The tricky, but po­ten­tially lu­cra­tive, task of stream­ing videogames

The Welland Tribune - - Business - SARAH E. NEEDLE­MAN

Tech­nol­ogy gi­ants are try­ing to bring to videogames the same stream­ing ca­pa­bil­i­ties that gave rise to Net­flix and Spo­tify, a trans­for­ma­tional leap that could usher in a new wave of growth for an in­dus­try big­ger than Hol­ly­wood.

Mi­crosoft Corp. and Al­pha­bet Inc.’s Google re­cently an­nounced ef­forts to let peo­ple play big­bud­get, vis­ually com­plex videogames — so-called triple-A games — on in­ter­net-con­nected de­vices with­out re­quir­ing spe­cial­ized hard­ware that costs hun­dreds of dol­lars. They join tra­di­tional pub­lish­ers such as Elec­tronic Arts Inc. in a more than decade­long pur­suit to stream triple-A games from the cloud to play­ers any­time, any­where.

That is crit­i­cal to at­tract­ing play­ers who don’t want to shell out for fancy PCs or con­soles such as the PlaySta­tion 4, Wall Street in­vestors and an­a­lysts say. It could also lead ex­ist­ing play­ers to en­gage more with — and spend more on — games, steal­ing away hours from movies, mu­sic and other me­dia in the com­pe­ti­tion for con­sumers’ time.

“This is go­ing to be pos­i­tive for gam­ing,” says Mark De­mos, a port­fo­lio man­ager at Foundry Part­ners LLC, which in­vested roughly 2.1% of its $11.3 mil­lion (U.S.) midcap-growth fund and 1.7% of its $8 mil­lion ac­tive­growth fund in Elec­tronic Arts in late Septem­ber. “The rev­enue pie prob­a­bly will grow faster.”

Game-soft­ware rev­enue rose 59% to $121.7 bil­lion world-wide be­tween 2013 and 2017, and this year is on track to reach $134.9 bil­lion, ac­cord­ing to in­dus­try tracker New­zoo BV. By com­par­i­son, spend­ing at the box of­fice and on home movie en­ter­tain­ment reached a global record of $88.4 bil­lion in 2017, the lat­est data avail­able from the Mo­tion Pic­ture As­so­ci­a­tion of Amer­ica show. Global recorded-mu­sic rev­enue, in­clud­ing stream­ing, was $17.3 bil­lion in 2017, ac­cord­ing to the In­ter­na­tional Fed­er­a­tion of the Phono­graphic In­dus­try.

Stream­ing of­fers an op­por­tu­nity “to reach a cus­tomer who isn’t per­haps as eas­ily reach­able to­day,” says Ka­reem Choudhry, cor­po­rate vice pres­i­dent of the gam­ing-cloud unit at Mi­crosoft. Bil­lions of peo­ple have in­ter­net ac­cess and “we know they’re not all go­ing to buy a con­sole,” he says.

Tech­no­log­i­cally, though, stream­ing games is chal­leng­ing. Un­like movies and mu­sic, games are in­ter­ac­tive, with highly de­tailed images cre­ated in real time based on play­ers’ ac­tions — in some cases hun­dreds at once. Even a half-sec­ond hiccup in pip­ing the mas­sive amounts of data needed to re­spond to play­ers’ ev­ery in-game whim could be the dif­fer­ence be­tween win­ning and los­ing in com­pet­i­tive games such as Call of Duty.

Ef­forts to stream games in the past failed in part be­cause of such hic­cups, known as la­tency. To­day, a small num­ber of ser­vices such as Sony Corp.’s PlaySta­tion

Now and Nvidia Corp.’s GeForce Now are test­ing the wa­ters.

“There’s min­i­mal lag,” says Phil Eisler, gen­eral man­ager of Nvidia’s cloud-gam­ing unit. “It’s not no­tice­able to the aver­age per­son.” But for a pro­fes­sional com­pet­i­tive gamer, GeForce wouldn’t be ideal. “Es­ports pros are not the tar­get for this,” Mr. Eisler says.

