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Gaming-on-Demand
IEOR 171 Technology Leadership Spring 2011 Project
Abstract
With technology moving towards faster servers and faster networks, businesses have begun to shift towards the cloud. The gaming industry is showing signs of movement in the direction of this trend. Computer hardware has finally reached the point where servers can store and run resource-intensive video games and transmit them across the Internet to low-end hardware that would be otherwise incapable of playing the game itself. This is a new frontier pioneered, not by established industry leaders, but rather by young start-ups with a vision for the future. For the most part, the technology has already been proven. Whats left is to see where this technology will head and how much it will impact the current industry landscape.
Table of Contents
GAMING-ON-DEMAND
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1
ABSTRACT
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2
TABLE
OF
CONTENTS
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3
INTRODUCTION
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4
1.
HISTORY
OF
VIDEO
GAMES
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4
2.
THE
CURRENT
MARKET
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6
PART
A:
GAMING-ON-DEMAND
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10
1.
WHAT
IS
GAMING-ON-DEMAND?
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10
2.
BARRIERS
TO
SUCCESS
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3.
GAMING-ON-DEMANDS
BUSINESS
MODEL
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15
4.
ADVANTAGES
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5.
DISADVANTAGES
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20
6.
THE
FIVE
FORCES
MODEL
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21
CONCLUSION
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25
ABOUT
UC
BERKELEY
CENTER
FOR
ENTREPRENEURSHIP
&
TECHNOLOGY
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26
ABOUT
THE
COLEMAN
FUNG
INSTITUTE
FOR
ENGINEERING
LEADERSHIP
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Introduction
The growth of the video game industry has exploded in the past decade with the advent of superior graphics cards, a growing community of game developers, as well as an increased interaction between video games and the Internet. These new developments have set the stage for a new online service, which liberates the user from conventional game consoles, called Gaming-on-Demand. Users can play high-end, graphics intensive video games on any computer or television with just an Internet connection. We hypothesize that Gaming-on-Demand will be a game changer that could take over a substantial market share of the video game industry and eliminate the need for console manufacturers and specialty game stores.
at a loss . As a result, the market price for quality consoles was ruined. In 1983, the video game industry suffered its second crash. This time it was due to poor game development. Developers were put on impossibly short schedules, and games were not produced to an acceptable quality. It was even discovered that, sometimes, more game cartridges were made than consoles sold, as in the case of the game Pac-Man for the Atari 2600. Since the two crashes, the industry, as well as the quality of its products, has matured. By the 1990s, the industry was back on track. Nowadays, there are teams of people working on games with sufficient budgeting and resources, as well as very capable platforms for their games.
67% of American households played video games 60% of the gamers were male and 40% were female. 53% of all Americans over 18 play video games. 97% of all American teens play video games. 34: the average age of a gamer 12: average number of years a gamer has been playing video games 273.5 units of video games were sold in 2009 58% of online players are male, 42% are female 41% of Americans plan on buying a video game 8: average hours a week spent playing video games. Video games are growing to become a more accepted activity for the average person and are becoming an integral part of American culture. Video games reach out to all parts of society, regardless of gender, age, or ability. While games were once only modeled towards the young male, it is now produced for all ages and generations. As the first generation of video game players grew older, they raised families with video games and consoles in the household. This effect has multiplied the pool of gamers exponentially. Technology helped develop games that lowered the learning curve, allowing the young as well as the old to play.
"History of Home Video Game Consoles." Buzzle Web Portal: Intelligent Life on the Web. Web. 19 Apr. 2011. <http://www.buzzle.com/articles/history-home-video-game-consoles.html>. 4 "Essential Facts about the Computer and Video Game Industry." The ESA. Web. 19 Apr. 2011. <http://www.theesa.com/facts/pdfs/ESA_Essential_Facts_2010.PDF>.
recently as 1997, the industry generated $5.1 billion over the entire year . The video game industry possesses many opportunities, and history shows that it is here to stay.
2006
$7.4 5.7% 240.7 6.4%
2007
$9.5 28.4% 267.8 11.3%
2008
$11.7 23.2% 298.2 11.4%
2009
$10.5 -10.3% 273.5 -8.3%
2.2. Businesses
As of today, there are various ways to acquire video games as well as their platforms. In July 2010, the NPD group estimated that 48% of PC game sales were downloads off the Internet . For the most part, it is not possible to buy from the original manufacturer and game developers. Instead, consumers purchase from authorized re-distributors. The most popular way of obtaining gaming merchandise includes buying from general retailers or specialized stores via Internet or brick-and-mortar stores. Each of these redistributors typically derives characteristics from four different genres.
