Verizon Trying Its Hand at Cloud Gaming

Verizon has a new cloud-based gaming service that is in the alpha testing stage, based on recent reports. Verizon Gaming is being tested on Nvidia Shield set-top boxes, according to The Verge.

The Shield devices, which were unveiled in 2015, were updated two years ago when Nvidia rolled out its own streaming service.

Verizon Gaming will give greater software support to the Nvidia Shield, but the service also will be opened to Android smartphones in the near future. Whether on the Shield or a smartphone, the games will be playable with a paired Xbox One controller.

There are currently around 135 games on the service. VerizonGaming reportedly is being rolled out slowly to testers who are being provided with the Nvidia Shield, an Xbox One controller, and login details — as well as a US$150 Amazon gift card for taking part in the testing.

At present, performance is the key point subject to testing rather than gameplay or graphics quality. There has been no official word on what games titles are actually available, but screenshots that have been posted online indicate that the service does include Fortnite, Red Dead Redemption 2, and Battlefield V, among other AAA titles.

However, these could be placeholders, and the actual content being tested could vary greatly from what the early reports suggest.

The initial testing period is scheduled to be over by the end of January.

Stream On

If the reports of Verizon Gaming are accurate, Verizon could be entering an increasingly crowded playing field. Microsoft, which has scaled back its presence on PC gaming to focus on its Xbox platforms, could be surging back to the PC market with its still-in-development Project xCloud streaming service. Google has been involved with a service known as “Project Stream.” There also have been reports that Amazon is working on its own gaming service.

This doesn’t even count Electronic Arts’ Origin service, which operates as a digital rights management (DRM) and matchmaking service, or Valve’s Steam, which rolled out in September 2003 as the first true matchmaking service for PC games.

Steam has gone on to become one the largest online retailers for third-party PC gaming software. It debuted its first mobile client for iOS and Android devices in 2012, and Valve released its own gaming system, dubbed the “Steam Machine,” which serves as an alternative to high-end PC gaming machines.

Crowded but Potentially Profitable Cloud

Although these companies see opportunities in the cloud, it isn’t clear if the players are as eager. For the publishers, however, it does provide a level playing field.

“The reason cloud gaming is so important to the gaming industry, even in the face of affordable local storage and processing, is that it will remove obstacles for consumers to experience top-quality videogames and further streamline distribution for smaller game companies,” said Ted Pollak, senior analyst for the game industry at Jon Peddie Research.

“We are forecasting that this will significantly increase the number of people who pay for gaming across all levels of production complexity,” he told the E-Commerce Times.

“This revenue will be realized as a month-to-month service, where the customer cloud streams all their gaming, but it could also serve to demo the fidelity of AAA games to people intimidated to try or on the fence about buying a gaming PC or console,” Pollak added. “After consumers have experienced a taste of games that suit their interests, they may very well become customers for local processing — consoles and gaming PCs — for a premium experience.

Not a Console, Not a PC

One advantage that Verizon Gaming could have is that it could offer an experience that is something of a hybrid between that of the PC and video game consoles such as Microsoft’s Xbox One or Sony’s PlayStation4.

Unlike the Steam Machine, the key point for the Nvidia Shield was to provide a level “gaming field” so that players with more expensive machines wouldn’t have an advantage.

“Verizon is already preinstalled on the Nvidia Shield device and appears to be running a beta test,” said Joost van Dreunen, commercial leader of SuperData, a Nielsen company.

“Publishers may not be ready to commit to a single provider as their primary platform for a few reasons. One, publishers have been rolling back on exclusivity over the past few years in the traditional console space,” he told the E-Commerce Times.

“Second, the emergence of a new platform, like Verizon Gaming, would be a secondary revenue stream,” added van Dreunen.

“It is an interesting area for Verizon to explore,” noted Brett Sappington, senior director of research at Parks Associates.

“Playing games via the Shield provides the game console-like performance that core gamers prefer, which is important,” he told the E-Commerce Times.

“Core gamers are the primary target market for paid game services,” Sappington added.

“Another distribution option could be good for consumers and developers, but it will need to deliver successfully on many levels to supplant Steam or other options,” said Sappington. “A particularly interesting — and unanswered — question is the business model that Verizon will use. A subscription that includes unlimited access to high-quality games will be popular but costly.”

A Data Plan

Even if it isn’t about a subscription model, there could be another reason for Verizon wanting to get into the game arena.

“It’s an obvious strategy for Verizon to take this approach — upsell their customers on massive data plans,” said SuperData’s van Dreunen.

“And let’s be honest, no one needs more data than gamers; however, short of giving users hardware for free — like phone companies tend to do with handsets — there are really no differentiating characteristics to such an approach,” he added.

“Verizon Gaming is still a work in progress, and publishers don’t know what the outcome will be just yet,” said van Dreunen. “In my view, all of this makes it a high-risk, low-return proposition for Verizon unless they are willing to make major investments to subsidize it or have a completely different, longer-term monetization strategy to capitalize on the gaming audience.”

Verizon as a Game Company

It isn’t clear if Verizon will make those investments, but what is clear is that it doesn’t have experience with this market of core gamers. Its success is far from guaranteed. Still, Microsoft and Sony have managed to become known as serious players in the gaming market — with the former known more for business software and its Windows PC operating system and the latter a major player in consumer electronics.

It is possible that Verizon could find success, but unlike those other companies, it is entering a very crowded market.

“It really will depend on the quality of the rollout — and I think Verizon is serious, but I doubt they have the talent to pull this off successfully,” observed Rob Enderle, principal analyst at the EnderleGroup.

“This is one of those things that sounds like a good easy idea but where a lack of experience could make execution problematic,” he told the E-Commerce Times.

“If they use Nvidia’s experience — given that Nvidia is a gaming expert — the outcome should be far more positive, but carriers are not known to be good listeners,” Enderle noted.

“Given the lack of experience, there is a good chance quality will suffer,” he said.

“The gaming market is unforgiving when it comes to quality, and gamers have incredibly high standards and are very vocal,” remarked Parks Associates’ Sappington.

“Those games or experiences that don’t measure up fall out of the market quickly,” he added.

“This is something you learn over time, and the phone carriers have a history of jumping in first and then learning by experience, which rarely ends well,” said Enderle.

“Increasing the channels for games should create competition and help drive prices down,” he said, “but that will depend on whether Verizon gets to critical mass. It certainly won’t make games more expensive, but its impact on pricing reductions depends on the service becoming viable.”