Clouds ahead for the video gaming industry

The video game industry is about to suffer a hurricane. Both Google and Amazon have announced they will enter the business and they won’t be satisfied with releasing just one more game in an already crowded space. They want to change the rules of the market.

On the one hand, Amazon Game Studios is working on a multiplayer online game called New World. The game has no overarching story, mission, or definite ending. In a large degree, it lets players decide what happens next. The most important rule is there is no endgame except your own. With this strategy, Amazon is aiming to change the video gaming narrative. The Seattle-based firm, with its powerful AWS infrastructure, will likely provide all computing necessary “on the cloud,” and users will be able to play without any expensive hardware.

On the other hand, Google is expected to launch an online streaming service for video games similar to Netflix. The concept is even simpler than Amazon’s: play directly on your browser, and if you wish, using a Bluetooth controller. They tested the concept until this January with a reduced group of testers under the name “Project Stream,”

These two tech incursions into the gaming industry do not come as a surprise. According to a PwC report, the video gaming market is on the rise. Between 2012 and 2017, the sector grew faster than any other content industry. The market is also expected to grow 28% between 2018 and 2022. In summary, the industry is booming and both Google and Amazon want a piece of this wealthy pie.

 

Amazon already had a foot in the door through its platform Twitch, which live-streams video gaming. With Twitch, Bezos’ firm controls distribution for specific types of games: eSports and live streamed.

Now Amazon is determined to define how games are built, distributed and played. The ‘open end’ kind of game that Amazon is proposing has been tried before (FarmVille by Zynga for one) but not at this scale. It is too expensive for average game developers to develop. New World can lead the industry into a new form of storytelling, one that is completely controlled by the consumer.

Google’s innovation can be even more disruptive. By controlling distribution and luring game developers into its net, Google could easily obliterate competitors like Nintendo, PlayStation and X-Box. Players won’t need heavy and uncomfortable specialized hardware. They will just connect online. Google will have access to data—how long consumers play, when they stop, what they like,—which will give them even more leverage when negotiating with game developers. As Netflix, Google could set up a subscription model, get a library full of games (both new and classics) and slowly learn everything about the players. Distribution is everything.

Apart from Microsoft, already in the business, video gaming seemed the last outpost from the Big Four tech companies not yet in the industry: Facebook, Amazon, Google, and Apple. But it is not anymore. Gaming companies like Activision, Electronic Arts and Ubisoft need to figure out whether they want in or out in regards to Google’s initiative. Their decision will have a lasting impact on the future of the industry.

About Josep Valor

Josep Valor-Sabatier is professor of information systems and information technology and holder of the Indra Chair of Digital Strategy. He received his Ph.D. in Operations Research from MIT, and his Sc.D. in Medical Engineering from the Harvard-MIT Division of Health Sciences and Technology. Josep Valor teaches extensively at the senior executive level on Management Information Systems, Media Management, Management of Technology, and Strategy.

About Carmen Arroyo Nieto

4 thoughts on “Clouds ahead for the video gaming industry

  1. If you picture the tech economy as a digital Game of Thrones waged by four giants–Amazon, Apple, Facebook, and Google–then any way you score it, Google would be installed at King’s Landing. The search company may not prevail by all measures; Amazon has more shoppers, Apple greater hardware profits, and Facebook a larger social network. But under Page, Google has the one thing its rivals lack–a coherent, long-term strategy to fight the tech war on every front

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