It’s been awhile since OnLive came out of stealth in 2009 and promised to disrupt the game consoles with a revolutionary cloud-gaming service, where remote data centers could compute the games rather than a user’s machine.
That rosy future didn’t quite happen, and Sony acquired OnLive’s assets in 2015 and shut the service down. But the promise of disruption is still out there.
We talked about the future of cloud gaming at a breakfast sponsored by Akamai during the recent Electronic Entertainment Expo (E3). Just as movie and music services have moved to the cloud, companies such as Sony (via PlayStation Now), Blade via its Shadow, and others have begun offering games that are served and played via cloud services. Distant data centers process the games and images are passed down as video to players, who interact with the content without downloading the games first.
Gamers haven’t yet flocked to these services, but cloud delivery is getting more efficient, and services such as 5G routers could make the technology work better. Our speakers included Jacob Navok, CEO of Genvid Technologies; Chris Early, vice president of partnerships and revenue at Ubisoft; Nelson Rodriguez, head of media partnerships at Akamai; and Doki Tops, CEO of Utomik, which has 800 games available via progressive downloading.
Here’s an edited transcript of our conversation.
GamesBeat: I started covering cloud gaming very intensively with OnLive. I wrote some of the first stories on OnLive, and then some of the last stories, when it went away. Nearly a decade after that, what are the lessons of that?
Nelson Rodriguez: That it’s hard. [laughs] What’s interesting about the panel is that I think the panel represents the three key questions for cloud gaming. When I talk about cloud gaming I’m talking about remote control games, server-based games. The three questions are: will the content be any good? Second, will the business model work? Is the price right for consumers without bankrupting the publishers? And third, does the tech work? Can it get under 200 milliseconds latency? Does it feel like your controller’s broken?
I don’t think there’s a question about whether customers want it or not. To me, that’s different from VR. There’s a question about whether the average person wants VR. For cloud gaming, there will never be a question about this. People will always prefer to immediately get what they want. The question is just, can we do it? Will publishers deliver good content at the right price and will the experience be viable? That’s what I’m curious to understand.
Jacob Navok: You hit what I was going to hit. People mistake the point of cloud gaming as being technological, just overcoming hurdles. It’s about, do you have content that justifies the investment into this technology, and can you create a business model that allows the industry to profit off something new? If you treat cloud gaming as, now I can take my console and put it in the cloud, you’re doing it wrong. If you’re going after that core customer, they already have an Xbox or a PlayStation. They don’t need something like that.
Furthermore, if the benefit of having a massive server farm is to be able to allow people to have new experiences, why aren’t you utilizing that? Why are you taking product built with local hardware in mind and just putting that on a server? Design new forms of content that are appropriate to the cloud and monetize it with business models that are appropriate to the cloud. Why take games that were packaged and built to be put on discs and throw that same business model to the cloud? Why would you even destroy that value by throwing it away in favor of an all-you-can-eat subscription model?
If the vast majority of the game industry these days monetizes through engagement and microtransactions, why would you not create business models for streaming that allow people to do that? It comes down to, can you create services around content design and business model design that fundamentally differ from what’s come up until now. That’s the opportunity that cloud gaming brings.
Doki Tops: I don’t necessarily agree with all of that. For me, the fundamental challenge of the cloud, the reason some of these developments never materialized — we’ve said it’s going to be cheaper because we’ll get more servers for more compute. But then the experiences ask for more and more compute as we go. Where we agree is, why isn’t anyone making a way more expensive experience that requires the power of four Xboxes, and then you use the cloud to give you that experience?
That was my dream, but I have a very technical background. I know how much engineering goes into games that just use the power of one Xbox. I know a lot of engineers that work on how to get more from that one console and get better results. Diminishing returns set in. When you have two Xboxes, the picture you can render doesn’t necessarily become twice as good. The user experience doesn’t become twice as good.
When we’re at a point where we can truly have content pipelines that can generate photorealistic art at a reasonable price, and have engineers to do all that stuff — up to that point I don’t think cloud will be used to create emerging new experiences. If you go to the Army or all the B-to-B businesses, cloud is already being used. It’s one of the most impactful things on how you can run your entire business. If you have 400 people on a project you want to run that in the cloud, because all your security problems are solved. All your licensing problems are solved. You don’t need more PCs. You need even less.
What I do find fascinating with the cloud is, we’re in the business of subscription gaming. As soon as you have games that are indie or not as high end, that starts to make more sense. We already give instant gratification. You get people complaining, “I want to play this on my Mac,” and a developer has to do an entire port. Then cloud becomes very interesting. It opens up more platforms.
