Services have overtaken products as drivers of business growth
In March 2019, Google unveiled Stadia, a long awaited video game streaming device. Stadia is geared towards solving many of the problems associated with gaming such as lag, glitches and low graphics quality. It is expected to leapfrog the world’s current most powerful console, the Xbox One X, and challenge all major gaming companies with exceptional scalability and speed.
So, why is Google moving into gaming? According to PwC, the global games market will exceed $93bn by next year. As if that wasn’t motivation enough, there’s another factor at play: the ascendance of the service based business.
From product to platform
In order to grow their businesses, companies can’t now rely on products alone. Consumers are becoming less interested in product ownership, and see more value in subscriptions. This is apparent in virtually all sectors, and the advantages are many. Businesses are able to build deeper and longer term relationships with users, learn more about them in the process, and there are more opportunities to upsell. In the entertainment world, the benefits of the subscription business model have been exemplified by Netflix and, in gaming specifically, Twitch.
Stadia, then, is another clear demonstration of the move from product to service. It will transform the way that games are played by making them accessible on any device or browser, without needing a specific console. In other words, it hopes to do for gaming what Netflix did for TV. Given the company’s ownership of YouTube, which is already a popular platform for game streaming and sharing, it might just be possible. Of course, they aren’t alone in this ambition.
Not the only player in the game
Streaming is something of a safe bet thanks to the success of sites like Netflix, but this means that competition is fierce. Stadia is a strong contender, with incredible computing power of 10.7 teraflops, 7,500 global servers to reduce lag, and the capacity to deliver gaming content to essentially any device. Nonetheless, Google’s step into streaming has been mirrored by its Silicon Valley friends. Apple, for example, has announced a subscription service called Apple TV Plus, which will provide news, video and gaming content to Apple TV owners. Microsoft is doing the same with Project xCloud, a step on from their Xbox days that promises 4K and HD gaming experiences. Amazon, the proud owners of Twitch, are also staking a claim to games with a cloud based streaming service.
In other words, big businesses have recognised the need to adopt new service-focussed business models to avoid disruption. The adoption and performance of these services remains to be seen, but what we can be sure of is that streaming is the next frontier for gaming, opening up a world where any game can be played anywhere, on any screen.
No consolation prizes
At one stage, it was difficult to imagine gaming without a console. However, the advent of high quality game streaming will, in time, lead to their abandonment. In many ways this is good news for the industry as it will lead to greater opportunities for expansion. However, traditional games companies will have to make the transition from console to platform very quickly if they want to remain relevant.
The transition from product to service is likely to have an impact outside of gaming and video, but we’re yet to find out how the likes of Stadia, Apple TV Now, and Project xCloud will fare in the market. At the moment, there’s everything to play for.
The games streaming war pulls together a number of important trends, particularly the fact that competition can come from anywhere. A decade ago, the likes of Nintendo, EA, and Sega could be forgiven for thinking that tech giants would ‘stay in their lanes’. But digitalisation has blurred these lanes, providing everyone with the chance to compete. There is now considerable pressure on gaming incumbents to compete (or collaborate) with technology heavyweights. It will be interesting to see how existing streaming companies react. Could Netflix start to create its own games? And, outside of entertainment, how will the move from product to service influence other industries? The winning companies will be those that diversify at pace and scale, tapping into different markets to reach consumers across the spectrum.
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