Despite short-term questions, games software/hardware to top $200 billion by 2023

There has been some negative sentiment surrounding the games industry recently, with stock prices of public games companies in question in both the U.S. and China. While being contrarian to market sentiment is always risky, it’s also possible that folks might be taking a long-term solution to a short-term problem. Games industry software/hardware combined revenue could drive well over $200 billion of revenue by 2023, and there was a record $5.7 billion investment in games companies in 2018. So what’s going on?

The games industry isn’t one monolithic sector. Depending on how you slice it, the market is made up of 15 sectors, eight platform types (e.g. mobile, PC, console) and even more proprietary hardware/software platforms (e.g. iOS, Android, Xbox One, Sony PS4, Nintendo Switch).

Games software/hardware sector revenue share versus growth (2018-2023)

(Note: See selected data below. Free charts do not include all the numbers, axes and data from Digi-Capital’s Games Report, with underlying data sourced directly from companies and reliable secondary sources.)

Mobile games rule

We first forecast mobile’s dominance of the games market way back in 2011. At that time, many traditional games companies didn’t believe mobile/online games could become the driving force for games. Some of those companies no longer exist, so what’s happening today is nothing new.

Total global mobile app store revenues (gross across games and non-games apps, including app store revenue sharetopped $100 billion for the first time in 2018. Mobile games delivered around three quarters of that number, as they have consistently for years. So where mobile games drove more than $70 billion gross revenue globally last year, they could top $100 billion revenue (again gross, including app store revenue share) in their own right in the next five years. But like all games sectors, mobile games are hit-driven. And this could be the source of some of the mismatch between the market’s understanding of short-term trends and long-term potential.

For example, Supercell’s Clash of Clans and Clash Royale have delivered over $10 billion revenue to date. However, Supercell also saw revenues and profits decline in 2018 for the second year in a row as its franchises matured. Yet Supercell’s newest franchise, Brawl Stars, delivered $100 million revenue within its first two months. Swings and roundabouts.

Epic Games had the biggest breakout mobile games hit of 2018, with Fortnite contributing significantly to a reported $3 billion profit in 2018. It also anchored part of the interest behind a record $1.25 billion fundraising round last year. Yet the company removed once-dominant mobile franchise Infinity Blade from the App Store, and redirected internal development resources to focus on Fortnite by closing Paragon and stopping further development on Unreal Tournament. We will come back to Fortnite in the context of mobile games becoming platforms in their own right.

Perhaps the biggest concern for mobile games after last year is China, in which the regulator ceased approving new games for most of 2018. This weighed particularly heavily on market heavyweights Tencent and NetEase, although the regulator returned to approving their games this year. However, the regulator again stopped accepting games in February, only to approve more games in March. This regulatory risk has resulted in our downgrading Chinese games revenue growth rates until a clearer long-term pattern emerges.

Niantic’s mobile AR smash Pokémon GO took just over 1 percent of mobile games revenue globally last year, and has been reported to drive some astonishingly big numbers: 800 million downloads, more than $2.5 billion lifetime revenue, 147 million MAU, 5 million DAU, 78 percent of users aged 18 to 34, 144 billion steps taken by users, 500 million visits to sponsored locations and Niantic’s valuation of nearly $4 billion (Note: Not all of these figures have been confirmed by Niantic.) Off the back of this, Niantic is exploring Pokémon GO’s potential to become a platform, with GO Snapshot challenging Snapchat, and the Niantic Real World Platform as a serious AR Cloud player. We’ll come back to these.

PC games hardware/software is big, too

PC games hardware/software is made up of four individual sectors, including PC games hardware (gaming computers, upgrades and peripherals), PC games, online (DLC, IAP and subscriptions), PC games (digital sales) and PC games (physical sales). While each subsector has different characteristics, scales and growth rates, together they make up the only part of the market close to mobile games long-term. Google’s new Stadia cloud gaming platform and competitors could also fundamentally impact high-end gaming across all platforms (not just PC). Mobile games software and PC games hardware/software combined could deliver three quarters of total games industry revenues by 2023.

Selected multiplayer PC games (ex-China)

While PC games hardware is massive, users are buying that hardware mainly to play MMO/MOBA games. This part of the market is consolidated around franchises from major public games publishers such as Tencent and Activision Blizzard, as well as independents like Wargaming and Bluehole.

