The launch of Google’s game streaming Stadia and its preceding rumors have made many wonder and speculate how games will be delivered in the future1. I have recently written a bit about platforms, and game streaming can potentially cause a huge shift in the power balance as the underlying hardware (or even storefronts) becomes irrelevant. There are many new hopeful entrants wanting to get a piece of hopefully an increasing pie.

Photo of Google Stadia’s controller

However, there hasn’t been much discussion how streaming and subscription services will change the portfolio of games developers will create. The current trend in the market is that it is getting similar to the movie market: only huge blockbusters or small indies with a valley of death in between. Similar production economics have probably bought us here, and especially on the AAA end of spectrum the games are more expensive and “cinematic” than ever.

Enter Netflix. An often repeated term in the future distribution of games is “Netflix of games” but in my opinion, this is a very ambiguous term2 not only because it is used interchangeably with both streaming and subscription based services. On top of that, Netflix is an independent company whereas many of the companies moving into service-based delivery of games are already involved in the value chain3. Before Stadia, Google was already making a lot of revenue from mobile games distributed on its Google Play platform. And Google is probably the most “outsider” to the games industry compared to the other players.

I have previously argued that much of the existing console platform holders’ interest in streaming is growth - compared to the growth on mobile and the user base there, consoles are way behind. It is also a difficult to sell $400 boxes to people who might not even have a television. Google’s and Amazon’s interest in game streaming might come from a little bit different angle: they might consider games to be yet another form of entertainment that they can deliver. Both are also heavily invested in live game streaming through YouTube and Twitch.

If “Netflix of games” means streaming, these kind of services already exist for games (fe. PS Now, GeForce Now). If it on the other hand means subscription based services, these also exist (PS Now, Xbox Game Pass, EA Access). However, if “Netflix of games” means a dominant player with a wide library and large user base, this doesn’t exist like Steam exists for more “traditional” digital delivery of games. It might be more apt to talk about the “next Steam”. However, it is way too early to count Steam out of the fight. It might have stagnated on the innovation front but it has all the resources to defend its position from non-disruptive competitors. However, it is very susceptible to the Innovator’s Dilemma, which probably explains how quickly they updated Steam’s in-game chat once Discord became a threat.

Games have been in the forefront of the digital revolution, so it is safe to assume that in most cases “Netflix” in fact refers to the monetization model and to the reach, and also independence from just one platform4. It is however difficult to see how the platforms that have grown with exclusives could live without them. I’m also a bit suspicious how well streaming will increase the market - in theory the potential market increases to everyone with a smartphone or a smart TV.

Like Netflix or Steam, it is unlikely that one service will define how media or games are consumed even if one service might be the household name. For example, instead of be-all and end-all, the streaming video services are heading into strong balkanization due to platform exclusives and publisher-only catalogs. Ease of use and wide availability of legal services had initially driven pirating of movies down, but as few can justify subscribing to all the services to get all the shows they want, piracy might be doing a comeback5. Anyone afraid that the new services will mean only one type of games will succeed or the way games work have to be adapted should sleep easy.

Instead, subscription-based streaming services can bring us back the AA-market - just like on Netflix. As mentioned before, the increasing budgets and risk for bigger games and the successful revolution of GaaS and F2P has meant that the games market has started to polarize into two camps: Red Dead Redemptions and Fortnites. There’s less and less feasibility in the middle6.

If we look at streaming services like Netflix, HBO or Amazon Prime Video, there are the acquisition drivers like Game of Thrones and other headlining shows but these services have to offer other shows to keep the customers paying month to month - even and especially when the customer have already binged through the big shows. Movies that would have previously gone straight to DVD are now not only coming to Netflix but ordered by the platforms7. The streaming libraries are full of shows that no-one would spend money standalone, but are crucial for customer retention. I don’t expect this to be any different on game subscription services.

Photo of Adam Sandler’s The Do-Over
No one gets Netflix for this stuff, but if I’m already paying for it...

In some sense, this is the main idea behind Apple’s Arcade. It is unlikely that these games would all be viable alone as premium titles on an App Store that is dominated by free-to-play titles. It is also very difficult to see that these Arcade games will be a major source of revenue for Apple when compared to the Clash of Clans and Pokémon GOs. Although Apple is betting heavy on services, it still makes most of its revenues from hardware sales and I do not think it’s much of a stretch to think that having “real” games on its devices is just an acquisition strategy to make an iPad more competitive against a Nintendo Switch.

Whereas Microsoft sees Xbox Games Pass as a complementary service to buying games, it is difficult to see someone who would buy the occasional premium game (or be a heavy Candy Crush or Fortnite player) and buy Arcade.

However, it still remains to be seen who will be the audience who actually subscribes to these services. Will streaming be a revolutionary step or just a complementary service to core gamers? It is very difficult to say but one thing is for sure - games are now a service business.