Can Amazon’s Luna eclipse its rivals?

Cloud gaming might still be in its infancy, but huge companies are already battling it out to find their footing in this unexplored space. Google may have had something of a head start with Stadia, but they were quickly followed by Microsoft with xCloud, and most recently by Amazon’s Luna.

Luna is just the latest gaming offering to come out of Amazon recently, joining the ill-fated Crucible and MMO title New World, but this is arguably its most ambitious to date.

Cloud gaming is still unexplored territory, and not one that will be mainstream for years to come just yet. Amazon clearly hopes to leverage Luna alongside its existing services to help it outlast this Hunger Games-era of early cloud gaming. And from what we know so far, it seems that Amazon may have learned from their rivals’ mistakes – both launching Luna under an all-inclusive subscription model, and as a PWA (Progressive Web App running in a browser) to bypass Apple’s strict App Store rules.

It’s all very encouraging, but given the mainstream reception Stadia has received, any cloud gaming offering without an existing customer base will attract cynics. Like VR before it, cloud gaming looks to have a pretty rocky road ahead of it before, hopefully, finding its own audience. We reached out to industry experts to see how Amazon’s cloud ambitions might pan out.

PART OF THE FAMILY

One advantage for Luna is that Amazon already worked its way into players’ homes, both physically and digitally, years ago. Luna has the potential to leverage both Amazon’s hardware, such as Fire TV and tablets, as well as digitally via Amazon Web Services (AWS) and Twitch. Will these enormous audiences dovetail with Luna?

“We’ll have to see how much cross-marketing Amazon ends up doing between their various services,” says Simon Carless, founder of GameDiscoverCo. “I could see Twitch and Luna providing very interesting cross-promotion in terms of being able to instantly play demos of games – or even the games themselves – that streamers are showing on Twitch. It’s definitely intended to be part of a larger ecosystem.”

The Twitch integration is certainly an incredible tool in Amazon’s armoury, similar – if not superior to – Stadia’s pull with YouTube. While Twitch may be expanding out from gaming, its gaming roots remain as healthy as they ever were – particularly during the pandemic.

A cross-promotion with Twitch could be reminiscent of Stadia’s State Share feature, that allows users to share game states via a URL. Being able to direct Twitch’s enormous audience directly to your game via Luna is certainly a compelling argument.

This integration, which will be available from launch, puts Amazon ahead of other initiatives in this area from Google with YouTube and Microsoft with Facebook Gaming.

“This will drive awareness and usage,” says Ampere Analysis’ Piers Harding-Rolls, “but I wait to see if users can demo games instantly without being a subscriber and thus frame cloud gaming within a new user acquisition-based business model.

“Integration also potentially opens up new forms of mass participation gaming through interactive video – Twitch has done a lot of experiments around viewer interactivity, so it’s likely these will evolve and using cloud gaming technology will accelerate that.”

“Amazon’s approach is a textbook case of exploiting platform economics,” adds Joost van Dreunen, co-founder of SuperData Research. “By establishing complementary services Amazon creates additional value for its user base, extracts more value from assets like AWS, and broadens the potential for ad revenue for Twitch.

“For that reason it can also do so at a very low margin, or even for free in some cases, because it can recoup its investment in other segments. Luna is born from Amazon’s conventional strategy that has allowed it to become as large and successful as it is.”

LIKE AND SUBSCRIBE

The second area in which Luna may have an edge over its competitors, or against Stadia at least, is that its games will be available as part of an all-inclusive subscription model, rather than selling the games individually.

It’s a move that brings Amazon’s efforts more in line with Microsoft’s, and with most people’s expectations of on-demand streaming in general.

“I think a subscription play is a much stronger one than ‘pay individually for games’ in cloud gaming,” says Carless, “simply because people like paying one-off for things they feel like they have ownership of.

“Cloud streaming feels less like ownership, because you have to connect to a high-speed Internet connection to play the game you bought. Perhaps this is a little illogical, but the Netflix model just seems to fit better. And we’re seeing this with Stadia too, as it’s beefing up its subscription elements.”

As Carless states, illogical as it might be, an all-inclusive model just feels natural for on-demand streaming. The likes of Netflix and Spotify have conditioned us to expect these services to work like that, so it’s hard not to wonder why Stadia opted to go a different route.

“Google probably did the maths on a viable business model,” Carless adds, “and with executives like Phil Harrison (ex-Sony and Microsoft) involved, felt like their competitors were Sony and Microsoft, so wanted to go in with a similar style approach. This was also before Xbox had started pushing Game Pass so aggressively, so perhaps it felt too early for a subscription-only approach then. But clearly things are changing.”

It’s not just an issue of their competitors, it could also be argued that Stadia was attempting to play to Google’s strengths.

“All of the different providers seek to take advantage of their respective strengths as a platform,” says Dreunen. “Both Amazon and Microsoft imagine cloud gaming as a celestial arcade that runs on their existing cloud infrastructure and charges a fee to consumers; Google has taken an approach that is consistent with its ad-based revenue model by integrating it more closely with YouTube and offering a tiered monetization structure.”

PORTING PROBLEMS

The third way that Amazon might stand out from its competition is that Luna runs on a Windows environment in the cloud – Making it potentially easier for devs to bring their games to the platform.