The console abides

Console games were the market leader for games hardware/software for decades, and remain huge despite no longer being an engine of growth. The highest growth here could come from console games (digital sales) and console games (online), with console games hardware and console games (physical sales) both ex-growth long-term. Despite flattish platform growth for console games hardware/software, they could still deliver multiple tens of billions of dollars revenue by 2023.

High-growth from a low base

Of the remaining market sectors, a handful are small today but have high-growth potential long-term. These include VR games, VR hardware, AR games and esports. Yet taken individually, each sector is likely to deliver in the 1 percent to 2 percent range of total games market revenue in five years’ time. So great for indie developers, but more challenging commercially for the big guns in terms of scale.

United nations of games

Geographical games market discussions tend to focus on China and the U.S., but there are more than 50 country markets driving growth at a global level. Scales and growth rates vary dramatically from giant, stable growth countries such as China (even with its current uncertainty), the U.S. and Japan to higher growth markets like India and Russia. In aggregate, Asia could take around half of global games market revenue by 2023 (despite short-term concerns about China). Europe might deliver around a quarter of global revenue, followed by North America at around one fifth in the same time frame. Countries in MEA and Latin America make up the balance at a much lower level.

Concentration versus growth

The law of big numbers caught up with the games industry years ago, with the 10 largest publicly listed games companies taking three quarters of public games company revenues globally (Note: This ratio does not include private games company revenues, which are substantial). When you already produce billions to tens of billions of dollars in revenue, high growth rates aren’t easy to come by as new hits counterbalance maturing franchises.

Public games company revenue share

(Note: Heat map displays relative revenue scale of publicly listed games companies. Private games company revenues not shown on this chart.)

Top grossing mobile games of recent years (outside China) often came from independents. Standouts include Supercell, King, Epic Games, Niantic, Machine Zone and others. Perhaps in response to this dynamic, there was more than $75 billion of games M&A over the last five years. Major games companies have been buying both growth and cash flow.

Mobile games as platforms?

The beauty of what Steve Jobs created with the App Store is that it democratized distribution of apps at scale beyond the early social games market. It also enabled indie games developers to build some of the rocket ships we’ve seen over the last decade. Yet despite massive growth, even the biggest mobile games couldn’t really be described as platforms in the traditional sense. Not yet.

Where Tencent’s WeChat messaging platform looks like a domestic app store rival with its “mini-programs,” some mobile games pureplays are taking very different routes to becoming platforms in their own right.

For Epic Games, the recent Marshmello concert in Fortnite held out the tantalizing prospect of the beginnings of the “Metaverse” on ubiquitous, affordable mobile devices. With 10.7 million concurrent attendees, this represents a significant milestone in the evolution of games as platforms. Given Fortnite’s previous records for streaming on Twitch and concurrent esports tournament viewers, the savvy Tim Sweeney is beginning to leverage all that scale in a totally new way. Together with building its own app store and the quality of its Unreal Engine, the lessons learned from Fortnite and partial owner Tencent are leading to new horizons.

Where Epic Games is building a metaverse that is a little like Ready Player One without the headsets, Niantic has taken a different approach. Leveraging the real-world, big data stream coming from Pokémon GO, Niantic is building the core of an AR cloud ecosystem to challenge Google, Apple and Facebook. It could also move the company far beyond its entertainment origins for real-world navigation, social, e-commerce, advertising and more.

Epic Games and Niantic could become two of the most valuable platform companies in the world, with long-term potential even they might not fully understand yet.

To infinity and beyond

All this potential doesn’t mean that short-term concerns aren’t valid, or that some games companies (even those currently at scale) might not fall from grace. Some of the volatility of recent times could turn out to be right on the money. When we talked to Epic Games’ CEO Tim Sweeney about all of this, he said “I think that we’re just in the final days of a long transition away from the old retail-centric game release model. Good times ahead.”

With the long-term prospects for games still looking positive, the brave, bold and lucky could have a bright future.

What latency feels like on Google’s Stadia cloud gaming platform

After peppering Google employees with questions regarding Stadia’s latency, pricing and supported devices to mostly no avail, I got my hands on one of their new controllers and pressed play on the Doom Eternal gameplay they were showing off on a big-screen TV.

Things started off pretty ugly. The frame rate dropped to a fast-paced PowerPoint presentation, the resolution dipped between 4K crispness and indecipherable blurriness and latency seemed to be as much as a half-second. As the Google employees looked nervously at each other, someone grabbed the controller from me and restarted the system.