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"The Entertainment Software Association - The Transformation of the Video Game Industry." The Entertainment Software Association - Home Page. Web. 19 Apr. 2011. <http://www.theesa.com/gamesindailylife/transformation.asp>. 6 "CIA - The World Factbook." Welcome to the CIA Web Site Central Intelligence Agency. Web. 19 Apr. 2011. <https://www.cia.gov/library/publications/the-world-factbook/geos/us.html>. 7 Siwek, Stephen E. "Video Games in the 21st Century." www.theesa.com. Web. 19 Apr. 2011. <http://www.theesa.com/facts/pdfs/VideoGames21stCentury_2010.pdf>. 8 Goldman, David. "Music's Lost Decade: Sales Cut in Half in 2000s - Feb. 2, 2010." Business, Financial, Personal Finance News CNNMoney.com. 02 Feb. 2010. Web. 19 Apr. 2011. <http://money.cnn.com/2010/02/02/news/companies/napster_music_industry>. 9 Thormahlen, Casey. "Video Games in the U.S." www.ibisworld.com. Mar. 2011. Web. 19 Apr. 2011. <http://www.ibisworld.com/industryus/industryoutlook.aspx?indid=2003> 10 Martin, Joe. "Downloads account for 48 percent of PC game sales." bitgamer 22 Jul 2010: n. pag. Web. 19 Apr 2011. <http://www.bit-tech.net/news/gaming/2010/07/22/downloads-account-for-48-percent-of-pc-game/1>.
Brick-and-mortar: The traditional way to acquire games and their operating platforms would be to go to a local brick-and-mortar store such as BestBuy or Target, inside of which they would have a section for videos game related products already stocked and available for purchase. These stores are not entirely dependent on their sales of video games; instead they also produce revenue from other products. Online: Another version similar to these brick-and-mortar stores are online retailers, e-commerce stores. One of the biggest examples would be Amazon, where customers can buy from a huge selection of products and have it shipped to them from a warehouse not necessary close to the customer. They have the convenience of direct to home fast shipping. Specialty brick-and-mortar: There are also specialized businesses that only sell gaming products. GameStop is on such example of specialty brick-and-mortar store that primarily sells gaming products. Specialty brickand-mortar stores largely depend on the video game industry for its revenue. Specialty Online: Gamefly is an example of a specialty merchant with the properties of an online retailer. Specialty online retailers operate like other online retailers in that they dont store their inventory at locations local to the customer but instead hold larger warehouses that ship orders as theyre made. They are different from online retailers because their product selection is much more specific to a certain genre. Business can benefit from either brick-and-mortar and online stores or both. Having one does not restrict from incorporating the other model and benefits. Businesses have developed hybrid plans to take advantage of the many options. But for the purpose of this analysis, only these four scenarios will be discussed.
Online: The Internet commerce business differs from the brick-and-mortar businesses with the main difference that they do not have the cost of keeping a physical store site or the expense of hiring employees to run the store and the rent for the building. Instead, they use their websites as their storefronts and have a larger centralized back-end system to deal with product order and placements, and all other services that may have been offered in a physical store. Their products do not necessarily have to be available in a location near the customer or even available at all. Items are kept in better shipping locations and are moved once the orders are complete. Purchases are not delivered immediately to customers, as in the case for brick-and-mortar. Since these stores dont have physical store site, they save the extra expense and avoid the opportunity cost that they otherwise would have had for holding inventory on-site. Specialty Brick-and-mortar: These businesses are very much the same as a typical brick-and-mortar with the exception of a much larger variety of video game products. They sometimes offer buy-back programs and sell used products. Specialty Online: Specialty Online companies such as Gamefly have a unique online business model that does more than just sell video games. Much like Netflix, Gamefly receives its main source of revenue comes from their subscription based rental service, (during which consumers have the option to purchase products after trying out the products). Their rental service is successful because like Netflix, they offer a back catalogue service. This means they rent out 6+ month old games, which are significantly cheaper than new releases more often and, consequently, have better life cycles on their products and lower costs for obtaining and maintaining games Revenue ($ in billions)
49.694 67.390 34.204 9.4737 0.101
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Company
*BestBuy (2009) *Target (2009) *Amazon (2010) GameStop (2010) GameFly (2009)
Profit ($ in billions)
13.086 20.805 5.909 2.5397 N/A
Growth (Revenue)
10.39% 3.11% 39.56% 4.36% 19.80%
* This reflects all departments (e.g. Amazon includes Books, Movies, etc.)
