Games On Demand: New Revenue Streams?
If you stream it, they will come - and stay, and buy. That's the theory. The difficulty is in converting viewers and listeners to actual purchasers - of content, products, or both. The proponents of a new kind of service - streaming games - are trying a new strategy: Stream something that users already buy. For game publishers and broadband-centric sites searching for ways to maximize revenue, streaming games could create a new world of possibilities.
Streaming games are part of the software-on-demand trend - one that is beginning to gain momentum on its merits of convenience to the user and profit potential for the distributor. "Software on demand provides the rich content that broadband needs to survive," says Mike Goodman, an analyst for the Yankee Group. "It gives subscribers something that they can't get with dial-up access. Users will ask, ‘What does the broadband connection mean to me?' That's where software on demand really comes into play."
Streaming games and other on-demand software applications use a downloadable player, similar to RealNetworks' RealPlayer, to catch and put together the pieces of a program as they are downloaded to your system (click here for more on how streaming games work). After you've got the player installed, you simply click a link to a title you'd like to play, and within seconds, it's up and running on your machine.
"Say, for example, I want to play a game or use Lotus 1-2-3. I click on the link, then the Into player jumps up and finds the closest server. Little blocks of data get sent, the player reassembles them, and the application starts to run," says Bill Holding, vice president of marketing for Into Networks, creators of the PlayNow.com streaming games service.
The potential benefits to the user are clear: Software on demand allows users to work with an application or play a game on a subscription basis, with click-and-play convenience that eliminates the need to download and installing the software on their PC. And to believe the early purveyors of streaming software, it creates a powerful new sales and promotional outlet for software publishers, as well as a new means of amassing market research, and will allow content distributors to take site stickiness to a whole new level.
The Players
In a Web packed with me-too companies and services, the streaming software space is relatively underpopulated. Among the first to tackle the segment are Into Networks and Stream Theory.
Stream Theory positions itself as a hosting service for software publishers. Using the free Stream Theory Player, it streams applications and games to the user in a customized format that allows the delivery of messages, advertisements, and promotions.
Into Networks' PlayNow.com service is being marketed by broadband service providers. Subscribers (Into Networks claims 500,000 users currently) can go to the site and click-and-play a variety of CD-ROM software titles, from the latest games and educational titles to self-help and leisure applications. Through content partnerships with software publishers, PlayNow.com lets users preview titles for free, rent individual titles, or subscribe to entire channels of content: Kids (edutainment), Games, and Lifestyle (reference, hobby, home office and productivity titles). Two-day rentals cost $2.99 per title, and channel subscriptions cost $5.99 each per month, or $9.99 per month for all three.
Under this model, the cost benefit to users could be attractive. For instance, popular games like Quake III Arena and Demolition Racer are typically priced from $40 to $45 retail.
For game publishers, the streaming format offers several benefits, these companies say. Streaming eliminates the high cost of physically distributing titles to retail outlets, as well as the cost of packaging. It also provides easy exposure to a publisher's full line of games, and serves as a vehicle for trials that may lead to purchases.
"It opens up a whole new world of software use," says Steig Westerberg, president and CEO of Stream Theory. "It gives consumers more choices and will dramatically decrease the amount of returns, for publisher cost savings."
Bonus Levels
If Into Networks' own research is any indication, the try-before-you-buy capability encourages users to try a wide range of products. During a trial run, the average PlayNow.com user played 9.2 titles, with some trying 20 or more different titles in a single week. The service's flexible pricing model may also help to drive profitable conversion: Of the users that made a purchase, about half signed up for PlayNow.com's $9.99 monthly subscription to all of the site's channels, and the other half chose a single-channel subscription.
Into Networks also claims that its software-on-demand model increases stickiness. During its trial, users spent an average of 50 minutes per month at PlayNow.com - a figure that rivals eBay and Yahoo.
Streaming games may provide other perks for game publishers. Currently, there's no way to tell how often a demo is played once someone has downloaded it. But both Into Networks and Stream Theory offer real-time statistics to publishers to show them how long people play a demo. The streaming players can even notice trends, such as users that have stopped playing at certain difficult sections of a game - the kind of information that heretofore could only be gleaned through expensive usability studies.
In addition, streaming games securely to subscribers' systems might help to reduce piracy - a major concern for publishers, especially in international markets.
King Content
The revenue models, though untested, appear to have potential -- they always do (watch this space for illuminating hindsight). But the success of streaming games may ultimately depend on how well the services meet the needs of consumers. "The most important thing for long-term health [of streaming games services] is what titles they have and the licensing deals they've made," says Goodman. "The games industry is very hit-driven."
Into Networks has been pursuing licensing deals aggressively, and recently signed a deal with Disney Interactive to create a Disney Interactive Channel on PlayNow.com that will feature a cross-section of titles from Disney Interactive's games, learning, and creativity segments.
Performance and usability are also critical. On this score, our own experience with Stream Theory's streaming games service points to a positive future. After we'd installed the small (1.45MB) Stream Theory Player, it took less than 10 seconds for Quake III Arena (a hugely popular game) to stream and begin running on our system, over a cable modem connection. After we selected a multiplayer game and entered the map, we had a longer (roughly 30 second) pause while the game downloaded the map -- but game play ran without a hitch.
Demolition Racer took only 15 seconds from click to run, while the more complex Deus Ex took about 45 seconds. All the games streamed quickly, at rates from 300Kbps to 500Kbps, and ran well once they'd gotten started. Considering that even with our high-speed access, it would take five to 10 minutes to download and install one of these demos, we were suitably impressed.
Will the rest of the estimated worldwide broadband user base of 30 million be as thrilled? Only if they have access to a service. Though Into Networks claims its PlayNow.com is the largest streaming games service, it wasn't available in our area - the tech-heavy San Francisco Bay area. However, the company is working with cable and DSL providers to expand its reach.
Only when a large slice of the broadband user pie is able to experience streaming games will we be able to see how this new trend will play out. The ducks are in a row - we'll see how well the players shoot.
Sidebar: How Streaming Games Work
Unlike streaming video or audio with no interactive elements, streaming software requires a more complex process than just grabbing the next chunk of data in a sequence. Both Into Networks and Stream Theory use an interactive streaming process that predicts what data the user will need next, and then streams it to the player so that game play runs seamlessly.
"It's an intelligent streaming process," says Bill Holding, vice president of marketing for Into Networks. "It knows what to look for.
The streaming player knows which chunks of data to ask for next, so it doesn't bog the user's connection or system down with all those megabytes. "The average CD-ROM holds 650MB of data, but you might play a title for an hour and only use 50 of those 650MB," Holding says.
Another nice touch is that once you're done playing, the temporary files used to run the game are cleaned off your drive. "It doesn't even change any registry or .dll settings," Holding says. Return to top