After a system restart, things moved along much, much more smoothly. But what the situation sums up is that when it comes to game-streaming, things can be unpredictable. To give Google credit, they stress-tested their system by running Stadia on hotel WiFi rather than taking me down to Mountain View and letting me play with Stadia under much more controlled conditions.

Stadia is Google’s cloud game-streaming service and while there’s a lot we don’t know the basic tenants are clear. It moves console-level gaming online into your Chrome browser and lets you access it from devices like smartphones that wouldn’t be able to handle the GPU-load initially.

Despite the initial hiccup, my experience with Stadia was largely positive. Doom Eternal was in crisp 4K and I was able to focus on the game without thinking about the service I was playing it on, which is ultimately the best endorsement of a new platform like this.

This will likely be a great service for more casual gamers but might not be the best fit for the most hardcore users playing multi-player titles. While you may be launching this service directly from YouTube feeds of eSports gamers, this is something they probably wouldn’t use. That’s because the latency between input and something being displayed onscreen isn’t imperceptible, though it’s probably good enough for the vast majority of users (myself included) which is still a worthy prize for the company’s efforts to take on the massive gaming market.

Google wouldn’t give me a proper range of where exactly latency fell, but they did say it was less than the time it took for a human to perceive something and react — which a Google employee then told me differed person-to-person but was generally 70ms-130ms — so I suppose the most official number we’ll get is that the latency is probably somewhere less than 70ms.

There is no hard truth here though because latency will really depend on your geographic proximity to the datacenter. Being in San Francisco, I connected to a data center roughly 50 miles away in San Jose. Google confirmed to me that not all rural users in supported countries will be able to sign-up for the service at launch because of this.

Other interesting things to note:

  • Google said they’d confirm devices later, but when asked about iOS support at launch they highlighted that they were focused on Pixel devices at launch.
  • It doesn’t sound like you’ll be able to restore purchases of games you’ve previously gotten, you’ll unsurprisingly have to buy all of your Stadia titles on the platform.
  • You’ll be able to access games from YouTube streams, but there will also be an online hub for all your content and you can access games via links.
  • The controller was nice and probably felt most similar to the design of Sony’s DualShock controller.

We’ll probably be hearing a lot more at Google I/O this summer, but with my first hands-on demo, the service certainly works and it certainly feels console-quality. The big freaking question is how Google prices this, because that pricing is going to determine whether it’s a service for casual gamers or hardcore gamers, and that will determine whether it’s a success.

Media fragmentation is annoying consumers

Deloitte’s Technology, Media and Telecommunications division published its 13th-annual Digital Media Trends survey, focused on identifying changes in the ways US consumers engage with various types of media.

Led by an independent research firm, the survey had roughly 2,000 consumer respondents across demographics – with the report categorizing respondents based on age (Gen-Z: ages 14-21, Millenials: 22-35, Gen-X: 36-52, Boomers: 53-71, and Matures: 72+).

While already accompanied by a succinct 13-page executive summary, the report can largely be summarized in just a couple of sentences: more people are using streaming or alternative media services than ever before, largely due to more user freedom and customization, though the growing quantity and fragmentation of platforms are becoming more frustrating for users to manage.

The survey results directionally echo already well-discussed dynamics, which we’ve previously dug into such as here, here and here. Instead, the most poignant aspects of the report were not the answers or conclusions themselves, but the immense level of support many of them received.

 

Somewhat interesting:

The 9 biggest questions about Google’s Stadia game streaming service

Google’s Stadia is an impressive piece of engineering to be sure: Delivering high definition, high framerate, low latency video to devices like tablets and phones is an accomplishment in itself. But the game streaming services faces serious challenges if it wants to compete with the likes of Xbox and PlayStation, or even plain old PCs and smartphones.

Here are our nine biggest questions about what the service will be and how it’ll work.

1. What’s the game selection like?

We saw Assassin’s Creed: Odyssey (a lot) and Doom: Eternal, and a few other things running on Stadia, but otherwise Google’s presentation was pretty light on details as far as what games exactly we can expect to see on there.

It’s not an easy question to answer, since this isn’t just a question of “all PC games,” or “all games from these 6 publishers.” Stadia requires a game be ported, or partly recoded to fit its new environment — in this case a Linux-powered PC. That’s not unusual, but it isn’t trivial either.