We can see from growth and data on these large, established businesses that the marketing is going well for them and there is still much opportunity to grow.
Lee, Hower. ""CLIFF NOTES" S-1S (PART II): GAMEFLY." AGILEVC - LEE HOWER. 26 Feb 2010. Web. 19 Apr 2011. <http://www.agilevc.com/venturesome-archives/2010/2/26/cliff-notes-s-1s-part-ii-gamefly.html>.
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1.1. OnLive
OnLive is a Gaming-on-Demand provider. OnLive is a service that does not require users to have a specific platform but only requires their customers to install a software application on their computers to connect to the severs in order to utilize their service. The games that OnLive provides are stored on its server and sent to its end users through broadband Internet. OnLive's physical product consists of a wireless controller and a MicroConsole TV adaptor, which can be 12 used to connect a television directly to the server . This allows a player to use OnLive with their TV instead of their computer. In addition, OnLive is capable of running on either a Windows or Mac operating system.
1.2. Gaikai
Gaikai is a game streaming service. Gaikai offers their customers the ability to play many PC and console game demos for free without the need of any installations or downloading of games or any additional 13 software . It offers users the chance to try games on the browser before they actually make purchases. In other words at the end of the free trial, consumers will have a choice to make a purchase from an onlinestore, local store, and etc. If the consumers choose to not purchase a game offered on Gaikai and but continue playing in the browser, Gaikai offers a pay-as-you-go plan so that the user can continue playing the game. Gaikai profits from the developers for advertising their games and from the users if they choose to play further using Gaikais services.
1.3. Otoy
Otoy is another Gaming-on-Demand provider. The company is still in the process of development. This company has not defined exactly how they would do the business yet, but they are aiming to provide the same services as OnLive and Gaikai. In addition, Otoy is also planning to provide the service that could 14 run on Mac, PC, Linux, iPhone, iPad and any mobile devices that has web browser
12 13 14
Welcome to OnLive.com. 13 Apr. 2011 <http://www.onlive.com/corporate/plugin>. Gaikai Video Game Advertising Network | Play Video Games Online. 15 Apr. 2011 <http://www.gaikai.com/>. "OTOY Launches Open Streaming in Q2 2010." OTOY. 18 Apr. 2011 <http://www.otoy.com/media/press/launch.html>.
2. Barriers to Success
2.1. Technological Requirements
Figure 3: The traditional client server architecture for gaming requires a powerful client machine to play games at maximum settings. Communication with the server is minimal.
The concept of online multiplayer gaming is not new. Online gaming has grown ever since consumers could connect to the web faster than the old 56k modem would allow. The concept was simple and based on a traditional client-server model. Clients would connect to a single server and could communicated to each other through the Internet at that single point. Since clients were running a local copy of a game on their computer, they only needed to communicate a minimal amount of information (location, items, etc.) to the server. Gaming-on-Demands multiplayer system introduces a whole new set of technological barriers. No longer is communication minimal. With Gaming-on-Demand, entire streams of high quality video are sent from the server to the client. Analysis of a Gaming-on-Demand system can be broken down into three sections: the client, the Internet connection, and the server.
Figure 4: With Gaming-on-Demand, there is no longer a need for a workhorse client machine. Even netbooks, tablets and mobile devices will be able to handle streaming games.
With a Gaming-on-Demand infrastructure, client requirements are more relaxed. All a user needs is a modern day computer capable of playing HD video. In the case of OnLive, client subscribers only require lightweight client software regardless of the computational intensity of the game. Others, such as Gaikai, simply require a modern browser with the latest version of Adobe Flash. Whether the clients are on a Mac or PC, they will all have the same experience. Barriers to entry for the client are minimal if not nil. The only real limitation on the client side is the Internet. Gaming-on-Demand services typically recommend having 5Mbps of bandwidth to obtain the best user experience. Some services work down to 2Mbps, although with less quality. Although bandwidth requirements seem high, they are actually not out of reach for the average US household. In the third quarter of 2010, the overall average connection speed in the US was 5.0Mbps. Surprisingly enough, the US ranked 12th in Average Mbps during this survey. The potential for adopting Gaming-on-Demand in these other developing economies and countries is promising. This trend is only increasing as it has since 2008.
