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Games on demand report

Video-streamed gaming faces "challenges", according to Screen Digest.

London 20th October 2010: The video-streamed games-on demand (VSGoD) sector faces serious challenges in trying to establish itself in a games market dominated by entrenched players, and it may struggle to find sustainable business models in the short-term, according to Screen Digest’s latest report, Challenges ahead for the video-streamed games-on-demand http://www.screendigest.com/reports/2010919d/10_10_challenges_ahead_for_video_streamed_games_on_demand/view.html.

“VSGoD technology is differentiated from established distribution technologies: its speed of delivery and quality of service under optimum conditions offers consumers the necessary ‘wow’ factor,” says the report’s author, Ed Barton. “With VSGoD, users can start playing graphically intensive games instantly on practically any connected PC.”

Screen Digest’s view is that this technological performance, however impressive, is unlikely to shift consumer games-buying habits significantly in the short- or even in the medium-term. A major hurdle lies in convincing consumers of the value proposition: VSGoD operators offer comparable games pricing to online and packaged retailers for a fully streamed service, however no physical goods change hands.

Crucially, many gamers, particularly in mature Western markets such as the US, the UK, France and Germany, who are interested in the biggest games from the best-known PC and console game publishers already have the latest equipment capable of playing these titles. This leaves a small group of potential customers for VSGoD services to target. Not until customers are asked to spend significant sums to upgrade to the next generation of consoles in the 2013-2014 timeframe will the value proposition of consumer-focused VSGoD services really come into effect. The big question is: Can existing services survive until that window?

“On a standalone basis, it looks as though VSGoD services will have a tough time initially,” says Barton. “Key to their future potential will be territorial expansion and broadening the target platforms away from the PC into connected TVs, set top boxes, mobile platforms and possibly games consoles”. While mobile network bandwidth and quality make this unlikely in the short-term, the ability able to serve games to mobile devices in the future would hugely increase the addressable market for VSGoD.

Screen Digest believes the VSGoD sector will go through a period of experimentation, with providers and games makers aiming to work out the best way to utilise the technology and optimize business models:

Leading operator OnLive is building out a consumer-facing brand and storefront, focusing on selling directly to the end-user. Distribution will be driven via offline and online marketing, as well as through deals with telcos, who can target the services to the relevant customers Gaikai is taking a different approach, promoting its streaming service as an online sales tool to help publishers sell their games. The operator will sell blocks of streaming capacity for certain titles that the publishers can then make available on their websites. Potential purchasers will be allowed to play for limited periods before being given the opportunity to purchase the game, or rent it for a further period. In North America, the key market given the location and rollout priorities of providers, we believe that VSGoD will generate $332 million in 2014. The performance and development of OnLive, the most prominent consumer-facing operator, will be crucial.

Western European revenues will total $79 million in 2014. Operators will soon increase their focus on this region given the combination of high broadband household penetration and strong games consumption patterns. OnLive, which has already inked agreements with distribution partners in the UK and Belgium, and is establishing its server infrastructure in Germany, is also likely to be a key growth barometer for VSGoD in this region.

Ends

For more information please contact:

Geraldine Gitel:  T: +44 (0) 7917 885380 ggitel@greenfieldscommunications.com

Lucy Green T: +44 (0) 7817 698366 lgreen@greenfieldscommunications.com

Screen Digest: Fay Hamilton, PR and Promotions Manager

T: +44 (0) 20 7424 2847 fay.hamilton@screendigest.com

About this report

Challenges ahead for the video-streamed games on demand assesses the opportunities for nascent video-streamed games-on demand services. There is commentary on the market opportunity in North America and Western Europe, plus analysis of current and potential business models, as well as of key VSGoD operators. The report contains on-demand games revenue forecasts for North America, Western Europe and the rest of the world. http://www.screendigest.com/reports/2010919d/10_10_challenges_ahead_for_video_streamed_games_on_demand/view.html

About Screen Digest

Screen Digest is the pre-eminent firm of industry analysts covering global media markets. Headquartered in London, with offices in the US and Australia, we employ a team of 50 specialist analysts covering film, television, broadband media, mobile media, cinema, home entertainment, gaming and advertising. Our online services and reports provide the information and analysis that hundreds of media companies worldwide base their decisions on. Most recently we have launched a service which provides research and analysis specifically for media-focused institutional investors. To find out more, contact Screen Digest sales@screendigest.com Tel: +44 (0) 20 7424 2820. www.screendigest.com 

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