When NVIDIA (NASDAQ: NVDA) launched its GeForce Now cloud gaming platform in February, apparently ready to disrupt the nascent market.
Not like that Alphabetthis (NASDAQ: GOOG) (NASDAQ: GOOGL) Google Stadia, which requires gamers to buy back the games they already have, GeForce Now allows gamers to stream their games without additional purchases.
GeForce Now is also launched with a free tier, while Stadia only launches a free tier in early April. GeForce Now also offers a wider choice of games, thanks to its partnerships with major game publishers. But over the past two months, many of these partners have removed their games from GeForce Now.
Activision Blizzard (NASDAQ: ATVI), Take twoGame 2K, Bethesda, Microsoft (NASDAQ: MSFT), AT&TWarner Bros. Interactive, Codemasters, and Klei Entertainment all pulled their game from the platform, and others could follow it in the near future. Does this exodus show that GeForce Now will fail before the cloud gaming market gains momentum?
Why do publishers withdraw their games?
This publisher is likely to withdraw their game from GeForce Now for four reasons. First, NVIDIA previously told me Bloomberg that Activision Blizzard wants to reach a new revenue sharing agreement after the official launch of GeForce Now. NVIDIA refused, and Activision interesting game. Other publishers might want a similar offer.
Second, some of these companies might develop their own cloud gaming platforms. Microsoft is preparing to launch its own service, xCloud, so it doesn’t make sense to offer first-party games on the competing NVIDIA platform.
Developers also complained that NVIDIA registered their games without their consent and that the “buy once and stream anywhere” model made cross-platform games obsolete. For example, cellphone ports from popular PCs and game consoles can disappear if gamers can stream the full version from any Android device.
Finally, publishers may feel more comfortable with Stadia’s digital locker model, where gamers buy the full version of the game again for streaming access. That model shatters the dream of developing “Netflix for games, “but this allows publishers to maintain tighter control over their property.
What’s next for NVIDIA?
NVIDIA is still in partnership with major publishers and other DRM platforms, including Valve’s Steam, Epic Games Store, and Ubisoft, and notes that 30 of the top 40 games on Steam are still available.
It also recently added the complete Ubisoft Assassin’s Creed and Far Cry franchise to the platform. Therefore, GeForce Now is not dead yet, but it is likely to lose any publisher with conflicting interests in the cloud gaming market.
By itself, GeForce Now will not move the needle for NVIDIA. But GeForce Now is tempting a future where gamers no longer need to upgrade their game chips – which generate 48% of their revenue in the last quarter – because they will be able to stream high-end games on low-end devices.
Cannibalization of it it won’t happen overnight, but we can see a gradual disruption in the GPU gaming market because cloud gaming services get major users. However, cloud-based games still need to be streamed from a powerful GPU – and Google and Microsoft are both installed AMDthis (NASDAQ: AMD) GPU on their cloud gaming platform.
Therefore, GeForce Now may be a reaction to AMD’s progress in the data center markets, which generated 31% of its revenue in the last quarter, rather than a full effort to challenge Stadia or xCloud. In other words, this is a showcase platform that shows the capabilities of its GeForce GPU in cloud gaming.
If gamers gradually switch to cloud gaming service over the next few years, when film observers leave optical discs for streaming, NVIDIA may offset the loss of discrete gaming GPU revenues by selling high-end GPUs to cloud gaming data centers.
The key is takeaways
“Buy once and stream anywhere” NVIDIA’s strategy with GeForce Now sounds promising to gamers, but it’s always destined to lose publishers – like Netflix loses content providers who want to develop their own streaming platforms. Going forward, we have to see if Microsoft, which also plans to let gamers play the games they already have on xCloud without a second purchase, can succeed with the same model.
GeForce Now is not a failure, because NVIDIA might never intend to subscribe to platform revenue to become the main growth engine along with its GPU and Tegra CPU business. Instead, this shows the power of the GeForce GPU in streaming cloud – which can convince other cloud game platforms to buy more NVIDIA chips for their data centers.
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