New Directions for Streaming Games

It's been nearly a year since we looked at some of the major players in streaming games and how they set up the systems to capture the time and money of broadband users. At the recent mother-of-all-gaming-conventions, E3, those companies were still present, but they've been joined by several others with novel approaches to interactive, collaborative games that employ streaming or digital media delivery technologies.

Crossing the Streams

Into Networks (www.intonetworks.com) showed off the new EB 1 site, the product of a deal with retailer Electronics Boutique and scheduled to launch June 1. The service will let users stream games on a short-term subscription basis at a price of $4.99 for three days. Then, if they decide they'd like to purchase the software, the rental price will be credited toward the cost of the full version.

"It's a game changer for the business in general," said Vincent Grosso, chief executive officer of Into Networks. "We're providing full versions of software that you can try before you buy. Consumers get click-and-play access to hundreds of games. A game starts within a number of seconds; you don't have to reboot your PC, and you don't have to actually install the game."

Stream Theory's (www.streamtheory.com) model works in a similar manner: You install the company's player software, which lets you stream and play games over a broadband connection, usually with less than a minute of waiting time. As you progress through parts of a game, additional levels and other data are seamlessly downloaded in the background so they're there when you need them.

Stream Theory showed off a working model of its newly revamped rental site, where publishers can build rooms with streaming demos to try, and games to buy. "They can have as many rooms as they want, with as many titles as they want in those rooms," said Jon Starbird, an engineer for Stream Theory.

Cash Value?

The streaming side of Stream Theory's solutions is still mostly about playing demos, according to Mike Goodman, senior analyst for research firm The Yankee Group (www.yankeegroup.com). "It's a very effective way to do the demos," he said. "But can you make enough money to stay in business?"

Good question — one that applies to all streaming entertainment plays. Goodman explains that the largest hurdle to overcome for any business model is obtaining an installed base of users. "No matter what, everybody is challenged by the fact that there were only 5 million broadband users in the United States at the end of 2000," he said. "These companies are going to have to be able to stick it out for two to three years."

It won't be rapid growth, he says. "By definition, it follows the roll-out of broadband. And only a small percentage of those users are paying to play games. It's not a lot of households and you have to split it across a number of companies," he Goodman said.

Still a Dial-up World

That's where gaming sites targeting low-bandwidth users come in, including RealArcade (www.realarcade.com) - the new downloadable gaming site from RealNetworks — and GameSpy (www.gamespy.com).

While not based on a streaming model, these services are pushing the use of digital delivery to reach a broader user base. "GameSpy and RealNetworks are leading the way to digital delivery of games to a mass market and are creating a new marketplace for games to be sold direct to consumers by developers of all shapes and sizes," said Mark Surfas, chief executive officer of GameSpy Industries. "It's revolutionary change for an $8 billion industry."

Goodman feels that the RealArcade model is better suited for profitability in the here and now. "On the dial-up side, you've got a 50 or 60 million installed market base. It's still a dial-up world for now and for the foreseeable future," he said.

Wireless Streaming

One monster of an installed base that streaming game providers have begun to tap is the wireless market. At E3, several business models were demonstrated by cell phone and personal digital assistant content providers.

G-cluster (www.gcluster.com), a wireless entertainment company, demonstrated wireless streaming games for the Pocket PC, using a service called G-screen. The service works by setting up a server cluster, which houses the games and feeds out wireless streams, in a "hot spot," such as a hotel, coffee shop, airport or restaurant. Users can rent a wireless modem and game time, and can play without having to install the games on their handheld.

"By using this method, G-cluster can bring PC games with fast 3D graphics and high-quality sound to handheld wireless devices," said Mika Peltola, chief executive officer of G-cluster.

Although a young technology, game play was quite smooth and looked good on a Pocket PC (the service will also work on other PDAs with the proper connectivity, says Peltola.

Peltola has high aspirations for the model - and the games. "G-cluster believes that wireless gaming should be as good as traditional computer and console gaming, if not better. G-cluster technology elevates wireless gaming way beyond the typical stick figure or card game," he said.

But again, there are obstacles to overcome in the wireless world. "On the PDA side, people use shareware instead of buying games," said Goodman. "That's a big problem."

Cell phone gaming is fraught with problems of its own — namely, high costs. "People are making money on cell phone games today, but it's the providers and their per-minute charges," Goodman said. "It's one thing to spend a few minutes playing games, but if you play for a few hours, that's going to run up your bill and hold down your usage. The providers love the per-minute charges, but at the same time, they're going to limit their market."

It's going to take time for business models to adapt on the wireless side and for the number of installed users to grow on the broadband side. "You have to have patience if you're a streaming software company," said Goodman. Hopefully, it'll be worth the wait.