Figure 5: The graph above shows worldwide bandwidth speed over each quarter. Note that there is a general upward trend toward higher bandwidth, especially in North America. [http://www.akamai.com/html/technology/dataviz5.html]
Server side requirements are more complex needing massive server farms specialized for graphics processing. This is different from traditional server farms, which focus on CPU speed. It boils down to the ability of graphic processors to compute matrix math more efficiently. Although server farm specifications 15 are typically trade secrets, in an interview with develop-online.net , Gaikai explained that their demo servers utilized the latest Intel six-core processors along with the then cutting edge GTX 470s. Not only does a Gaming-on-Demand service need high-end hardware, but it also requires cutting edge encoding algorithms that are kept as trade secrets. Despite the excitement over this technology, there has also been deep skepticism. Richard Leadbetter of Eurogamer.net points out several contentions about OnLives Gaming-on-Demand service. He argues that OnLive could not possibly offer the high quality gaming it claims at such large scales. However, several CTOs from large developer companies, like Electronic Arts, have taken a look at OnLive and believe that the technology is viable. They have even entered content agreements with OnLive in support.
Crossley, Rob. Gaikais reality check. Develop 11 Jun 2010: Web. 17 Apr 2011. <http://www.developonline.net/features/900/Gaikais-reality-check>.
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Second, he argues, OnLive counts on the datacenters to not only offer 720p, 60fps gameplay, but also to encode the video output so that the player can receive the visuals at a rate of 1.5MB/s for standard definition and 5MB/s for high definition (HD). To compare these statistics, YouTube has encoding farms that take a considerable amount of time to produce their current, offline 2MB/s, 30fps HD video. OnLive claims to do the encoding real-time through a PC plug-in card at 5MB/s on top of surround sound. 16 However, in and MTVPlayerBlog interview with OnLive founder Steve Perlman, he notes that OnLive has a good footing in the market due to the special, patented encoding techniques they use to deliver blazing fast games. Also, YouTube is not in the business of encoding video quickly. They are simply in the business of serving rendered videos. Leadbetter later goes on to argue that latency will be a huge factor in OnLives success. This is very true. The amount of data transferred between the server and client is more using OnLives infrastructure than the typical client-server infrastructure. However what he ignores is whether that latency is relevant to the user. Perlman noted in his interview that OnLive uses encoding technology and latency optimization to remove perceived latency, a very important difference. The server side difficulty wont be focused so much on the capability of supporting but rather on the cost to achieve such technical feats.
popular content to attract mainstream users. Second, it acquires a large number of cheap titles, which it then recommends to viewers based on their previous choices. Finally, Netflix finds projects that they believe will be a hit and signs them on before the price of the show increases. In comparison, OnLive has done the same and chosen hot new games like Assassins Creed by Ubisoft to lure mainstream gamers. OnLive then acquired lesser-known games, but from multiple genres, so that the mainstream players would find a reason to continue with the service. Finally, OnLive offered its Software Developer Kit and 20 tools to independent game developers allowing them to easily distribute their games to a market composed of either PC, Mac, or television (with the purchase of a MicroConsole). Normally, users have to wait months before a game available on PC is available for Mac. Now, game developers can use OnLive as the middleman to enable cross-platform functionality for their video games. This saves time for users who no longer have to wait for a game to be converted from one platform to another as well as resources for game developers who can use it to focus on producing new games. Additionally, companies looking to get into the gaming-on-demand services will face tough legal 21 opposition. OnLive recently received approval of a patent on gaming-on-demand at the end of 2010 . There will many legal proceedings, contracts, and law suits in gaming-on-demand as a result of this patent. Recently, T5 Lab, a startup, claimed that they should own the patent because they applied for this patent earlier than Perlman. Entry into the gaming-on-demand market will not be easy work for 22 competing companies .