Porting is just part of the job for a major studio like Ubisoft, which regularly publishes on multiple platforms simultaneously, but for a smaller developer or a more specialized game, it’s not so straightforward. Jade Raymond will be in charge of both first-party games just for Stadia as well as developer relations; she said that the team will be “working with external developers to bring all of the bleeding edge Google technology you have seen today available to partner studios big and small.”

What that tells me is that every game that comes to Stadia will require special attention. That’s not a good sign for selection, but it does suggest that anything available on it will run well.

2. What will it cost?

Perhaps the topic Google avoided the most was what the heck the business model is for this whole thing.

Do you pay a subscription fee? Is it part of YouTube or maybe YouTube Red? Do they make money off sales of games after someone plays the instant demo? Is it free for an hour a day? Will it show ads every 15 minutes? Will publishers foot the bill as part of their normal marketing budget? No one knows!

It’s a difficult play because the most obvious way to monetize also limits the product’s exposure. Asking people to subscribe adds a lot of friction to a platform where the entire idea is to get you playing within 5 seconds.

Putting ads in is an easy way to let people jump in and have it be monetized a small amount. You could even advertise the game itself and offer a one-time 10 percent off coupon or something. Then mention that YouTube Red subscribers don’t see ads at all.

Sounds reasonable, but Google didn’t mention anything like this at all. We’ll probably hear more later this year closer to launch, but it’s hard to judge the value of the service when we have no idea what it will cost.

3. What about iOS devices?

Google and Apple are bitter rivals in a lot of ways, but it’s hard to get around the fact that iPhone owners tend to be the most lucrative mobile customers. Yet there were none in the live demo and no availability mentioned for iOS.

Depending on its business model, Google may have locked itself out of the App Store. Apple doesn’t let you essentially run a store within its store (as we have seen in cases like Amazon and Epic) and if that’s part of the Stadia offering, it’s not going to fly.

An app that just lets you play might be a possibility, but since none was mentioned, it’s possible Google is using Stadia as a platform exclusive to draw people to Pixel devices. That kind of puts a limit on the pitch that you can play on devices you already have.

4. What about games you already own?

A big draw of game streaming is to buy a game once and play it anywhere. Sometimes you want to play the big awesome story parts on your 60-inch TV in surround sound, but do a little inventory and quest management on your laptop at the cafe. That’s what systems like Steam Link offer.

Epic Games is taking on Steam with its own digital game store, which includes higher take-home revenue rates for developers.

But Google didn’t mention how its ownership system will work, or whether there would be a way to play games you already own on the service. This is a big consideration for many gamers.

It was mentioned that there would be cross platform play and perhaps even the ability to bring saves to other platforms, but how that would work was left to the imagination. Frankly I’m skeptical.

Letting people show they own a game and giving them access to it is a recipe for scamming and trouble, but not supporting it is missing out on a huge application for the service. Google’s caught between a rock and a hard place here.

5. Can you really convert viewers to players?

This is a bit more of an abstract question, but it comes from the basic idea that people specifically come to YouTube and Twitch to watch games, not play them. Mobile viewership is huge because streams are a great way to kill time on a train or bus ride, or during a break at school. These viewers often don’t want to play at those times, and couldn’t if they did want to!

So the question is, are there really enough people watching gaming content on YouTube who will actually actively switch to playing just like that?

Photo: Maskot / Getty Images

To be fair, the idea of a game trailer that lets you play what you just saw five seconds later is brilliant. I’m 100 percent on board there. But people don’t watch dozens of hours of game trailers a week — they watch famous streamers play Fortnite and PUBG and do speedruns of Dark Souls and Super Mario Bros 1. These audiences are much harder to change into players.

The potential of joining a game with a streamer, or affecting them somehow, or picking up at the spot they left off, to try fighting a boss on your own or seeing how their character controls, is a good one, but making that happen goes far, far beyond the streaming infrastructure Google has created here. It involves rewriting the rules on how games are developed and published. We saw attempts at this from Beam, later acquired by Microsoft, but it never really bloomed.

Streaming is a low-commitment, passive form of entertainment, which is kind of why it’s so popular. Turning that into an active, involved form of entertainment is far from straightforward.

6. How’s the image quality?

Games these days have mind-blowing graphics. I sure had a lot of bad things to say about Anthem, but when it came to looks that game was a showstopper. And part of what made it great were the tiny details in textures and subtle gradations of light that are only just recently possible with advances in shaders, volumetric fog, and so on. Will those details really come through in a stream?

