Why Video Game Industry Pushes Cloud-Based Gaming

Playing video games used to be simple. You bought, borrowed, or rented a cartridge, gave it a good blow to “get the dust out”, and popped it in your system.

The advent of connected consoles, growth of digital distribution, and departure from physical media have muddied the waters. You can play games in more ways than ever before, but it isn’t necessary “easy” for consumers or developers to figure out the best way to buy and sell. And it’s about to get even more complicated.

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At GDC 2019, Google pulled back the curtain on its upcoming streaming platform, Stadia. We know very little, with price and monetization structure (ownership versus subscription) just a couple of the blank spots on the canvas left to be painted in.

Google enters the race against Electronic Arts, Sony, Microsoft, and a bevy of other companies confirmed and rumored to be working on streaming solutions. Whether one of them (if any) manage to make it work is anyone’s guess and entirely dependent on technology that mitigates less-than-ideal broadband infrastructure and a revenue structure that supports developers across genres and play styles.

The Netflix of Games
It seems that everyone entering the streaming ring is chasing a singular brass ring: The Netflix of Games. But that title means different things to different players.

For some, it simply means the de facto choice for a streaming game library. For others, it means a gaming subscription service that eschews traditional ownership in favor of a rotating, robust library of titles only accessible with an active monthly payment and hefty broadband connection. No local downloads. No ownership.

Services like Turner’s GameTap and Jump have been down this road, but the former was ahead of its time and the latter hasn’t taken off. Microsoft’s xCloud and EA’s Project Atlas could both pair well with existing services to deliver subscription gaming currently tied to downloads (Xbox Game Pass and EA’s Origin Access Premier) via the cloud.

Both companies have been building their libraries of owned and licensed content. The only thing left to do (and it’s no small thing) is implement a streaming component that allows those games to be played anywhere, on any device, at any time.

Sony has been working toward this with PlayStation Now (formerly Gaikai), earning itself its position as market leader according to analyst firm SuperData in November 2018. Early stumbles led Sony away from a per-title rental fee toward a blanket subscription. Or, put another way, it traded Blockbuster for Netflix, and like the streaming giant, it later added a download option for some games. This created the hybrid that Microsoft and EA may be targeting with their own efforts.

PlayStation Now still suffers in genres requiring precision, like fighting games and competitive first-person shooters. The model is sound, but the technology needs additional refinement to see wider adoption.

The Netflix of Games needs to contend with entrenched perceptions of media ownership that aren’t relaxing quickly among many players. Technology and psychology are big mountains to climb, which is why other models might be the gateway to a video game industry future already realized by film and music.

Library in the Clouds
One of the biggest questions looming about Google Stadia is how players will interact with its library. Google is investing in first-party publishing, but it’s unclear whether that will be more like Netflix Originals (a value-add for a subscription-based service) or Halo, Mario, or God of War (impressive games with massive marketing budgets that their publishers are comfortable viewing as loss leaders due to support of console adoption).

What does it mean to own a game in 2019? It’s a question the industry and consumers wrestle with all the time. For some, it means purchasing physical media. Others are content with an ethereal license that allows them to download a game from a storefront. It’s a question of permanence. Except for those instances when a platform holder removes the option to re-download existing purchases (like Nintendo did with the Wii Shop channel), you can access your games whenever you turn on the console.

A cloud-based service that uses a traditional purchase paradigm could be a solution, but it’s a better fit for hybrid services that allow downloads for local play. It’s going to be a much easier proposition to sell someone on a digital license they can use both locally and via the cloud rather than one that can only be used for streaming.

For this reason, it seems likely that Google will opt for a monthly subscription setup for Stadia. There is cognitive dissonance, at least for the time being, around purchasing access to a game you never really possess (even in digital form on a hard drive). Additionally, Stadia’s announced library includes games already available on other platforms. Google would have to make a Nintendo Switch-like compelling case for either double-dipping or choosing the streaming platform over one that offers local play.

Perhaps in the future, broadband infrastructure and preservation initiatives will be at the point that consumers have faith in paying premium per-title prices for games exclusively available via the cloud. Neither of those is firm enough now to instill that level of confidence.

A PC You Pay For Monthly, But Never Own
The last model competing for consumer attention changes things up entirely. Instead of offering up a storefront, Blade is selling a cloud-based Windows 10 PC. The Shadow service is available via PC and Mac computers, smartphones, tablets, and a standalone television set-top box called Ghost.

Currently, the Shadow servers approximate the GPU processing power of an Nvidia 1080 graphics card. That’s not the top of the line card, but for those playing on a 1080p monitor, an Nvidia 1080 is more than capable of hitting 60 frames per second in most games.

