Image credit @Valve
One of the interesting by-products of the Covid pandemic has been the insatiable demand for electronic hardware. The shortage of graphic cards, PlayStation 5, and Xbox Series consoles has been well-documented. It could be argued, given the current chip shortage impacting multiple industries, that streaming games could be an alternate solution.
Similar to how Netflix has grabbed the video-on-demand market by playing movies and TV shows on any device that can support the Netflix app, the ability to play games without worrying about hardware follows the same concept. The concept of playing the latest games (with all of their graphic settings set to high) on older computers or app devices without the need to buy new hardware is one of the primary marketing goals of streaming services such as Microsoft’s xCloud, Google’s Stadia, Amazon’s Luna, Ubisoft Plus, and Nvidia’s GeForce Now. That is the theory anyway.
So, what was Valve thinking when it announced its portable PC gaming device, the Steam Deck? Is it not the future to rent or own games on the cloud and stream play them?
Three forces could be at play
Firstly, Nintendo has shown with the Switch that portable and traditional console gaming via a TV is seamless. To date, the Switch has sold 85 million units worldwide, making it one of the best-selling consoles in history. This is important to note because the Switch successfully coupled portable and couch gaming. By satisfying both play styles with little to no inconvenience to the other, the Switch has made itself the benchmark for versatility in console gaming. This is a condition the Steam Deck will also fulfill when it comes to portable gaming, but also gaming via a monitor or TV.
Secondly, Valve is facing increased pressure in the PC gaming market and needs to innovate to stay relevant. Those pressures not only come in the form of marketplace competition such as Epic Games, PC subscription services like Microsoft’s GamePass or Nvidia’s GeForce Now, but also from companies that have entered the portable PC gaming market such as the Aya Neo or the OnexPlayer (both playing Steam games, taking advantage of Valve’s core business).
Thirdly, Valve has observed that the appetite for new gaming hardware could be at an all time high. As well as the Switch, both Sony and Microsoft have confirmed that their new consoles are the fastest selling consoles since the time both companies have entered the video game market. There is a strong possibility this phenomenon of virtuous sales could have happened even without the black swan event that is the Covid-19 pandemic. It feels like consumers are as hungry as ever for video game hardware. We can see this pent-up demand in action. Reports are that the demand for the Steam Deck has been so high, the release date for the portable has been pushed back from holiday 2021 to sometime in the first half of 2022.
The best of both worlds
The Steam Deck seems to be a gamble that may have paid off handsomely for Valve and that could be because of what it actually is. Just like the Switch, the Steam Deck can be used as a portable gaming device with its dual pads and motion tracking sensors, but when docked in a peripheral cradle (sold separately) it can also be used as a PC gaming system on a monitor or TV using a traditional mouse and keyboard. The system will come with a Zen 2 3.5Ghz processor, a GPU equivalent to a next-gen console and with 16 GB of Ram. For “gaming on the move” it offers the best of both worlds – a portable console with the power of a home device. It will pose the biggest rival to video game streaming services because, unlike the Switch, the Steam Deck can come with a vast library of games already bought.
Interestingly, Valve already has a steaming solution by way of the Steam Link app. The downside is that the app only works provided the main gaming PC it is linked to is already running Steam. So, although the Steam Link app is a streaming solution, it comes across as half baked, especially in this day when streaming via the cloud is supposedly the future. The Steam Link app is neither conducive to convenience nor does it save on electricity bills if it means running a computer in the background to make it work. Valve could have gone down the route of investing in a purely cloud-based solution, akin to xCloud or Stadia, but that would mean changing its business model from a client store to a client service. Charging its customers for access to games they have already paid for would not fit well with Valve’s business strategy unless Valve makes the service free, but that could entail a sunk cost with little to no benefit to the company. Then there is the headache of licences, revenue sharing and royalties with the partner publishers whose games are streamed. Given that there are tens of thousands of games in the Steam store it would be impractical to run a paid-for subscription service with revenue sharing. As a result, the Steam Deck offers a simple yet innovative solution by comparison. Besides, it seems Valve is more than comfortable to broaden its breadth of hardware products because the Steam Deck will follow a line of other Valve hardware from Steam Controller, Steam VR Index, Steam Link and Steam Machines.
A direct rival?
I would venture that while the Steam Deck is not a direct rival to video game streaming, it offers an alternative that could take away some of its potential client base and revenue. This is because both the Steam Deck and streaming services answer the same question: can I get access to the latest games while on the “go” without losing performance? Both solutions have strengths and weaknesses in answering this question but fundamentally, they are doing the same thing.
Streaming provides gamers with the opportunity to game on any app, PC or browser-based device provided it has access to the internet. That is the key. Provided it has access to the internet. Not only do you need to be online, but the access will also have to be very stable and relatively fast. For both xCloud and Stadia that means a minimum of 10mbps downstream. That is not a problem if you have access to 5G (or 4G if the connection is very good) but getting fast internet on hotel or public transport wifi cannot be guaranteed. Although streaming liberates the gamer from carrying hardware, unless the interface is touch screen or if a PC is at hand, the player will still need access to a controller.
The Steam Deck, by contrast, is designed to be carried, which by itself can lead to inconvenience, or at worst, the risk of theft or loss. Where the Steam Deck has the marketing advantage is ownership and price. The GamePass model is one of renting games and the Stadia model is one buying games and still paying for a subscription service to access 4K resolutions. Steam Deck could play to its strength in that it is a one-off cost with no subscription expenditure. The cost will come thereafter of buying games on Steam, allowing for as many games to be installed on the system that its storage can handle. In addition, streaming services often have a limited library of games they support. The Steam Deck has no such constraint.
Gamers will be in the fortunate position where they can choose which type of “remote play” best serves their needs. The Steam Deck’s lowest price tier will be $399 going all the way up to $649. Streaming services can also add up in price over time. The monthly cost for Stadia Pro comes to $10 without the upfront and extra cost of buying games from the Stadia store. Microsoft’s xCloud is only available on the GamePass Ultimate subscription service which costs $15 per month. Amazon’s Luna offers the lowest subscription for rented games at $6 per month but that service has still yet to launch in Europe. Whoever said gaming was an inexpensive hobby was lying. For many, an opportunity cost must be considered. The cost of buying into both a Steam Deck and one or more subscriptions service is not a possibility for many. A choice will have to be made and that is the heart of the matter on who could become the biggest rival to streaming services.
A lot has been written about the Steam Deck since its announcement. Most of the articles on the internet have focused on the technology itself, some have compared the system to the Switch, and others have spotlighted how it will close the gap in the portable PC market. For me, the Steam Deck will be the biggest disrupter to the infantile market that is video game streaming. This is because it has made the so-called “portable” gaming with the least amount of inconvenience, more difficult to sell. It is amazing what this industry comes up with and how quickly things change. For me, the success of video game streaming felt like a certainty six months ago. Now I am not so sure.