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Verizon has a new cloud-based gaming service that is in the alpha testing stage, based on recent reports. Verizon Gaming is being tested on Nvidia Shield set-top boxes, according to The Verge.

The Shield devices, which were unveiled in 2015, were updated two years ago when Nvidia rolled out its own streaming service.

Verizon Gaming will give greater software support to the Nvidia Shield, but the service also will be opened to Android smartphones in
the near future. Whether on the Shield or a smartphone, the games will
be playable with a paired Xbox One controller.

There are currently around 135 games on the service. Verizon
Gaming reportedly is being rolled out slowly to testers who are
being provided with the Nvidia Shield, an Xbox One controller and login
details — as well as a US$150 Amazon gift card for taking part in the
testing.

At present, performance is the key point subject to testing, rather
than gameplay or graphics quality. There has been no official word on
what games titles are actually available, but screenshots that have
been posted online indicate that the service does include Fortnite, Red Dead Redemption 2 and Battlefield V, among other AAA titles.

However, these
could be placeholders, and the actual content being tested could vary
greatly from what the early reports suggest.

The initial testing period is scheduled to be over by the end of January.

Stream On

If the reports of Verizon Gaming are accurate, Verizon could be
entering an increasingly crowded playing field. Microsoft, which has scaled back its presence on PC gaming to focus on its Xbox platforms, could be surging back to the PC market with its still-in-development Project xCloud streaming service. Google
has been involved with a service known as “Project Stream.” There also have been reports that Amazon is working on its own gaming service.

This doesn’t even count Electronic Arts’ Origin service, which
operates as a digital rights management (DRM) and matchmaking service,
or Valve’s Steam, which rolled out in September 2003 as the first true
DRM and matchmaking service for PC games.

Steam has gone on to become one the largest online retailers for third-party PC gaming software. It debuted its first mobile
client for iOS and Android devices in 2012, and Valve released its own
gaming system, dubbed the “Steam Machine,” which serves as an alternative
to high-end PC gaming machines.

Crowded but Potentially Profitable Cloud

Although these companies see opportunity in the cloud, it isn’t clear if the players are as eager. For the publishers, however, it does provide a level playing field.

“The reason cloud gaming is so important to the gaming industry, even
in the face of affordable local storage and processing, is that it
will remove obstacles for consumers to experience top quality video
games and further streamline distribution for smaller game companies,”
said Ted Pollak, senior analyst for the game industry at Jon Peddie
Research.

“We are forecasting that this will significantly increase the number
of people who pay for gaming across all levels of production
complexity,” he told the E-Commerce Times.

“This revenue will be realized as a month-to-month service, where the
customer cloud streams all their gaming, but it could also serve to
demo the fidelity of AAA games to people intimidated to try, or on the
fence about buying a gaming PC or console,” Pollak added. “After
consumers have experienced a taste of games that suit their interests,
they may very well become customers for local processing — consoles and
gaming PCs — for a premium experience.

Not a Console, Not a PC

One advantage that Verizon Gaming could have is that it could offer an
experience that is something of a hybrid between that of the PC and video game consoles such as Microsoft’s Xbox One or Sony’s PlayStation
4.

Unlike the Steam Machine, the key point for the Nvidia Shield
was to provide a level “gaming field,” so that players with more
expensive machines wouldn’t have an advantage.

“Verizon is already preinstalled on the Nvidia Shield device and
appears to be running a beta test,” said Joost van Dreunen, commercial leader of SuperData, a Nielsen company.

“Publishers may not be ready to commit to a single provider as their
primary platform for a few reasons. One, publishers have been rolling
back on exclusivity over the past few years in the traditional console
space,” he told the E-Commerce Times.

“Second, the emergence of a new platform, like Verizon Gaming, would
be a secondary revenue stream,” added van Dreunen.

“It is an interesting area for Verizon to explore,” noted Brett
Sappington, senior director of research at Parks Associates.

“Playing games via the Shield provides the game console-like
performance that core gamers prefer, which is important,” he told the E-Commerce Times.

“Core gamers are the primary target market for paid game services,” Sappington added.

“Another distribution option could be good for consumers and
developers, but it will need to deliver successfully on many levels to
supplant Steam or other options,” said Sappington. “A particularly
interesting — and unanswered — question is the business model that
Verizon will use. A subscription that includes unlimited access to
high-quality games will be popular, but costly.”

A Data Plan

Even if it isn’t about a subscription model, there could be another reason for Verizon wanting to get into the game arena.

“It’s an obvious strategy for Verizon to take this approach — upsell their customers on massive data plans,” said SuperData’s van Dreunen.

“And let’s be honest, no one needs more data than gamers; however,
short of giving users hardware for free — like phone companies tend to
do with handsets — there are really no differentiating characteristics
to such an approach,” he added.

“Verizon Gaming is still a work in progress and publishers don’t know
what the outcome will be just yet,” said van Dreunen. “In my view, all
of this makes it a high-risk, low return proposition for Verizon
unless they are willing to make major investments to subsidize it or
have a completely different, longer-term monetization strategy to
capitalize on the gaming audience.”

Verizon as a Game Company

It isn’t clear if Verizon will make those investments, but what is
clear is that it doesn’t have experience with this market of core
gamers. Its success is far from guaranteed. Still, Microsoft and
Sony have managed to become known as serious players in the gaming
market — with the former known more for business software and its
Windows PC operating system, and the latter a major
player in consumer electronics.

It is possible that Verizon could find success, but unlike those others
companies it is entering a very crowded market.

“It really will depend on the quality of the rollout — and I think
Verizon is serious, but I doubt they have the talent to pull this off
successfully,” observed Rob Enderle, principal analyst at the Enderle
Group.

“This is one of those things that sounds like a good easy idea but
where a lack of experience could make execution problematic,” he
told the E-Commerce Times.

“If they use Nvidia’s experience — given that Nvidia is a gaming
expert — the outcome should be far more positive, but carriers are not
known to be good listeners,” Enderle noted.

“Given the lack of experience there is a good chance quality will
suffer,” he said.

“The gaming market is unforgiving when it comes to quality, and gamers
have incredibly high standards and are very vocal,” remarked Parks
Associates’ Sappington.

“Those games or experiences that don’t measure up fall out of the
market quickly,” he added.

“This is something you learn over time, and the phone carriers have a
history of jumping in first and then learning by experience, which
rarely ends well,” said Enderle.

“Increasing the channels for games
should create competition and help drive prices down,” he said, “but that will
depend on whether Verizon gets to critical mass. It certainly won’t
make games more expensive, but its impact on pricing reductions depends
on the service becoming viable.”

Peter Suciu has been an ECT News Network reporter since 2012. His areas of focus include cybersecurity, mobile phones, displays, streaming media, pay TV and autonomous vehicles. He has written and edited for numerous publications and websites, including Newsweek, Wired and FoxNews.com.
Email Peter.