microsoft has been making other recent moves to better position itself for the incoming cloud gaming wars. Last year, Microsoft acquired six different video game studios and founded one new studio. The company now owns 13 video game studios total.

Fischer said that as the industry moves into a “Netflix of gaming” model, having a lot of content for a very wide audience is important. That means Microsoft could have a leg up on its competition by owning so many points of video game output.

But Fischer expects there will be tons more investment in the space from all the players. He pointed toward the desire for big tech companies to build presence within the home as a reason why companies like Apple and Google chased Amazon into the voice assistant device market. But he said so many of the devices and cloud platforms currently inside lots of homes rely on services like streaming video and music, which don’t necessarily have the same usage life cycle as console-quality video games, which can keep users coming back for months or even years.

Fischer said that by getting users onto cloud gaming platforms, companies can perhaps drive deeper engagement with other cloud services and/or devices. That’s why there’ll likely be deep investment in cloud gaming from the companies currently pursuing platform launches.

According to a recent study from Wise Guys Reports, the cloud gaming market could expand at a 23% compound annual growth rate between 2019 and 2023. If those figures are accurate, it shouldn’t be surprising that so many companies are looking to secure a spot in the cloud gaming space. But it’s still early and Fischer said that all the players have a shot at cashing in.

“It’s anybody’s prize to take at this point,” Fischer said.

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