In­dus­try watch­ers be­lieve the spread of data cen­ters and de­ploy­ment of next-gen­er­a­tion wire­less, known as 5G, will do away with those chal­lenges, soon let­ting peo­ple play a game in a triple-A fran­chise like As­sas­sin’s

Creed by pop­ping open an app on a TV or phone in much the same way they would find a movie on Net­flix.

In fact, As­sas­sin’s Creed Odyssey, the just-re­leased se­quel in the fran­chise, was Google’s choice to test game stream­ing on its Chrome browser for lap­tops and PCs. Google in its an­nounce­ment said it is look­ing to solve some of the big­gest chal­lenges of stream­ing, and that block­buster games are among the most de­mand­ing ap­pli­ca­tions.

An­a­lysts say the mar­ket has great po­ten­tial.

“Stream­ing is a mass-mar­ket op­por­tu­nity,” says Mike Ol­son, a se­nior re­search an­a­lyst at in­vest­ment bank Piper Jaf­fray. “Just like mo­bile phones brought new peo­ple into gam­ing, so could stream­ing. Al­most ev­ery­one has ac­cess to the in­ter­net.”

Stream­ing also could lib­er­ate pub­lish­ers from the cur­rent stan­dard of sell­ing triple-A

games for about $60 a pop, and in­stead nudge them to­ward more-lu­cra­tive sub­scrip­tions. An­a­lysts and ex­ec­u­tives say monthly fees like the kind Net­flix and Spo­tify col­lect could help game pub­lish­ers gen­er­ate morepre­dictable rev­enue over time.

Elec­tronic Arts be­lieves that, “just like most me­dia has evolved, sub­scrip­tions plus stream­ing will be the fu­ture of the busi­ness,” the com­pany’s fi­nance chief, Blake Jor­gensen, told share­hold­ers in late Au­gust.

One way game stream­ing could play out, an­a­lysts say, is cloud­com­put­ing com­pa­nies such as Ama­zon.com Inc. launch com­pet­ing apps with broad se­lec­tions of games and ser­vices such as player match­mak­ing and chat, much the way Sony, Mi­crosoft and Nin­tendo Co. do on their con­soles to­day.

Other pos­si­bil­i­ties: Pub­lish­ers with large con­tent li­braries, such as Ac­tivi­sion Bl­iz­zard Inc., re­lease their own apps for an ar­ray of de­vices. Elec­tronic Arts, Ubisoft En­ter­tain­ment SA and other pub­lish­ers al­ready have ser­vices that sell games and con­nect play­ers on­line. Or, they could cut

ex­clu­sive deals with de­vice mak­ers such as Ap­ple Inc.

No mat­ter how things shake out, the com­pe­ti­tion for gamestream­ing cus­tomers “will be in­tense,” says Tim O’Shea, an an­a­lyst at in­vest­ment bank Jef­feries Fi­nan­cial Group. “It’s go­ing to be a cloud war.”

Arthur Rich of Port­land, Ore., used to buy new con­soles ev­ery few years, plunk­ing down hun­dreds of dol­lars each time for the lat­est ad­vances in graph­ics, speed and stor­age.

The 36-year-old grade-school teacher says he gave up in the early 2000s be­cause “it costs too much.”

Mr. Rich is a fan of stream­ing, though. He sub­scribes to Net­flix and HBO Now, apps he ac­cesses four to five times a week via Ama­zon’s Fire TV Stick, as well as on his smart­phone and tablet when he trav­els.

“I would love it if I could do the same with videogames,” Mr. Rich says. And if a ser­vice could rec­om­mend games he might en­joy the same way Net­flix does with movies and TV shows,

“that would be a big in­cen­tive to sign up as well,” he says.

AN­DREW FRAN­CIS WAL­LACE TORONTO STAR

Leafs Gam­ing Day fea­tur­ing games like Fort­nite at in Toronto, Oc­to­ber 21. Tech­nol­ogy gi­ants are try­ing to bring the same stream­ing ca­pa­bil­i­ties as Net­flix to videogames.

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