Rates ($)
2.99-6.99 6.99-10.99 9.99-59.99 9.99/month
Sources: 1 - http://www.onlive.com/games/featuredgames#shaun_white_skateboarding
Figure 6: The pricing model of OnLive
"OnLive Offers Indie Game Developers a Direct-To-Consumer Channel on TV, PC and Mac." OnLive 15 Sep 2010: n. pag. Web. 19 Apr 2011. <http://www.onlive.com/corporate/press_releases/onlive_makes_sdk_available_to_indies_print>. 21 Takahashi, Dean. "Rivals Beware: OnLive Says It Has a Fundamental Patent on Cloud-based Games | VentureBeat." Tech News | Innovation News | Money News | VentureBeat. 14 Dec. 2010. Web. 18 Apr. 2011. <http://venturebeat.com/2010/12/14/rivals-beware-onlive-says-it-has-received-a-fundamental-patent-on-cloud-basedgames/>. 22 Takahashi, Dean. "Who Invented Cloud Gaming? T5 Labs Tangles with OnLive (exclusive) | VentureBeat." Tech News | Innovation News | Money News | VentureBeat. 15 Feb. 2011. Web. 18 Apr. 2011. <http://venturebeat.com/2011/02/15/t5labs-patent-onlive/>.
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Gaikai. "What Is Gaikai? Video Game Lead-Gen Ad Platform, Play Games For Free." Gaikai Video Game Advertising Network | Play Video Games Online. Web. 17 Apr. 2011. <http://www.gaikai.com/about>.
Another model emphasizes is game rental or full game purchase a game. Players can purchase a 24 PlayPass for any games available in the online game library . Companies, like OnLive, have developed a new way for gamers to purchase games. With three-day, five-day, and full play passes, gamers are allowed to access the game they bought for three, five and unlimited days. After they purchase a game, the game does not install in the console but exists in the server. So the players actually do not buy the game, but buy the right to play the game. Compared to online game distributors like GameFly, OnLive does not deliver any games via discs to customers. With Gaming-on-demand, gamers no longer have to wait for their games for several days. Finally there is the pay-as-you-go subscription model where players have unlimited access to certain games in the game library as long as they pay the subscription fee. OnLive provides a subscription option for their gamers. Different from PlayPass, the subscription model allows gamers to get access to more than one game in a low price. It is currently doing a promotion where, with just $9.99, players can get unlimited access to forty games in the OnLive game library. Although the new released games do not go into the subscription plan, players are still some popular games, like NBA 2K10.
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Gaming-on-demand introduces significant changes in the game industry value chain. The value chain becomes much more simple than before. Instead of having manufactures build consoles, they are replaced by components makers for servers. A gaming-on-demand company will act as the distributing entity. Consumers will not obtain access to games from traditional game distributors but rather directly from gaming-on-demand services.
OnLive. "Featured Games." Welcome to OnLive.com. Web. 17 Apr. 2011. <http://www.onlive.com/games/featuredgames>. Sheth, Romeen . "Evolutionary Value Chain." Video Game Industry 2008: n. pag. Web. 19 Apr 2011. <http://sites.duke.edu/soc142-videogames/global-value-chain/evolutionary-value-chain/>.
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4. Advantages
Gaming-on-Demands new technology is gradually changing the game industry. This change has provided a lot of benefits to many people in the game industry as well as game players. It means that people in the industry will be able to produce better games to fulfill the needs of their consumers and present better quality game services to their clients. At the same time, gamers can also enhance their gameplay experience.
4.1. Industry
The Gaming On-Demand model can prevent one of the greatest parasites to the video game industry 26 piracy . This means that it will be harder for gamers to copy games or hack consoles. Amount Lost (in billions)
Worldwide (2004-2009) Japan (2004-2009) UK (2010) Applied Materials Inc. Sources: 1
27 28
- http://www.gamasutra.com/view/news/28848/CESA_Portable_Piracy_Cost_Game_Industry_415_Billion.php
2 - http://www.crunchgear.com/2011/01/21/uk-video-game-piracy-caused-1-45b-in-losses1000-jobs-last-year/
Figure 9: The amount loss due to piracy
With physical games distribution, customers could purchase or rent games and easily make illegal copies. These illegal copies can be redistributed to friends and family or even worse, sold. The illegal distribution of their games has had a significant effect on many game publishers. According to the table above, there are significant amounts of monetary loss in the game industry. For example, between 2004-2009 total loss in the game industry is $41.5 billions. Gaming-on-Demand can protect game publishers from piracy. Moreover, Gaming-on-Demand eliminates all the physical packaging and production so that game companies and service providers to reduce their expenses, earn more revenue, and reduce environmental waste. For these reasons the industry may provide its game services at a lower price. Finally, Gaming-on-Demand actually enables game developers to have more control over old and new games in the process of being developed. For instance, the game developers can release a demo version of their new game with a limited access time allowing their clients to try their new game and give them some feedback quickly. This means game developers can get a better understanding of how to make improvements on their new games.