Logging into Shadow is no different than booting up your own Windows 10 PC. Log in, and you’re on a personal, secure desktop. Download Steam or Epic Games Store, download games from your library, and go. Blade says its data centers each have seven 100GB fiber optic connections. Testing Shadow bears this out with download speeds of more than 900 megabits per second. This helps negate the impact of Shadow’s relatively meager 256 GB of storage space. It’s not a problem to juggle space by deleting and reinstalling a 50 GB game if downloading it only takes a couple of minutes.

The potential sticking point is the cost. At $35 per month, Shadow is a hefty ding to your monthly expenses. It means you’ll likely need to make a decision when you’re ready to upgrade your PC or purchase a new one: own or rent?

Buying a bleeding edge system could run you $2,500 – $3,000 depending on what you pack into it. Go all out and that price could jump to $3,500. It used to be that building was much more affordable, but crypto miners have driven the prices of GPUs into the stratosphere, making the newest, most powerful cards the biggest expense for any build by growing margins.

For a system that approximates Shadow’s specs, the price is significantly lower. OEM systems with a 1080 are much more affordable (around $1,500). If you want to keep up with 60 frames per second over time, decide to purchase a 4K monitor, or simply want to future-proof yourself, you’ll spend about that just on a new video card (which may, in turn, also necessitate a new processor and motherboard). In short, it’s expensive to stay ahead of the curve.

At $35 per month for Shadow, break even on a $2,500 system is 72 months (six years). That’s not bad, especially since Shadow tells Variety that it will be upgrading its hardware periodically to keep up with increasingly demanding specifications.

The drawback is that you won’t be able to upgrade on your schedule. Often, players pair upgrades with one or more contemporaneous game releases that they’d prefer to play at the highest resolution and fastest frame rate. For Shadow, you’ll be waiting for Blade to juice up its hardware.

Blade also tells Variety that it has a method to deal with variable internet connections. Unlike other streaming media, you can’t buffer a video game being streamed from offsite. Instead, the Shadow technology looks at how packets are delivered and adjusts how data is sent to create stable performance. If one company can crack this conundrum, it’s likely that Microsoft, EA, and Google are going to find their own solutions that mitigate the problems caused by broadband infrastructure.

Ultimately, it’s a series of choices. Do you prefer to own your hardware, or are you comfortable renting it monthly? Can you wait for your virtual machine provider to upgrade their hardware to boost your performance, or do you need to set the pace? Are you willing to live without an “offline mode” or is does your internet service suffer downtime so significant that it would impact your ability to play entirely during those periods?

Who Does Streaming Help?
The one question that many have breezed past is why platform holders are pushing a streaming solution at all. The answer isn’t all that complex.

Subscriptions are reliable, recurrent revenue. Customer acquisition is expensive, but retention becomes a matter of routine. Watch Netflix a couple of times per week, listen to music on Spotify in your car or on a jog, and read a couple of comics each month on Marvel Unlimited, and the chance of canceling those services on a whim (rather than extenuating circumstance) is low. The same is true of playing online with PlayStation Network or trying out a game or two on Xbox Game Pass.

Players have been ceding power to console makers since the advent of digital distribution. There’s no guarantee that cloud-based play will be the bridge too far.

However, creators have had a bulwark against platform over-reach. There have always been other distribution methods (even if they don’t offer the same reach). Consolidation of power in any industry, especially in an industry like video games that already suffers from excessive (sometimes brutal) work conditions, has the potential to be detrimental to workers.

Depending on how developers are compensated, subscription models can also shape the creative nature of the industry. Platform holders and creators need to be aware that any model that links compensation to time played will push developers to create a narrow subset of games: those with extensive replay (like roguelites) and multiplayer, service-based titles. Short, narrative games won’t earn in this type of environment.

In order to reach a wide audience, developers already cede control to platform holders and storefronts. Giving up autonomy entirely and putting your destiny in the hands of someone else and their platform doesn’t leave creators with any power.

Streaming as a technology is an intriguing concept. Who wouldn’t want to play their game anywhere, any time? It’s why Nintendo hit a home run with the Switch.

Companies participating in the cloud gaming gold rush have bypassed the most important question: Why is this good for players and creators? Without a thoughtful answer to that, streaming is just another video game industry innovation that benefits bottom lines and not consumers.

“In-Game Economy” is a monthly column exploring business happenings and demystifying how the video game industry works by Michael Futter, freelance journalist and author of “The GameDev Business Handbook.”

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