Chris Early: I worry that — part of what you’re describing assumes a linear progression of game experiences. They don’t have to get more complex.
Navok: Right. It’s about new experiences. Minecraft showed what you could do with different graphics and new gameplay.
Early: We have 150 million HD gamers out there today. That’s our primary addressable market. We know that there are close to 2 billion people playing games. That’s a big gap between those two. One of the things we’re interested in is, how do we address that market? How do we get to the people who maybe can spend a bit of money a month to have that access who’ve never bought a console, and don’t have the investment or desire to build their own high-end PC? How do we increase that total addressable market size with people who maybe were gamers at one time, but they aren’t buying the latest consoles anymore because they have whatever else going on?
It’s not about the game necessarily being super more complex or anything else. I can make the same game and now I suddenly have access to 10 times the market size, if we can figure out how to make that easy. That’s pretty good from a business standpoint.
Tops: That’s what I’m saying about other platforms. If you can go to a lower-end box, all of a sudden….
Early: I think the point is, also, once you’re doing that, will new forms of entertainment emerge? Absolutely. Are there new business models that emerge? Absolutely. We all saw that happen in mobile. Everyone started out saying, “Oh, now I can do a premium experience on mobile and someone will pay $10” for it.
Navok: At Square Enix, we were the first ones trying to do that. We ported Final Fantasy games for $10. If you look at the revenue Square Enix makes now in mobile, it’s all from free-to-play. Not those Final Fantasy games.
Tops: What I found fascinating about OnLive, I remember the E3 show. It was pre-Twitch. You could just watch everything. The implications of cloud gaming, outside of just playing games remotely — with all the live streaming that’s going on, you could do some really crazy stuff. I talk to people who work in VR. You could create a virtual arena where you’re sitting in your VR headset and watching the game.
GamesBeat: Maybe OnLive should have become Twitch.
Tops: But the premise of cloud gaming is that in a way, you’re an observer. You’re not a player. All the parts and the costs and the high-speed rendering is somewhere else. I can go into a game in my VR helmet and watch it. VR actually requires more framerate depending on the experience, but not so much when it’s static, when you’re not moving around. That’s an interesting possibility, the chance for people to hop into an experience from any device. I can take my Samsung VR and not use it to play games, but to watch somebody else play.
Navok: You said something very interesting there, that OnLive could have become Twitch. When I left Shinra and started my company, I decided that instead of focusing on cloud gaming, I was going to focus on interactive broadcasting. What’s the market that exists today? What’s the market that will exist in the future? But the challenge that I saw — this was the challenge that I had at Shinra that I spent most of the decade on in cloud gaming — was that developers didn’t understand how to generate content that could take advantage of streaming.
Yet if we look at the broadcast ecosystem today, streaming is happening. Adding bits of interactivity to it enables developers to think about how you can create experiences that are brand new. I flipped the pyramid on the work I was doing. I decided to go from the Twitch route and create content directly on Twitch and YouTube, which steadily taught developers who were working with us how to create streaming experiences.
What’s fascinating is, when I started this company two years ago, some of the first questions we got were, can you get over the latency? Can you get this back to zero latency? If you can do that, the difference between interactive streaming and cloud gaming is effectively zero.
GamesBeat: Genvid raised about $6 million in April, right?
Navok: Yes, we did, for a total of $10 million so far. I think you’re right, though. There will be evolving business models. But we’re still stuck at — Fortnite shows us that there are tons of mobile gamers — everyone in this side of the industry said, “Well, they’re not real gamers. They’re not interested in this kind of stuff.” Maybe we’re wrong, or at least half wrong. Somewhere between 2 billion and 150 million, half of that is a pretty good margin to be wrong about. You can still make some money there, just getting the games we have today into more people’s hands.
Tops: If you look at Hearthstone, that’s being played on mobile and everywhere else.
GamesBeat: I think 80 million of Fortnite’s 125 million gamers are on mobile.
Navok: It’s kind of an HD game. It’s a complicated, core game. It’s not just match-three game.
Early: The game industry has come a long way on the challenge of how you get a great game experience on a phone. Five years ago, if you said that a first-person shooter, any good shooter — a boring experience that people threw away after five minutes, those were the first shooters on mobile. That’s a hard thing to do.
Navok: There’s a mistaken assumption that the game industry shifts. The game industry doesn’t shift. The game industry expands. If you look at the history, from arcades onward, it’s like geological strata. The arcades still exist in Japan. It’s a $5 billion business. Console still exists. PC online still exists. Mobile still exists. Cloud will still exist. Cloud will expand the industry. It doesn’t replace it.
Early: And that sounds great to me. More of our games in more people’s hands.