“Two Billion Gamers”

I’ve been meaning to write a post about cloud gaming for a while now – there’s a rather long draft sitting in my editor from several months ago (hope I can dust it off and ship it), back when Google generated some headlines with the Assassin’s Creed Odyssey streaming beta.

Anyhow – the topic picked up again the past couple of weeks, this time with Microsoft Xbox making some bold proclamations.

I for one, wholeheartedly welcome the “two billion gamers” concept, that apparently Microsoft has been talking about for at least a year now. This is an audacious vision and easy to rally around. (Tooting my own horns a bit – 3 years ago I wrote about the path to a billion MAU game… coincidentally also in a post about Microsoft.)

The problem for me, with Microsoft’s stated strategy, is there are certainly competing paths to this vision, and Microsoft’s version is (of course) based on what’s feasible for Microsoft. However as an independent observer I do feel other paths are more likely to realize this goal.

What do I mean by this – consider Microsoft’s industry position in the various gaming platforms:

  • PC – clearly Microsoft still is a dominant platform holder in the PC segment with the Windows platform. However the entire Wintel ecosystem is structurally challenged, and have been eclipsed/leapfrogged by mobile in most areas of personal computing. That puts a serious cloud over the future prospects of PC gaming, which remains one of the core niche cases for PC hardware
  • Console – Xbox unfortunately is an also-ran this gen
  • Mobile – Microsoft has tried in earnest, but failed, to establish its own mobile OS. Android and iOS have won, in various ways. Mobile has also turned out to be the majority growth driver of the entire gaming industry and its rapid ascension has toppled the old world order (see the rise of Chinese developers that I’ve frequently written about on this blog)

Given this set of circumstances, it is logical for Microsoft to attempt to change the basis of competition – namely, to bet all-in on cloud gaming as a disrupter to established platform advantages, and go to a Post Platform world. To be clear, it faces obvious challenges:

  • At least so far, the stringent network requirements (especially latency for good feel) means cloud gaming remains a mature markets play, and thus dramatically limits the addressable audience. (For the two billion gamers vision to be achievable – markets like China, India, Indonesia and the Philippines must be unlocked, and at a rough glance cloud gaming faces severe hurdles in those markets)
  • It is not yet clear how other platform holders (i.e. Sony, Nintendo, Apple, Google) will react. Will they allow 3rd party devs to utilize Microsoft’s solutions on their platforms, and to what extent? For example, if a game is streamed onto iOS, can it thus bypass the App Store 30% revenue cut? Thus it’s unclear what exactly the value proposition is being offered to game developers (some will no doubt try)

And this now leads to the competing paths part I alluded to earlier. In the emerging markets I mentioned above – China, India, Indonesia, Philippines, Vietnam, Thailand etc. – there is already a single platform with the clear runway to two billion gamers: mobile. Thus it seems more probable that Supercell or Tencent can ride the mobile gaming evolution to serving two billion gamers faster than Microsoft or Google can with a cloud gaming solution.

This is a much belabored point – but North America truly is a mobile laggard and that biases the industry on its mobile perspective. So much so that when one of the biggest western publishers, Activision Blizzard, talk about “mobile is a top priority”, it inevitably invites players to complain and mock the company for being out of touch with its player-base. (Some of that criticism is deserved, but not all.) Still, I give Blizzard plenty of kudos for sticking to the mobile priority vision, and I suspect they will bear some surprisingly good fruit in the not too distant future.

One last random tidbit that’s worth mentioning in this free-flow post: Vivo announced a fairly affordable ($450) high-end gaming phone, iQOO, last week. It sports a top of the line Qualcomm Snapdragon 855 chipset, but what’s more interesting to me are the gaming specific hardware features – the two bumper buttons (when you hold the phone in landscape mode) is a significant gameplay upgrade for games such as PUBG Mobile. I’ve long clamored for a mobile controller peripherals push by the platform holders such as Apple – building it directly into the device is also a great path. I expect more Chinese phones to add such features – and these Chinese brands just so happens are generally doing well in all the aforementioned emerging markets. (Sadly, I expect Apple to be quite a laggard here as well.)

This example is to say – the mobile gaming ecosystem continues to rapidly evolve, and there are signs of further movement upmarket. (Speaking of which – the foldable phones by Huawei and Samsung, while unlikely to be more than proof-of-concept demos this year, speaks to interesting mobile hardware leaps in the next few years.) So if “two billion gamers” is the only metric to pursue – my money would be on mobile to hit it first.

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