Competition within the cloud gaming service is heating up, with Google Stadia's impending launch next month and Microsoft xCloud in beta phase. In an attempt to one up competitors, Sony Interactive Entertainment recently slashed prices for its streaming service PlayStation Now (PS Now) from US$19.99 to US$9.99 each month.
Along with the price slash, it is also bolstering its game catalogue with marquee content and limited edition titles such as Grand Theft Auto V, God of War, and UNCHARTED 4: A Thief’s End. Each month, the streaming service will add a refreshed selection of games on top of its existing offering of popular evergreen titles such as Dynasty Warriors 8, Mortal Kombat, NBA 2K18, and others.
On the marketing front, Sony Interactive Entertainment also doubled down on its efforts working together with adam&eveDDB to produce its first-ever global marketing campaign that saw game characters come to life. The marketing blitz aims to raise awareness of "PS Now" in all 19 territories where the streaming service is offered, including Japan, US, France, Germany, Italy and UK.
Jim Ryan, Sony Interactive Entertainment's president and CEO, said that following PS Now's expansion to more markets, it has coverage for over 70% of its global PlayStation 4 (PS4) user base. As such, it was an ideal time to revamp the service with a more compelling price and stronger content offering.
"We have accumulated a wealth of knowledge in cloud gaming since PS Now’s launch in 2014. That, coupled with our 25-year legacy in the games business and strong partnerships we’ve forged with publishers, positions us to continue leading and innovating in this field as the gaming industry evolves," he added.
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Industry experts Marketing spoke to say that PlayStation's effort to remain dominant in the console gaming industry might pay off. PS Now was launched in 2014 and today, it allows players to stream or download more than 800 games, for a price that is on par with competitors, such as Xbox Game Pass, Apple Arcade and EA Access. Newzoo's market consultant Guilherme Fernandes said what might previously been perceived as an "under-powered offer" is now a strong contender in the cloud gaming race.
"Sony cutting PS Now's price in half and adding more high quality and high profile content such as God of War and Grand Theft Auto V is the move we have been waiting to see from the Japanese gaming giant," Fernandes said. Therefore, the number of PS Now subscribers is expected to "increase substantially", enticed by the improved value proposition.
Despite the increased competition in the gaming industry, Fernandes said Sony can still count on its brand value, excellent catalogue of games, and its first-party development capabilities to convince players to choose its service and products. He added that looking ahead, it would not be surprising if Sony chose to offer a new subscription that combines both PS Now and PlayStation Plus (PS Plus). PS Plus is also a streaming service offered by Sony but unlike its counterpart PS Now, which offers access to a myriad of online from PS2 to PS4 games, PS Plus is only limited to PS4 games.
In fact, more partnerships with other non-gaming entertainment services could become more common, he said. For example, Xbox Games Pass Ultimate includes six months of Spotify subscription.
Agreeing with Fernandes on the increase in subscribers is Piers Harding-Rolls, director, head of games research and lead AR/VR analyst, IHS Markit, who said that the new price point and better content coupled with higher marketing spend is expected to increase adoption growth of PS Now by at least two times in 2019, compared to previous year-on-year growth, which has been around the 40% range since its launch.
Harding-Rolls added that in the games console space, Sony is the market leader and at present, "Google and Amazon do not compete".
"Google, with YouTube, and Amazon, with Twitch, are strong in the video streaming AAA game content, but have so far failed to compete directly with Sony in producing game content," he said. AAA games are generally produced and distributed by major game publishers and have become culturally relevant due to their massive marketing campaigns. Some examples include Halo, The Legend of Zelda, and Call of Duty.
Looking beyond the console
In a surprising move in May, Sony and Microsoft teamed up to develop new innovations to enhance customer experiences in their direct-to-consumer platforms and AI solutions. The two companies will explore joint development of future cloud solutions in Microsoft Azure to support their respective game and content-streaming services. Additionally, the two companies will explore the use of current Microsoft Azure data centre-based solutions for Sony’s game and content-streaming services. The announcement comes approximately two months after Google unveiled its Stadia service. According to multiple media reports, the partnership was to fend off rivals in the gaming industry.
Besides having AAA games and an attractive price point, Harding-Rolls said both companies need to expand beyond the console. Hence, the investment in cloud gaming services to bring AAA games to what they consider an under served audience. This also means that they will be competing head on with companies such as Google, Amazon and Tencent.
He added that while it is very likely that powerful console hardware will be come less necessary in the future due to the emergence of cloud gaming services by Google and Amazon, Harding-Rolls expects the disruption to be more significant in the five to 10 year time span, and next generation sales will be minimally impacted over the next five years.
"Console companies are key protagonists in this new wave of cloud gaming interest as well, and in an effort to expand their reach to new audiences it is inevitable and commercially acceptable that some self-cannibalisation of the hardware businesses will occur," he said. As such, disruption that does occur will be from a mixture of external and internal competition. He also expects there to remain a large niche of approximately "tens of millions" of dedicated console gamers that want to invest in gaming hardware for as long as it exists, and that will not be disrupted by cloud gaming services.
"If anything, these gamers will buy hardware and use cloud services to supplement their consumption of content, through access in mobile use cases for example," he added.
Keeping the gaming giants on their toes
Meanwhile, Newzoo's Fernandes said Google and Amazon "have their work cut out for them". Despite its future potential, cloud gaming is unlikely to be the only way of playing video games any time soon. Even Microsoft's executive VP of gaming, Phil Spencer, said during the Electronic Entertainment Expo 2019 in June that the company is not "planning for Xbox's Scarlett to be [its] last console".
"Gamers in general know what they like and like what they know. The tech giants will have to show that they mean business - have compelling content and offer a quality gaming experience - if they hope to succeed in their gaming endeavour," he said.
Whether or not they succeed in winning significant market share, Fernandes believes that the tech giants are likely to play the role of keeping the gaming giants on their toes and stimulating innovation moving forward.