Damn.

Don’t get me wrong. I know a 1080p stream looks decent. But the simple fact is that high-efficiency HD video compression reduces detail in a noticeable way. You just can’t perfectly recreate an image if you have to send it 60 times per second with only a few milliseconds to compress and decompress it. It’s how image compression works.

For some people this won’t be a big deal. They really might not care about the loss of some visual fidelity — the convenience factor may outweigh it by a ton. But there are others for whom it may be distracting, those who have invested in a powerful gaming console or PC that gives them better detail at higher framerates than Stadia can possibly offer.

It’s not apples to apples but Google has to consider these things, especially when the difference is noticeable enough that game developers and publishers start to note that a game is “best experienced locally” or something like that.

7. Will people really game on the go?

I don’t question whether people play games on mobile. That’s one of the biggest businesses in the world. But I’m not sure that people want to play Assassin’s Creed: Odyssey on their iPa… I mean, Pixel Slate. Let alone their smartphone.

Games on phones and tablets are frequently time-killers driven by addictive short-duration game sessions. Even the bigger, more console-like games on mobile usually aim for shorter play sessions. That may be changing in some ways for sure but it’s a consideration, and AAA console games really just aren’t designed for 5-10 minute gaming sessions.

Add to that that you have to carry around what looks like a fairly bulky controller and this becomes less of an option for things like planes, cafes, subway rides, and so on. Even if you did bring it, could you be sure you’ll get the 10 or 20 Mbps you’ll need to get that 60FPS video rate? And don’t say 5G. If anyone says 5G again after the last couple months I’m going to lose it.

Naturally the counterpoint here is Nintendo’s fabulously successful and portable Switch. But the Switch plays both sides, providing a console-like experience on the go that makes sense because of its frictionless game state saving and offline operation. Stadia doesn’t seem to offer anything like that. In some ways it could be more compelling, but it’s a hard sell right now.

8. How will multiplayer work?

Obviously multiplayer gaming is huge right now and likely will be forever, so the Stadia will for sure support multiplayer one way or another. But multiplayer is also really complicated.

It used to be that someone just picked up the second controller and played Luigi. Now you have friend codes, accounts, user IDs, automatic matchmaking, all kinds of junk. If I want to play The Division 2 with a friend via Stadia, how does that work? Can I use my existing account? How do I log in? Are there IP issues and will the whole rigmarole of the game running in some big server farm set off cheat detectors or send me a security warning email? What if two people want to play a game locally?

Many of the biggest gaming properties in the world are multiplayer focused, and without a very, very clear line on this it’s going to turn a lot of people off. The platform might be great for it — but they have some convincing to do.

9. Stadia?

Branding is hard. Launching a product that aims to reach millions and giving it a name that not only represents it well but isn’t already taken is hard. But that said… Stadia?

I guess the idea is that each player is kind of in a stadium of their own… or that they’re in a stadium where Ninja is playing, and then they can go down to join? Certainly Stadia is more distinctive than stadium and less copyright-fraught than Colosseum or the like. Arena is probably out too.

If only Google already owned something that indicated gaming but was simple, memorable, and fit with its existing “Google ___” set of consumer-focused apps, brands, and services.

Oh well!

Here’s how you’ll access Google’s Stadia cloud gaming service

Google isn’t launching a gaming console. The company is launching a service instead, Stadia. You’ll be able to run a game on a server and stream the video feed to your device. You won’t need to buy new hardware to access Stadia, but Stadia won’t be available on all devices from day one.

“With Google, your games will be immediately discoverable by 2 billion people on a Chrome browser, Chromebook, Chromecast, Pixel device. And we have plans to support more browsers and platforms over time,” Google CEO Sundar Pichai said shortly after opening the conference.

As you can see, the Chrome browser will be the main interface to access the service on a laptop or desktop computer. The company says that you’ll be able to play with your existing controller. So if you have a PlayStation 4, Xbox One or Nintendo Switch controller, that should work just fine. Google is also launching its own controller.

As expected, if you’re using a Chromecast with your TV, you’ll be able to turn it into a Stadia machine. Only the latest Chromecast supports Bluetooth, so let’s see if you’ll need a recent model to play with your existing controller. Google’s controller uses Wi-Fi so that should theoretically work with older Chromecast models.