"Games on Demand and Piracy." Games on Demand Reviews | Download Full PC Games | Metaboli. 16 Apr. 2011 <http://www.unlimited-pc-downloads.com/games-on-demand-and-piracy>. 27 "Gamasutra - News - CESA: Portable Piracy Cost Game Industry $41.5 Billion." Gamasutra - The Art & Business of Making Games. 17 Apr. 2011 <http://www.gamasutra.com/view/news/28848/ CESA_Portable_Piracy_Cost_Game_Industry_415_Billion.php>. 28 "UK Video Game Piracy Caused 1.45B In Losses & 1,000 Jobs Last Year." CrunchGear. 17 Apr. 2011 <http://www.crunchgear.com/2011/01/21/uk-video-game-piracy-caused-1-45b-in-losses1000-jobs-last-year/>.
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Money Spent
$25,290,000,000 3,780,000,000 3,650,000,000 3,570,000,000 590,000,000 570,000,000
# of players
183,500,000
"Gamasutra - Features - Sponsored Feature: Changing the Game - Experimental Cloud-Based Ray Tracing." Gamasutra - The Art & Business of Making Games. 13 Apr. 2011 <http://www.gamasutra.com/view/feature/6322/sponsored_feature_changing_the_.php>.
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A Gaming-on-Demand subscription service such as OnLive charges $9.99 a month for 40 games. Comparing typical Gaming-on-Demand subscription costs to average yearly spending, we see that there is approximately $18 in savings per year. However, the savings do not stop there. Typically, the PC hardware required to play comparable console games cost several hundred more than console systems.
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With Gaming-on-Demand, the cost of a comparable PC will significantly drop at or below the cost of consoles. PC upgrades may not even be necessary in this case. Most modern computers going as far back as 2005 are capable of running a Gaming-on-Demand service. Additionally, the cost of owning new games will be fewer.
Campbell, Devon. "The True Price of PC Gaming." The Married Gamers. Gaming Angels, 03 Feb 2011. Web. 19 Apr 2011. <http://www.themarriedgamers.net/?p=11440>.
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Under a subscription based Gaming-on-Demand model, users can get the latest games at a fixed cost rate. They will not only be paying less for games on average, but also gain the added benefits of a wide selection and new releases at no additional costs.
5. Disadvantages
5.1. Old versus New
The clash between the console and PC gaming industry and Gaming-on-Demand is inevitable. As of now, the console leaders (Sony, Microsoft, Nintendo) have managed to coexist by offering games that are only available on their respective devices. However, OnLive could aggregate these games into one place without requiring a console. Traditional gaming companies will not allow Gaming-on-Demand to take the market share so easily. They are still maintaining a dominant market position because Gaming-onDemand is still in its early stages of development. For example, OnLive still lacks features such as achievements and voice chat for its platform. These are difficult to do with the fact that OnLive requires all of its bandwidth for players to play the game. The MicroConsole is OnLives first attempts at entering the home entertainment system beyond a gamers computer. As a cheap and basic model, the MicroConsole cannot compete with the special some of the special features that the PlayStation, Wii, and Xbox posses. The Nintendo Wii features multiple controller designs such as the Wii Remote and Nunchuk that can combine to form the Wii Wheel and Wii Zapper. All these controllers are motion sensitive to the console. Additionally, the recommended 3-5Mbps of 32 bandwidth is still prone to poor video streaming and multiple service interruptions .
Campbell, Devon. "The True Price of PC Gaming." The Married Gamers. Gaming Angels, 03 Feb 2011. Web. 19 Apr 2011. <http://www.themarriedgamers.net/?p=11440>. 32 Newman, Jared. "OnLive MicroConsole Review: Future Imperfect." Technologizer 01 Dec 2010: n. pag. Web. 19 Apr 2011. <http://technologizer.com/2010/12/01/onlive-microconsole-review/>.
