The video game industry has remained pretty constant since the 1980s. The names of the big players may change periodically, but the business model hasn’t. Currently, Nintendo, Sony, and Microsoft compete to make the most powerful and innovative gaming consoles, often commanding only slim profits or even selling consoles for a loss. Once gamers choose a console, they can only play games designed for that brand. Manufacturers like Nintendo count on this monopoly to make money on software sales.
What if I told you this long-enduring model could be on its way to extinction? Better yet, what if you never had to buy another expensive gaming console ever again? Cable companies are betting that gamers are ready to replace the clutter of expensive and bulky consoles in favor of streaming games straight from a cable box. The implications and opportunities presented by this shift away from consoles cannot be underestimated. We may soon see the most tumultuous time in the video game industry since the North American video game crash of 1983.
Considering that this technology already exists, this riotous time may be here sooner than you think. If you are among the small minority of gamers that prefer a PC over a console, you can already stream video games to your computer with OnLive, which recently experienced a restructuring. I’m not talking about simple social games like Angry Birds—OnLive Game Service offers streams of over 200 console-class games. Enjoy a free test drive of top games like Sid Meier’s Civilization V, rent or purchase games, or signup for unlimited access to OnLive’s entire catalogue. Cloud gaming services are popping up around the globe, including Singapore, South Korea, France, and Portugal. Playcast in Israel announced a deal with CJ Hellovision last July to bring gaming services to 3.51 million South Korean cable subscribers.
Several major cable companies are investing in bringing a similar streaming experience to living room televisions. AT&T, Time Warner Cable, and Verizon Communications are all expected to wade into these waters with testing and tweaking by 2013 or 2014. Other cable companies including Comcast Corp. and Cox Communications are also exploring ways to offer the streaming of top video game titles through cable boxes. Cable box cloud gaming may allow consumers to use generic controllers or even their smartphones instead of proprietary controllers.
With over 50 million digital TV subscribers, this could be a big opportunity for software makers. Firstly, they will save money by developing only for one platform instead of a version for each console on the market. Secondly, smartphones and tablets have made casual gamers out of more Americans. These casual gamers may not be ready to spend hundreds of dollars on a console, but might pay to play a game through their cable box. Of course, this poses a potentially fatal threat to console brands such as Xbox, Playstation, and Wii. Microsoft could potentially leverage its experience with its successful Xbox Live online service to capitalize on this transition. Sony recently took a public step in this direction by buying cloud-based gaming service Gaikai Inc. for $380 million. This also provides opportunities for cable TV providers to gain a new revenue stream by offering in-game advertising. It’s such a no-brainer from DVR-fearing cable companies that patents have already been filed by Sony Computer Entertainment America.
At January’s Consumer Electronics Show, American video game developer Valve presented its own set-top gaming device called Steam Box. The device aims to make switching between cable TV, video games, and digital media seamless; allowing users to switch between all kinds of content on any TV or screen in the house. Analysts predict that Valve will market Steam Box to non-gamers as a set-top box alternative to devices such as Apple TV, but with the added value of being a gaming device.
Are you ready to say goodbye to your gaming console in favor of streaming from your cable box?
Follow Dwayne @Dwayne_CableTV
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