On mobile, it sounds like Google isn’t going to roll out its service to all Android devices from day one. Stadia could be limited to Pixel phones and tablets at first. But there’s no reason Google would not ship Stadia to all Android devices later.

Interestingly, Google didn’t mention Apple devices at all. So if you have an iPhone or an iPad, don’t hold your breath. Apple doesn’t let third-party developers sell digital content in their apps without going through the App Store. This will create a challenge for Google.

Stadia isn’t available just yet. It’ll launch later this year. As you can see, there are many outstanding questions after the conference. Google is entering a new industry and it’s going to take some time to figure out the business model and the distribution model.

Google scores a custom AMD GPU to power its Stadia cloud gaming hardware

Google’s new Stadia game streaming service may be great for people who don’t own a powerful PC or console, but those games have to run somewhere — specifically, in a Google datacenter. And the hardware they run on will be largely powered by a custom graphics card from AMD that, on paper at least, puts the PS4 Pro and Xbox One X to shame.

In its presentation at GDC today, Google touted its partnership with AMD, which created the unnamed card for integration with its Stadia “instances,” the Linux-based computers that will actually run the games players stream.

The actual specs shown on screen don’t mean much to hardware fiends — teraflops are how supercomputers are rated, not graphics cards, which have sophisticated custom units and pathways for different effects and calculations.

So although it’s impressive that this one produces 10.7 TF, more than the PS4 Pro and Xbox One X combined, unless you’re using this hardware for sequential logic operations, it’s more important to know its actual game-specific chops. Of course, I’m sure the GPU is also quite competent there — it has to handle both running a modern game at 4K and 60 FPS and may have some extra load from streaming the video as well.

The 16 GB of “total” RAM is also suspicious. The way it’s phrased suggests it may be inclusive of video RAM, i.e. that in the graphics card, which makes the most likely combo 4 GB in the card and 12 for the system. That’s just speculation, though.

Interestingly, shortly after announcing the single-GPU system that the Stadia will use, a multi-GPU instance was teased in order to show the possibilities of fluid dynamics in games. It’s unclear how this would come into play — perhaps it’s necessary for 4K instances of some games, or would be an upsell for performance-obsessed players.

Whatever the specifics, this gives an idea of what kind of power and cost the Stadia backend infrastructure is going to necessitate. Every concurrent player will require a dedicated instance, which at the scales Google hopes for means at least a couple hundred thousand of these things, increasing to millions if it takes off. Call the bill of materials $150 plus $50 a year in maintenance and upgrades (this is all just napkin math) and you’re easily looking at a hundred million dollar bottom line, probably way more.

As of this writing (the presentation is ongoing) there’s still no mention of how Google plans to make money from this whole… situation. Show ads every 10 minutes of play? Take a cut of game sales? Publishers pay Google to make instant games available? Perhaps, as with plenty of other Google products, they’ll just release it first and figure out how to make money later. That works sometimes.

Google’s Stadia game-streaming platform kills huge downloads

Onstage at GDC, Google CEO Sundar Pichai announced the company’s latest big initiative, taking on the entire gaming industry with a live-streaming service called Stadia.

The service will let gamers leave their hefty GPUs and expensive systems behind. Pichai says that the service can be used on devices with a chrome browser and an internet connection. To Google that means Stadia will launch on desktops, laptops, TVs, tablets and phones.

Google working on new gaming efforts here isn’t exactly a surprise. Last fall, the company launched a pilot program of sorts with Project Stream, allowing gamers to stream gameplay of Assassins Creed Odyssey in their internet browser at 1080p in 60fps.

At launch Stadia will support 4K at 60fps with surround sound and HDR. They say they are also working on 8K 120fps support in “the future.”

The company will work across platforms so you won’t just be competing with other Stadia users.

Google is an underdog here, though the company obviously has a massive mobile gaming platform with Android, when it comes to desktop gaming, the tech giant doesn’t have a ton of background aside from their sporadic efforts on PC virtual reality. One would imagine that Microsoft or Valve are the best positioned here, but Google has some pretty heavy mindshare with YouTube Gaming and some pretty heavy infrastructure with Google Cloud.

Viewers will be able to move from YouTube directly into gameplay without any downloads. Google says this can be done in as little as 5 seconds.

Google certainly has ample reason to want gamers to move away from Windows PCs to systems with more lightweight onboard compute. The idea of running something heavier than minesweeper-equivalents on a Chromebook can be pretty powerful.

