Source Code: Your daily look at what matters in tech.

next-upnext upauthorJanko RoettgersNoneDo you know what's coming next up in the world of tech and entertainment? Get Janko Roettgers' newsletter every Thursday.9147dfd6b1
×

Get access to Protocol

Your information will be used in accordance with our Privacy Policy

I’m already a subscriber
Power

Microsoft's new cloud gaming service is more about the cloud than gaming

Project xCloud is no Netflix for video games, but it could still turn into a massive business opportunity.

Xbox Game Pass app

Coming soon to an iPhone near you?

Photo: Rafael Henrique/SOPA Images/LightRocket via Getty Images

Microsoft is getting serious about cloud gaming. The Xbox maker will add its Project xCloud game-streaming service to its Game Pass Ultimate subscription tier in September, Phil Spencer, Microsoft's head of gaming, announced in a blog post Thursday morning. This will enable Game Pass Ultimate subscribers to stream more than 100 games directly from the cloud to compatible phones and tablets.

xCloud may not be the much-touted "Netflix for games" just yet — but for Microsoft, that may not even be the ultimate goal. The company's positioning of cloud gaming as an add-on to an existing service shows that even with its gaming division, everything still goes back to selling more-lucrative cloud services contracts.

Microsoft first began testing Project xCloud with a handful of games in September, and the company isn't alone in using the cloud to deliver console-quality games to less powerful devices. xCloud is competing with similar services from Sony, Nvidia and Google, and there have long been rumblings about Amazon developing its own game-streaming service.

Microsoft revealed earlier this year that it now has more than 10 million paying Game Pass subscribers. The company didn't break out how many of those subscribers are paying for the $15-a-month Ultimate tier, but xCloud could be a powerful upsell incentive: xCloud users will be able to play games together with close to 100 million Xbox Live subscribers, begin a game on their Xbox, and then continue at the exact same spot on their mobile device, "just like you do with the popular movie and music streaming services," as Spencer put it.

That being said, the service will only be available in some markets, and it's still unclear whether xCloud will be available on iOS devices, as Apple has blocked similar moves in the past.

xCloud might be likened to Netflix and Spotify, but the fact that it is being positioned as an add-on to an existing subscription tier shows that the company isn't quite there yet. The same is true for Microsoft's key cloud gaming competitors: Sony's PlayStation Now service is based on a similar all-in subscription model, offering access to over 800 games for a monthly fee of $9.99, or $60 annually. However, PlayStation Now is thus far only available on PCs and the company's PS4 console, and the company hasn't committed to mobile game streaming.

Google's Stadia service does bring console gaming to mobile, albeit without a real console. Consumers only need a compatible controller and a Chromecast Ultra streaming adapter to play Stadia games on their TV, and the service is also available on mobile and PCs. But while PS Now and xCloud are based on an all-you-can-eat subscription model, Stadia instead relies on a more traditional pay-per-game business, while offering a limited number of "free" games to consumers who pay $10 per month.

Nvidia's GeForce Now offers consumers the ability to stream games they already own as well as free-to-play games to mobile devices, underpowered PCs, and the company's own Nvidia Shield TV streaming device. This approach has faced significant pushback from game publishers, many of which often strike platform-exclusive deals with mobile, PC and console app stores. Some major publishers, including Activision Blizzard, have removed their titles as a result, which could help explain why the service has seen a somewhat slow start. Earlier this year, Nvidia said that the service was used by "hundreds of thousands of members." For comparison, Sony's PlayStation Now service hit 2.2 million paying subscribers in May.

However, for Nvidia, Google and Microsoft, cloud gaming isn't just about paying consumers. The companies are also looking to strengthen key parts of their existing businesses. In the case of Nvidia, that business is selling chips. "Cloud gaming helps to democratize ray tracing and also drive developers to optimize for low-latency as well as decouple the gaming experience from the PC," said Moor Insights & Strategy analyst Anshel Sag. In other words: Nvidia's end game is about enabling cloud gaming as an industry, not necessarily running a cloud gaming service. "It's about moving more GPUs by doing all that," he said.

Google and Microsoft, on the other hand, have been busy competing with each other in the cloud computing space, and cloud gaming is just another application to run on their cloud infrastructure. "It's 100% about Azure vs. Google Cloud Platform," Sag said. Stadia could be a powerful case study as Google is looking to sell cloud streaming technology to the video game industry — in much the same way that Amazon built a cloud computing infrastructure to support its own store and then started selling that technology to other businesses.

Likewise, xCloud may help Microsoft sell additional Game Pass subscriptions, but the resulting revenue is chump change compared to lucrative cloud computing contracts the company could gain from selling xCloud's technology to publishers who may want to control their own streaming library of games instead of giving a cut to a third-party streaming platform. In the last quarter alone, Microsoft's commercial cloud business generated over $13 billion, a jump of 39% over the same period the year before. "Everything Microsoft does as a company is framed around one question," Sag said: "Does it drive Azure usage?"

The same is likely true for Amazon's efforts, which are now pegged for a 2021 launch. However, cloud gaming services do need to have access to popular titles to attract enough interest from consumers. That puts Microsoft, which operates more than a dozen game studios in-house, at a key advantage over the competition. Case in point: Amazon's first in-house game, Crucible, bombed so badly that the company pulled the public release just a few days after its launch.

Power

The video game industry is bracing for its Netflix and Spotify moment

Subscription gaming promises to upend gaming. The jury's out on whether that's a good thing.

It's not clear what might fall through the cracks if most of the biggest game studios transition away from selling individual games and instead embrace a mix of free-to-play and subscription bundling.

