"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.