Playing Cloud Games
by Jameson Berkow, Financial Post
Today's video game fans have good reason to be jealous of all those lucky future gamers being born this year.
By the time they can drink legally, the latest blockbuster game titles will be beamed directly to their screens via the Internet. So if, say, the new God of War XVI (Super Sweet Sixteen) comes out at midnight on some day in the not-too-distant future, by 12:04 they could have already beaten the first level.
It is a future in which the entire console disc-based gaming world, and the vibrant retail and resale industry it supports, will have moved entirely into the cloud.
Indeed, early signs of the impending console-pocalypse are already beginning to show. Much as cloud-based entertainment providers such as Netflix Inc. are slowly replacing the need to insert a shiny disc into a physical device to watch a movie or television show, services provided by TransGaming Inc., OnLive Inc. and a growing list of others will eventually bring about the extinction of the physical gaming console.
"Ultimately we won't have consoles," predicts Michael Pachter, a gaming-industry analyst with Los Angelesbased Wedbush Securities. "I don't think the end is imminent, but this is absolutely the beginning of the end."
OnLive, a Palo Alto, Calif.-based online game startup, is mounting a direct challenge to the Big 3 console makers -- Sony Corp.'s PlayStation, Microsoft Corp.'s Xbox and Nintendo Co.'s Wii -- by offering even the most hardcore gamers remote access to top titles such as Batman: Arkham Asylum, Unreal Tournament and Tom Clancy's Splinter Cell with little more than an Internet connection, bypassing the console entirely.
Others, such as the GameTree TV service offered by Toronto-based TransGaming, are looking to deliver smaller, less graphically intense games intended to supplement the console experience rather than compete with it directly.
"We're looking at [cloud-] enabling games that aren't at that high-end or AAA catalogue," said Paul Nowosad, TransGaming's vice-president of corporate marketing and business development. "We're looking more at the AA family friendly casual gaming."
So instead of Call of Duty or Need for Speed, think Bejeweled or World of Goo.
There are some advantages to the TransGaming strategy over the more aggressive OnLive tactics. Providing gamers with remote access to high-performance games requires tens of millions of dollars in server infrastructure and, at least in the case of OnLive, users still have to invest about US$100 in a 'microconsole' and controller package. That is still a bargain compared with the cost of a traditional console system, which, combined with a dozen or so retail game titles, can easily run past $1,000.
But the hardware contained within the next generation of Web-connected TVs is capable of handling the demands of the GameTree TV platform all on its own.
Every major television manufacturer was either showcasing its latest Internet-enabled sets or talking up plans for similar products during the International Consumer Electronics Show in Las Vegas this month. Such devices are expected to become the standard in Canadian living rooms by mid-decade.
"Looking three or four years down the road, I think every TV you can buy out there will have some sort of apps built directly into it and be able to be Web-connected," said Matthew Tattle, Canadian video-game industry analyst with market research firm NPD Group Inc.
Realistically, cloud-based gaming services won't be able to convince hardcore gamers to toss their consoles for some time -- 20 years at least, says Wedbush's Mr. Pachter. Meanwhile, services like GameTree will appeal to the growing number of casual gamers. Their ranks have been increasing dramatically since Nintendo Wii launched in 2006, reminding the entertainment world that video gaming can also be a family affair.
"Our plan [involves] bringing back family night in the home, if you will," Mr. Nowosad said.
As the casual gaming population continues to expand, major game developers like Tokyo-based Konami Digital Entertainment Inc. are adapting their classic titles such as X-Men: Arcade for a new audience.
"Things are changing and we need to change with them," Careen Yapp, vice-president of acquisitions and franchise development for Konami, told Canadian gaming industry representatives at the GameON Finance 2011 conference last week in Toronto. "There are all sorts of gamers coming to market now that were never attracted to the industry before [and] they're not going to sit in front of the television and play a game for 40 hours until they beat the last level, they're going to have these byte-sized experiences on many different platforms."
The first sets featuring the GameTree TV byte-sized gaming service are expected to hit the European market before the spring. TransGaming chose to focus on Europe ahead of North America because the especially competitive nature of the European television market is pushing Europe-based telecoms to introduce new technologies sooner to stay ahead, Mr. Nowosad said.
But bandwidth-gobbling services such as GameTree TV and Netflix face an additional barrier to entry to the Canadian market in particular: space. With all Internet service providers in Canada mandated to impose preset limits on the amount of data each customer can consume each month, those who use live video-streaming services consistently will be hit with costly overage charges whenever that limit is exceeded.
"We're in a country where I am only allowed 20 [gigabytes] or something like that each month," Mr. Tattle of NPD said. "I've got my regular surfing, I've got my [Apple] iPad and Netflix and all this other stuff; and now I've got to stream my gaming over the Internet? The cost for me on bandwidth alone is going to be phenomenal."
Mr. Tattle questions whether GameTree TV will find enough customers willing to pay a few dollars for temporary access to a small, casual game.
"You might have a [business] model where people are going to play, but I don't think you have a model where people are going to pay," he said. "If they can come up with one killer app then they're in business ... people are clearly willing to drop $2 on Angry Birds, no problem."
With the goal of finding that one killer app in mind, TransGaming last week launched a $50,000 developer challenge.
"Connected-TV or IPTVgaming, as it used to be called, never really took off, and we think part of the reason for that is because developers weren't really part of the ecosystem," Mr. Nowosad said, explaining the reason for the challenge.
This article was originally published in the Financial Post and can be found here. Article and photos are copyright the original authors.