Porting costs aren’t necessarily insurmountable, even for indies – and Google has made efforts with its Stadia Makers program to account for those costs. But it’s certainly a more attractive prospect if you don’t have to worry about these costs at all. Can we expect this to attract more developers to Luna?

“That’s a good question!” says Carless. “I haven’t heard that this difference is a major reason why the catalogue is going to be different, since both platforms are picking just a few highlights from a very wide range of games, and devs/publishers are generally keen to get on these new platforms for incremental revenue. It may be a marginal help, though.”

“Porting costs are a relevant consideration,” adds Dreunen, “especially during the initial period following the release of a new platform. Creatives will have to figure out if the player base is large enough to commit to porting their titles. I expect to see a lot of small and medium-sized companies flooding onto Amazon Luna to try and capture a first-mover advantage and benefit from Amazon’s effort to market the service.”

APPEASING APPLE

The fourth and final advantage to Luna, in our eyes at least, is that it is launching as a PWA. As mentioned before, being able to access Luna via your browser instead of an app allows Amazon to side-step the App Store rules that have hindered Google and Microsoft’s iOS plans.

Both Google and Microsoft have fully functioning apps on Android of course, but being cut off from Apple’s ecosystem is sure to be frustrating for a new platform. By going with the PWA approach from the start, Amazon is potentially avoiding future headaches.

Microsoft seems to be considering the PWA route of late too, after being frustrated with its standalone app approach. At least, if recent comments from Phil Spencer in a internal Microsoft town hall are to be believed.

“It is consistent with Amazon’s strategy in other entertainment categories to target the broadest possible audience to develop a technology that bypasses Apple’s rules by operating as a browser-based application” says Dreunen. “Google and others have, strangely, not taken advantage of this and, instead, developed applications. In theory that gives Amazon an advantage and potentially will allow it to quickly ramp up its user base.”

It seems such a convenient loophole that it’s hard not to wonder why Google and Microsoft didn’t adopt this approach in the first place, at least on iOS. Are there any meaningful downsides to this method?

“While a native app is preferable,” says Harding-Rolls, “due to performance benefits, integration into system level functionality, such as notifications, and discoverability within the App Store; advanced web technologies mean that browser-based solutions can offer some of the functionality and feel of a native app.

“Even so, I consider this a sub-optimal approach and one that would be quickly superseded by a native app if Apple was to change its App Store guidelines for cloud gaming services.”

“I think it’s considered a bit of a ‘kludge’ to go with this method,” adds Carless. “It’s not the best in terms of discovery or user interface to go with a PWA, so I’m sure the bigger platforms were keen to try other approaches first.”

So that’s how Luna differs from its competitors – Stadia in particular. But that’s not to say Amazon and Google are exactly polar opposites here, as Harding-Rolls points out:

“Amazon’s strategy is most closely comparable to Google’s given the limited first-party games studio capability of each player and the motivations of building such an overarching approach to the games sector. They are driven by largely similar general motivations: compete in cloud services, support their core revenue streams – ecommerce (Amazon) and advertising (Google) – and link together their B2B and consumer-facing platforms. First-party games are an important mechanism to support this strategy and also to drive incremental high-margin revenue.

“What this means is that Amazon’s games strategy is not simply – ‘let’s make great games and build a games business’. There are other commercial dynamics at play here. The scale of Amazon and Google, and these other commercial dynamics, I would argue, make it harder for them to build successful first-party games businesses.”

FUTURE CONCERNS

Still, the success of any cloud platform feels speculative at the moment. It’s still in its infancy, and its main USP, ease of access, isn’t really a key selling point for the usual early adopter crowd. While the demands of 4K streaming (or even 1080p) restricts the audience to those with stable, high-speed internet – is that still too limiting for cloud gaming to be a mainstream concern?

“I think cloud gaming currently works best as a complement to other ways of downloading/playing games,” says Carless, “which is why I think Microsoft and Game Pass has the best strategy currently. But if the value proposition is good enough over time, I don’t see why the other services from Google and Amazon can’t at least grab some market share – or create new video game-related subscribers.”

“We’re still only in the early stages,” Dreunen adds. “It will take another five years before we can start talking about cloud gaming becoming mainstream. That means the first consumers for this new type of service will be tech savvy early adopters. As broadband penetration continues to reach more households, and, ostensibly, 5G starts to deliver on its promises, it opens the market to a wider range of players.

“The real challenge here lies in not making false promises: if big tech firms rush to market and create all types of expectations they cannot deliver, consumers will be disappointed. It may cause them to turn away from cloud gaming and thereby further delay its broader adoption. We’ve seen that before with VR, too, for example.”

And as with VR, cloud gaming is seeing companies rush into this new and unproven territory, lest they regret not doing so further down the line. It’s understandable to want to be the first to find success in this new arena, but that very eagerness could cause problems for everyone.

“There is an eagerness in the way that especially big tech firms are rolling out their services,” Dreunen continues. “The cynic in me says that we’ll soon face a market circumstance of too many firms pushing out content and offerings that are indistinguishable and bland. It won’t decimate the industry like it did in the 80s, but you have to ask whether the consumer audience can really support all of these firms. Cloud gaming is still several years out and it worries me that this rush to market may ultimately turn audiences off.”