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6.2. Competitors
If Gaming-on-Demand successfully takes over the game market, games on DVD and SD cards, as well as consoles, will become fossils in history. Gaming-on-Demands competitors are planning on either developing popular games that will be unavailable on the cloud or entering the Gaming-on-Demand market themselves. The leaders of the console industry (Sony, Xbox, and Nintendo) will not give up their hold on the gaming industry easily. Because Gaming-on-Demand costs much less than gaming on consoles, customers will change their way of gaming if console companies do nothing to keep their customers. For these leading game companies, letting gaming-on-demand take over game industry will mean a huge loss of both their profits and reputation. In order to keep their customers, companies will most likely create or ask developers and publishers to build exclusive games, such as World of Warcraft and Starcraft, which would not be available on gaming-on-demand services. This way, console companies would be able to keep customers loyal and maintain a competitive advantage.
Figure 13: Wii, Xbox 360, PlayStation, Nintendo and PSP possess a large market share in video game industry. Losing in video 33 game market, these companies will suffer a huge loss.
Large companies such as Microsoft will likely go into Gaming-on-Demand. Although Microsoft does not have gaming-on-demand technology, it already possesses a great deal of cloud computing technology. It will be easier, though not easy, for them to enter gaming-on-demand in the future. Microsoft recently 34 launched Games for Windows Marketplace, which allows users to download games from Internet . Notice that this is different from Gaming-on-Demand because the customers actually download the entire game to play locally on their consoles or computers. Microsoft does not any Gaming-on-Demand service yet, but perhaps their games on demand is the first step forward toward Gaming-on-Demand. Another competitor, GameStop has recently purchased Kongregate, Impulse, and Spawn Labs, which 35 indicates its movement from being a strictly brick-and-mortar store to a digital game store . According to Venturebeat, Spawn Labs was a new start-up company, and it develops technology which allows players to play games on home machines while theyre traveling with laptops. The game plays in a console and streams its game to the laptop. Learning from Blockbuster, GameStop is recently working closing with Spawn Labs to develop game streaming technology so that GameStop will not be the next Blockbuster in game industry. As mentioned before, OnLives patent on Gaming-on-Demand will be a great barrier to entry for existing competitors.
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"Video Game Charts, Game Sales, Top Sellers, Game Data - VGChartz." Video Games, Charts, Articles, News, Reviews, Community, Forums at The VGChartz Network. Web. 18 Apr. 2011. <http://www.vgchartz.com/home.php>. Takahashi, Dean. "Microsoft Launches Its Own Games-on-demand Online Market | VentureBeat." Tech News | Innovation News | Money News | VentureBeat. 22 Oct. 2010. Web. 18 Apr. 2011. <http://venturebeat.com/2010/10/22/microsoft-launchesits-own-games-on-demand-online-market/>. Takahashi, Dean. "Retailer GameStop Buys Its Way into Digital Distribution of Games | VentureBeat." Tech News | Innovation News | Money News | VentureBeat. 31 Mar. 2011. Web. 18 Apr. 2011. <http://venturebeat.com/2011/03/31/retailergamestop-buys-its-way-into-digital-distribution-of-games/>.
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According to the data from Newzoo Games Market Report 2010, $15.14 billion dollars was spent on console gaming in the U.S. If we also take the profit in PC games and Mobile devices into account, there will be an additional $5.2 billion dollars within reach for to gaming-on-demand.
Figure 15: Gaming-on-Demand consoles possess a large market share in every country .
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Takahashi, Dean. "Americans Spend $25.3B Each Year on Video Games | VentureBeat." Tech News | Innovation News | Money News | VentureBeat. 09 May 2010. Web. 17 Apr. 2011. <http://venturebeat.com/2010/05/09/americans-spend-25-3beach-year-on-video-games/>.
Gaming-on-Demand will have a deep impact on the current market distribution. The consoles 68% market share will be most affected by Gaming-on-Demand. The remainder of the segment will also experience a similar loss in market share.
