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"Netflix of games" a threat to developers

If subscription streaming services take off, creators likely to lose leverage in dealing with platform holders

Downloadable subscription game services and on-demand game streaming are not new. The former has been around in one form or another since the early 1980s. The latter is almost a decade old already.

But what is new is the fervor with which the industry has been pursuing both ideas of late. Sony has had both on the PlayStation family of systems for years. Microsoft and Electronic Arts have their own subscriptions and both announced plans for streaming services at E3. Smaller publishers like Capcom are testing out streaming, and an assortment of start-ups like Hatch, Jump, Utomik, and PlayKey have also joined the field. Google is rumored to be muscling in on game streaming as well. Amazon has tested out subscriptions with Twitch Prime, and would anyone be surprised by a jump into on-demand streaming as well?

There remain a number of non-trivial challenges for these companies, some technical and some financial. We've covered those in the past on this site, but one thing we haven't talked about as much is the threat a "Netflix of Games" poses for game developers.

Many aspects of that threat are dependent on what form these future streaming platforms take. Look at discoverability, for example. An industry-reshaping streaming platform set up like Netflix--where you can only find things by searching for the title or browsing endlessly through an algorithm's idea of what you might like--would have particularly concerning implications for small creators. And if that platform holder were also a content creator weighting the algorithm toward its own efforts, the negative effects to small developers could multiply like Netflix Originals recommendations.

This Netflix PR image exaggerates the emphasis the service gives to its own programming, but only a little.

This Netflix PR image exaggerates the emphasis the service gives to its own programming, but only a little.

And what happens to user mods in a world of streaming games? Perhaps there's a technical solution where the platform can let players turn on and off the mods they want, but then there's the question of which mods would be approved and offered to players, and how the platform holder could monetize them to justify the hassle.

But for developers, the biggest concern I have at the moment is funding. It's already difficult enough to find backing for development, but the investments made in smaller titles--whether by boot-strapping developers or angel investors--are often predicated on the idea that their investment may one day see a return. That's always going to be a gamble for independent developers, but if streaming subscription services become the norm in the industry, those odds are going to get increasingly intimidating.

"The more successful streaming subscription services are, the more they will undermine developers' already limited leverage in dealing with platform holders"

Even if subscription services and on-demand game streaming take off in a big way, massively expanding the gaming audience and increasing the overall amount of money pouring into games, I don't see developers being well positioned to benefit from it. To the contrary, the more successful streaming subscription services are, the more they will undermine developers' already limited leverage in dealing with platform holders.

When working with a digital storefront, developers know how many copies they sell and how much they're charging for those copies. That makes figuring out how much money a game brought in a straight-forward process. Platform holders and creators may argue about how to split the pie, but at least they can more or less agree on how big the pie is.

Compare that to subscription services, where the metrics a developer has for their game's performance will likely be limited to the number of times it was downloaded/streamed, or perhaps cumulative and average time spent playing. If companies use Netflix as a model (and why wouldn't they, at this point?), developers may not even have access to those except through third-party solutions with questionable accuracy.

Even if platforms do give developers the metrics for their own games, those numbers alone don't give accurate insight into how much money a given game has brought in. Generally speaking, they are poor ways to assign value, as a beloved niche simulator game may not generate huge download numbers but could be reason enough for its modest audience to stay subscribed long-term, even if they never touch another title. On the other hand, if payments are tied to time spent playing, the platform favors games designed as engagement engines and disadvantages more finite experiences from Undertale to Uncharted, which wouldn't be ideal for either developers or platform holders.

Regardless, the only party who will be well positioned to determine the value of a given game to a streaming subscription platform is the platform holder, because only the platform holder can put those numbers in the context of the streaming service as a whole. How impressive were those numbers relative to other games? Did the addition of the game to the catalog drive new subscriptions? How many people would be a risk to cancel their subscriptions if this game were no longer available?

With limited information, the developer cannot hope to answer these questions as well as the platform holder. So when it comes time to negotiate terms, the platform holders have an incredible advantage. Better than anyone else, they will know the value an individual game or a slate of games can bring to their service. All the developer knows is how much they think they need to keep the lights on. The worst case scenario here may be the music industry, where even the most successful of artists routinely complain of insulting royalty checks from streaming services.

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Latest comments (9)

Nick Ferguson Executive Producer, Stadia, Google3 years ago
The counter-argument to this is that all these services need content and in the TV space you have streaming companies spending billions a year on exclusive shows in the hope of creating the next Game of Thrones or Stranger Things. Also, rather than publishers and platform holders chasing the next AAA mega-hit I'd expect to see them show more interest in a broader portfolio of titles. Microsoft's recent acquisition of Ninja Theory is evidence of this, IMHO.
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Gareth Wilson Design Director, SUMO Digital3 years ago
Respectfully disagree with this article. If TV and film are anything to go by, streaming giants fighting it out for content will result in a mass of new videogame commissions. Good friends of mine in TV are saying they've never had it so good. Its a goldrush, a good script, even for a niche audience gets snapped up and actively chased by multiple parties in a way that never happened a few years ago.