Image: Christopher T. Fong/Protocol

Subscription services are coming for the game industry, and the shift could shake up the largest and most lucrative entertainment sector in the world. These services started as small, closed offerings typically available on only a handful of hardware platforms. Now, they're expanding to mobile phones and smart TVs, and promising to radically change the economics of how games are funded, developed and distributed.

Of the biggest companies in gaming today, Amazon, Apple, Electronic Arts, Google, Microsoft, Nintendo, Nvidia, Sony and Ubisoft all operate some form of game subscription. Far and away the most ambitious of them is Microsoft's Xbox Game Pass, featuring more than 100 games for $9.99 a month and including even brand-new titles the day they release. As of January, Game Pass had more than 18 million subscribers, and Microsoft's aggressive investment in a subscription future has become a catalyst for an industrywide reckoning on the likelihood and viability of such a model becoming standard.

Keep Reading Show less
Nick Statt
Nick Statt is Protocol's video game reporter. Prior to joining Protocol, he was news editor at The Verge covering the gaming industry, mobile apps and antitrust out of San Francisco, in addition to managing coverage of Silicon Valley tech giants and startups. He now resides in Rochester, New York, home of the garbage plate and, completely coincidentally, the World Video Game Hall of Fame. He can be reached at nstatt@protocol.com.

Over the last year, financial institutions have experienced unprecedented demand from their customers for exposure to cryptocurrency, and we've seen an inflow of institutional dollars driving bitcoin and other cryptocurrencies to record prices. Some banks have already launched cryptocurrency programs, but many more are evaluating the market.

That's why we've created the Crypto Maturity Model: an iterative roadmap for cryptocurrency product rollout, enabling financial institutions to evaluate market opportunities while addressing compliance requirements.

Keep Reading Show less
Caitlin Barnett, Chainanalysis
Caitlin’s legal and compliance experience encompasses both cryptocurrency and traditional finance. As Director of Regulation and Compliance at Chainalysis, she helps leading financial institutions strategize and build compliance programs in order to adopt cryptocurrencies and offer new products to their customers. In addition, Caitlin helps facilitate dialogue with regulators and the industry on key policy issues within the cryptocurrency industry.
Protocol | Policy

Lina Khan wants to hear from you

The new FTC chair is trying to get herself, and the sometimes timid tech-regulating agency she oversees, up to speed while she still can.

Lina Khan is trying to push the FTC to corral tech companies

Photo: Graeme Jennings/AFP via Getty Images

"When you're in D.C., it's very easy to lose connection with the very real issues that people are facing," said Lina Khan, the FTC's new chair.

Khan made her debut as chair before the press on Wednesday, showing up to a media event carrying an old maroon book from the agency's library and calling herself a "huge nerd" on FTC history. She launched into explaining how much she enjoys the open commission meetings she's pioneered since taking over in June. That's especially true of the marathon public comment sessions that have wrapped up each of the two meetings so far.

Keep Reading Show less
Ben Brody

Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.

Protocol | Fintech

Beyond Robinhood: Stock exchange rebates are under scrutiny too

Some critics have compared the way exchanges attract orders from customers to the payment for order flow system that has enriched retail brokers.

The New York Stock Exchange is now owned by the Intercontinental Exchange.

Photo: Aditya Vyas/Unsplash

As questions pile up about how powerful and little-known Wall Street entities rake in profits from stock trading, the exchanges that handle vast portions of everyday trading are being scrutinized for how they make money, too.

One mechanism in particular — exchange rebates, or payments from the exchanges for getting certain trades routed to them — has raised concerns with regulators and members of Congress.

Keep Reading Show less
Tomio Geron

Tomio Geron ( @tomiogeron) is a San Francisco-based reporter covering fintech. He was previously a reporter and editor at The Wall Street Journal, covering venture capital and startups. Before that, he worked as a staff writer at Forbes, covering social media and venture capital, and also edited the Midas List of top tech investors. He has also worked at newspapers covering crime, courts, health and other topics. He can be reached at tgeron@protocol.com or tgeron@protonmail.com.

Protocol | Workplace

The Activision Blizzard lawsuit has opened the floodgates

An employee walkout, a tumbling stock price and damning new reports of misconduct.

Activision Blizzard is being sued for widespread sexism, harassment and discrimination.

Photo: Bloomberg/Getty Images

Activision Blizzard is in crisis mode. The World of Warcraft publisher was the subject of a shocking lawsuit filed by California's Department of Fair Employment and Housing last week over claims of widespread sexism, harassment and discrimination against female employees. The resulting fallout has only intensified by the day, culminating in a 500-person walkout at the headquarters of Blizzard Entertainment in Irvine on Wednesday.

The company's stock price has tumbled nearly 10% this week, and CEO Bobby Kotick acknowledged in a message to employees Tuesday that Activision Blizzard's initial response was "tone deaf." Meanwhile, there has been a continuous stream of new reports unearthing horrendous misconduct as more and more former and current employees speak out about the working conditions and alleged rampant misogyny at one of the video game industry's largest and most powerful employers.

Keep Reading Show less
Nick Statt
Nick Statt is Protocol's video game reporter. Prior to joining Protocol, he was news editor at The Verge covering the gaming industry, mobile apps and antitrust out of San Francisco, in addition to managing coverage of Silicon Valley tech giants and startups. He now resides in Rochester, New York, home of the garbage plate and, completely coincidentally, the World Video Game Hall of Fame. He can be reached at nstatt@protocol.com.
Latest Stories