6.3. Customers
Gaming-on-Demand offers a combination of PC and console games for its users. Therefore, its consumer base is a combination of the PC gaming market as well as the video game console market. With the rise of 38 casual gamers , gaming has become so diversified that there is no longer a stereotype for the average gamer. Now, the games being offered span a wide genre for various types of people. The consumers dictate what kind of games Gaming-on-Demand should offer in the market. Gaikai is an exception because they earn revenue by charging game developers who would like to advertise a free demo of their game for customers to try. However with a limited amount of capital, Gaming-on-Demand companies such as OnLive must be cautious about what types of games to invest in. If they are unable to attract enough of a customer base with the games they possess, their business model is unlikely to succeed. According to a study conducted by the Entertainment Software Association (ESA), the best selling video game genres were Action and Sports, each accounting for 20% of the sales in 2009. For computer games, they were strategy games (35%) and family entertainment (18.7%). As for OnLive, out of the 46 game titles it offers, the most popular genres were Action (22%) with Adventure (18%) and Puzzle (17%) at a close second and third. Figure 10 displays the actual distribution of games based on data from the OnLive 39 website .
Computer games are ideal for multi-player role-playing and strategy games because of the keyboard and chat and audio capabilities. Consoles are ideal for Action and Sports because the controller is the perfect interface to play the game. Dedicated, hard-core gamers normally make up those who play computer software, which allows more inputs, while groups that want to do a social activity together normally play console games. However, since Gaming-on-Demand connects players across the Internet and uses
See Footnote 14 Boyes, Emma. "GDC '08: Are Casual Games the Future? - News at GameSpot." GameSpot Is Your Go-to Source for Video Game News, Reviews, and Entertainment. GameSpot UK, 18 Feb. 2008. Web. 19 Apr. 2011. <http://uk.gamespot.com/news/6186207.html>. 39 See Footnote 24
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multiple platforms, OnLive does not need to emphasize any one genre. Interestingly, they have a wide offering of Puzzle games that is not seen in PC or Video Games. It is not as often explored in PC or console gaming, but it is very popular among casual gamers playing mobile applications. With the ability to feature any genre thanks to Gaming-on-Demands cross-platform functionality, it can service a wide user base from the console and PC markets as long as it can gain rights to the hot content that gamers would be willing to buy.
6.4 Suppliers
As more companies move towards cloud computing, many vendors are adjusting their product lines to create products just for the cloud. For companies relying on cloud computing, the CEO of Dell, Michael Dell, comments, We created a whole new business just to build custom products for those customers. Now its a several-hundred-million-dollar business, and it will be a billion-dollar business in a couple of 40 years. Gaming-on-Demand requires three components for their service: servers, CPUs, and graphics cards. IBM, Dell, and Hewlett-Packard are moving aggressively in that direction by providing products specifically for the cloud. For Gaming-on-Demand, which will require reliable and fast servers for its users, these companies will be vital for creating server farms like those at OnLive. Intel and AMD manufacture CPUs while NVidia and ATI produce graphics cards. These suppliers specially make these off-the-shelf products for companies that require massive amounts of processing capabilities for their services.
Conclusion
The video game industry has changed dramatically since its inception. We have gone from waiting rooms to consoles in a relatively short period. Despite the changes in venue, the purpose of video games has always been the same - to entertain users. Gaming-on-Demand fulfills this essential invariant by facilitating easier access to this entertainment.. It truly alleviates the pain points of consumers. Not only can a user play a game anytime and virtually anywhere, but it also allows the user to play at the best graphics settings with no difference in network performance. All of this is served at a lower cost to the consumer. With a service such as OnLive, software installation is quick and easy. Other services such as Gaikai make the user experience even easier by utilizing software already installed on most users computer. Although still in its infancy, these services offer a huge leap over the brick-and-mortar businesses of yesterday. The video game industry is simply moving to more direct channels of distribution. Whether it is through better graphics, multiplayer gaming, or new user interfaces, a la Microsoft Kinect, the video game industry will always be in a state of progression. We are now at the beginning of the next progression: gaming-on-demand.
King, Rachael. "How Cloud Computing Is Changing Business - Business - Bloomberg Businessweek - Msnbc.com." Msnbc.com Breaking News, Science and Tech News, World News, US News, Local News- Msnbc.com. 4 Aug. 2008. Web. 19 Apr. 2011. <http://www.msnbc.msn.com/id/26015759/ns/business-bloomberg_businessweek/>.
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