For years there's only been the big 3 consoles platform and Steam. Mobile was always a bit of a wild west. So many new entrants with extremely deep pockets should mean opportunities to get a high quality big budget title, or a niche audience smaller game signed will never have been better.

As an industry we do need to avoid the royalty led revenue model the music industry has. Its a different industry to us though - the many millions of music artists have limited collective bargaining. Games are much closer to movies, where most titles requiring an upfront dev fee that will cover costs and make a small profit for the studio involved. Royalties will be a bonus.

Edited 3 times. Last edit by Gareth Wilson on 9th August 2018 5:02pm

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Sergio Rosa3 years ago
I think one of the problems is that the author assumes discoverability on Steam and other platforms is good. On Steam you also need to look for things by name because recommendations also favor certain games with a certain user base, but smaller unknown games by smaller unknown creators are lost.
So, it's not like Steam is making small creators' life any easier...
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Show all comments (9)
Paul Jace Merchandiser 3 years ago
"Microsoft added first-party exclusives to its Game Pass program earlier this year, and has followed that up with a few third-party titles as well"

What's interesting about this complaint is that, when Microsoft launched Game Pass last year there were editors on this site stating that Microsoft couldn't be the Netflix of gaming because they didn't have any original content( for which I pointed out that Netflix as a company was around for a decade and a half before they started making original content, and even before that first show they were steadily growing their customer base). And now that they do have original content it's looked at as a bad thing? It actually makes their subscription service that much more desirable.

"The danger comes when these services shift from a secondary sales window to the primary way the audience plays its games."

This isn't really an issue for game creators on Game Pass. For starters, all the games that launch on Xbox Game Pass (both first and third party) are not strictly limited to Game Pass. You can also buy them on disc(first party), as digital downloads and in most cases Windows 10 PC. Now compare that to the Netflix model of exclusive content, where their shows have to stay on their service at least a year before being launched on bluray/dvd and also a considerable amount of time before hitting other streaming sites such as Vudu. I'm not sure about the other subscription services but Microsoft's seems to work pretty well for game creators as far as limitations are concerned.

Edited 1 times. Last edit by Paul Jace on 11th August 2018 1:35am

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Bob Johnson Studying graphics design, Northern Arizona University3 years ago
AS if streaming isn't going the way of 3d and VR.
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Klaus Preisinger Freelance Writing 3 years ago
Aren't we forgetting the customer a bit? TV show streaming services sure work, however, the customers also happily jump from show to show. $100 millions worth of production cost are consumed in one weekend. In contrast to TV, games center much more around the belief in the one true game people then play for months, while spending money on it along the way.

There is no shortage of people claiming that single player games were dead. But upon closer inspection, you realize this belief comes from the financial reality of games that only monetize once being deemed undesirable by publishers and single player games falling heavily in this category.

More than anything, the Netflix of games needs customers which are willing to jump from game to game across wildly different genres. Easy for Netflix to hook you on comedy today, horror tomorrow and action next week. Difficult for any developer to move their customers from twitch action to turn based strategy, or into puzzle games.
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James Coote Independent Game Developer 3 years ago
Means we're back to gatekeepers dictating what content gets funded and made. Maybe that's not so different to how it is now for most large studios.

However, the worry is for Indies and small studios who currently go make whatever they want, of their own volition, self-funded. Then hope to make that back through selling on various stores. There are probably tens of thousands of such operations, and they are the ones who will suffer.

The reason streaming will be worse for them is because it precludes other methods of discovery. At the moment, Indies can use ads, social media, games press and streamers to get word of their game out. If games are played via a Netflix type platform on a smart TV, unlike on a PC or mobile, players aren't going to be browsing the web, browsing social media on that smart TV (it's simply too clunky). The subscription model means no ads inside other games. That just leaves store algorithms and maybe people watching the twitch app on their smart TV before switching over to their games app and playing the game they just saw streamed (by someone else).

My guess is narrative games and games-as-a-service type games - the sort you keep coming back to day after day, will fair better. But can also see whole genres that don't fit being left out in the cold.
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Bob Johnson Studying graphics design, Northern Arizona University3 years ago
Tv was always "streamed." And so was music.

TV was broadcast over the air via antenna and then later broadcast over a cable.

Music was always broadcast over the air on the radio. And even cable later carried its 20-30 music channels.

GAmes? There have been attempts to "stream" games and they never caught on, eventually went belly up and ceased to exist. Completely opposite of tv and music where OTA and Radio thrived the whole team and still exist and even are viable still even if streaming is becoming the better way to "stream" these things.

The entire reason behind this is games are programs that require constant input and feedback. Music and TV are just already known gobs of data.
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Notice on netflix, there are few blockbusters that grab your eye, and a few indies or surprisingly good TV series that binge watch. Similarly, Gaming content - will need to be sufficiently diverse robust and experimental even to cater to a wide demographic
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