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 inthe near future. Whether on the Shield or a smartphone, the games willbe 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 arebeing provided with the Nvidia Shield, an Xbox One controller and logindetails — as well as a US$150 Amazon gift card for taking part in thetesting.

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

However, thesecould be placeholders, and the actual content being tested could varygreatly 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 beentering 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. Googlehas 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, whichoperates as a digital rights management (DRM) and matchmaking service,or Valve’s Steam, which rolled out in September 2003 as the first trueDRM and 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 mobileclient for iOS and Android devices in 2012, and Valve released its owngaming system, dubbed the “Steam Machine,” which serves as an alternativeto high-end PC gaming machines.

Crowded but Potentially Profitable Cloud

Although these companies see opportunity 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, evenin the face of affordable local storage and processing, is that itwill 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 PeddieResearch.

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

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

Not a Console, Not a PC

One advantage that Verizon Gaming could have is that it could offer anexperience 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 Shieldwas to provide a level “gaming field,” so that players with moreexpensive machines wouldn’t have an advantage.

“Verizon is already preinstalled on the Nvidia Shield device andappears 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 theirprimary platform for a few reasons. One, publishers have been rollingback on exclusivity over the past few years in the traditional consolespace,” he told the E-Commerce Times.

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

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

“Playing games via the Shield provides the game console-likeperformance 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 anddevelopers, but it will need to deliver successfully on many levels tosupplant Steam or other options,” said Sappington. “A particularlyinteresting — and unanswered — question is the business model thatVerizon will use. A subscription that includes unlimited access tohigh-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 todo with handsets — there are really no differentiating characteristicsto such an approach,” he added.

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

Verizon as a Game Company

It isn’t clear if Verizon will make those investments, but what isclear is that it doesn’t have experience with this market of coregamers. Its success is far from guaranteed. Still, Microsoft andSony have managed to become known as serious players in the gamingmarket — with the former known more for business software and itsWindows PC operating system, and the latter a majorplayer in consumer electronics.

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

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

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

“If they use Nvidia’s experience — given that Nvidia is a gamingexpert — the outcome should be far more positive, but carriers are notknown to be good listeners,” Enderle noted.

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

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

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

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

“Increasing the channels for gamesshould create competition and help drive prices down,” he said, “but that willdepend on whether Verizon gets to critical mass. It certainly won’tmake games more expensive, but its impact on pricing reductions dependson the service becoming viable.”

Peter Suciu has been an ECT News Network reporter since 2012. His areas of focus include cybersecurity, mobile phones, displays, streaming media, pay TV and autonomous vehicles. He has written and edited for numerous publications and websites, including Newsweek, Wired and FoxNews.com.Email Peter.

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