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Who will will the race to be the dominant streaming service for games?

Everybody wants to become the dominant player in the games subscription space - but who will be left once the dust settles, and what does that mean for developers?

There is a quiet battle being waged behind the scenes that will have huge consequences for everybody in the games space. The battle to be the pre-eminent streaming service of the future. The battle to become the “Netflix of Games.”

The First Wave : Establishing the Platforms With Existing Content

Companies LOVE subscription services. Ever since it became clear that Netflix could turn $10 subscriptions into billions of dollars of reliable revenue, all the big players in the games space have wanted to get a piece of that pie. Sony, Microsoft, Amazon, Google, EA, Humble, GameFly, and others all offer some form of service where in exchange for a monthly fee you get access to a number of free games. Each of the players in this market is trying to increase the value they offer in order to become the first choice for players.

It’s worth noting that all of these services have their own nuances. EA, Microsoft and Sony both run two services, one that gives you free games each month (Humble Monthly works the same way) and another that gives you access to a large library of games. Amazon are currently leaning on their Prime service, which gives you access to free games each month. NVidia have NVidia Now, which allows you to play games you own streamed down from the cloud. Google are rumoured to have their own streaming service in development. There’s also any number of smaller players trying to make their mark in the space (spoiler : none of them have).

What does all that mean for developers? It means that if your game isn’t a F2P or Game as a Service (GaaS), at some point one or more of these subscription services will come knocking and offer you a flat fee in order to give your game to all their subscribers. This is a good way for developers to make a quick buck, with most services offering a one time payout along side a usage fee.

There is an element of the tragedy of the commons at play here. While each platform will offer developers enough to bring their game onboard, all of these subscription services and F2P games in aggregate change the value proposition for players. Games quickly stop becoming something you pay for and, as is the case with TV, there are clearly more great games than you could ever hope to play. We saw the race to zero on mobile, and the way it has decimated the market for anything other than F2P games in that space. The same forces are already at play in the PC/Console space, but we’ll soon see them combined with increasingly strong portfolios from all-you-can-eat subscription services. The motivation to pay for subscriptions is going to be a lot higher than the motivation to pay for content.

It’s already tough to find a market for games that are paid upfront, single player, limited duration experiences. GaaS games dominate peoples time and attention — that is their job! The longer you play, the more likely you are to pay. Add ubiquitous subscription services into the mix, where people can find quality single player games all for a fixed price, and the open market for those sorts of titles will vanish almost entirely.

One thing is certain. All of this helps to drive the perceived consumer value of games down to zero. Games are quickly becoming something you don’t pay for — they’re something that comes down the pipe free. This means there’s no hope for survival for short, single player games other than sub services.

Yet all hope is not lost.

The Second Wave : Commissioning First Release Content

Just as Netflix went from simply being a platform for second hand shows to a fully fledged production company creating original content, the same forces are beginning to shape the games space. Companies are starting to commission games directly for first release on their service — you can see this happening with Microsoft Game Pass, which offers all first party titles day and date of release and is starting to sign pre-release deals with developers.

The truth of the matter is, subscription portals offer immense value for the players and immense profits for the company. Because most people will only pay for one subscription service, winning in this space is worth an immense amount of money. In order to win and hold the title (as Netflix has seen) you HAVE to invest in content.

What does all this mean?

In essence, it means that we’re going to see the publishing side of games head in two directions. On one side publishers will chase the 
 F2P + GAAS games, and on the other side will be games that are unsuited for F2P — story games, single player linear games, games that offer 2–10 hours of play, games that have no IAP’s or DLC. Those sorts of games are going to find it harder and harder to make a return in the market as the expected upfront price for entertainment heads towards zero.

When Netflix pays for content, they pay upfront. The series has a budget, and that is the amount paid to the producers. There are no royalties and no performance based fees. In fact, the producers have no idea how well their program rates — Netflix does not share that information with the people who create their shows. The best you can do is hope they commission a second season.

This is a model that puts an enormous amount of power in the hands of the commissioning editors at Netflix.

It seems inevitable that we will soon see the same model become part of the business when it comes to subscription platforms. In the next 4–5 years, each subscription platform will be competing for your business. Competing for the $10 per month of as many people as they can manage. In order to do that, they’ll need exclusives, and due to the amount of money those platforms make I have no doubt they’ll begin to fund them.

In the end, it means that games are going to have to work out which group they sit in. Are you a F2P service that can fill every waking hour of people’s days? Are you an interesting headline exclusive for a Netflix of Games that can help them find and retain more subs? Or are you a blockbuster AAA game that can do both of those things, and provide $60 worth of value by providing hundreds of hours of gameplay?

For most indies currently working in the business, only the middle is a viable path. For indies hoping to earn their living, the Netflixing of the industry is the biggest upcoming opportunity, and the biggest threat.

Winner and Losers:

Who’s going to win when all the dust settles? You’d have to be bolder than I am to make a concrete prediction. There are some clear forces moving in the wind, however. Steam is obviously a huge player in the non-subscription side of the business, and has the portfolio and technology to quickly pivot in that direction. Epic have both the audience of Fortnite to bring to any store, and a relationship with the biggest game platform in the world WeGame (the Tencent game store) and intentions to bring it to the west. Google and Amazon have access to the biggest data centers and audience analysis on the planet. EA, Microsoft and Sony are existing behemoths who have built their business in these spaces. 2K have one of the biggest online GaaS at the moment with GTAV which gets bigger every year, but have yet to play their hand in the subscription space.

Ultimately, the victory will go to the platform that has the best games. The one that commissions the best content. The one that makes headlines by signing the best creatives. If you want to know who will win, look at which company has the best commissioning editors and the best analytics. Look at the people making the decisions. Look at who has good taste and understands the market. History is going to write that somebody had a billion dollar eye for talent. Who will be the Rick Rubin, the David Geffen, the Michael Ovitz of games? The window is open.

In the right hands, we can go from the golden age of television to the golden age of games — and hopefully we’ll see content as varied, fresh and exciting. If that’s the case, everybody wins — players, developers, and platform holders. In the wrong hands, we simply burn down the current markets and end up with a range of platforms offering bland, recycled content.

Let’s see what the future holds!

A final plug : We’ve just released Hand of Fate 2 on the Switch. Go buy it!

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