Updating

TikTok parent Bytedance is getting serious about games

A turbulent 2018 for China’s gaming market hasn’t held back newcomers. Bytedance, the world’s most valuable startup behind a collection of rising new media apps including TikTok and Jinri Toutiao, is making a further push into video games after it took control of a mobile game developer through a roundabout deal.

According to a business registration filing, Shanghai Mokun has become wholly owned by Beijing Zhaoxi Guangnian, a second-tier subsidiary of Bytedance. Mokun is a mobile game developer previously owned by 37 Interactive Entertainment, a publicly listed games publisher that earmarked $791 million in revenue last year, which makes the Shanghai-based company about one-sixth the size of Activision Blizzard.

Zhang Lidong, a veteran journalist-turned senior vice president at Bytedance, has taken the helm as Mokun’s legal representative.

The price of the deal is undisclosed. A spokesperson from Bytedance declines to comment on the transaction. TechCrunch has reached out to 37 IE and will update the story if we hear back.

This isn’t the first time Bytedance has shown interest in the lucrative gaming market. Last month, TikTok’s Chinese version Douyin released its first in-app “mini-game” and Toutiao had already rolled out such lite games on its personalized news distribution platform in September.

These stripped-down forms of apps within a super app have been a sought-after way for Chinese tech giants to lock users in rather than sending them to download a stand-alone app. Bytedance’s foray into mini-games comes as a likely move to take on Tencent’s WeChat messenger, which had amassed 400 million MAUs on its own army of mini-games by January. On the other hand, Tencent is getting nervous about ByteDance’s rise and made inroads into short videos after trying its hand at several TikTok-like apps.

Though best-known for WeChat, Tencent has been generating the bulk of its income from video games for years and is the world’s largest games publisher by revenues, according to market researcher Newzoo. Tencent’s asset of more than 1 billion MAUs on WeChat and about 800 million MAUs on QQ, its legacy messenger from the PC era, allows the giant to conveniently convert social media users into gamers. Users can, for instance, easily log in and invite friends to play games via their WeChat or QQ accounts.

By comparison, 500 million users stream short-form videos on Douyin each month. Many of them may have already seen in-stream ads for games on the video app, which has become a popular marketing channel for small game developers, according to several media-buying agencies TechCrunch previously spoke to. Worldwide, TikTok has collected an estimated 1 billion downloads. This considerable global reach, which Tencent lacks, may eventually give Bytedance an edge in games distribution if the company decides to launch the effort overseas.

Watch Google unveil its mysterious gaming project live right here

Google is holding a press event at the Game Developers Conference today in San Francisco. The conference starts at 10 AM Pacific Time, 1 PM Eastern Time, 5 PM in London and 6 PM in Paris.

While many game companies rely on Google Cloud Platform for their server and infrastructure needs, today’s conference is going to be different.

The company has been working on something called Project Stream for more than six months. In its initial technical test, the company let you play Assassin’s Creed Odyssey in your Chrome web browser. The game would run on a server in a data center near you, and you’d see the video stream in your browser and interact with your character from your computer.

And it sounds like Google is ready to launch its cloud gaming service for real. So let’s see how Google plans to sell this service and the initial game lineup.

How to build The Matrix

Released this month 20 years ago, “The Matrix” went on to become a cultural phenomenon. This wasn’t just because of its ground-breaking special effects, but because it popularized an idea that has come to be known as the simulation hypothesis. This is the idea that the world we see around us may not be the “real world” at all, but a high-resolution simulation, much like a video game.

While the central question raised by “The Matrix” sounds like science fiction, it is now debated seriously by scientists, technologists and philosophers around the world. Elon Musk is among those; he thinks the odds that we are in a simulation are a billion to one (in favor of being inside a video-game world)!

As a founder and investor in many video game startups, I started to think about this question seriously after seeing how far virtual reality has come in creating immersive experiences. In this article we look at the development of video game technology past and future to ask the question: Could a simulation like that in “The Matrix” actually be built? And if so, what would it take?

What we’re really asking is how far away we are from The Simulation Point, the theoretical point at which a technological civilization would be capable of building a simulation that was indistinguishable from “physical reality.”

[Editor’s note: This article summarizes one section of the upcoming book, “The Simulation Hypothesis: An MIT Computer Scientist Shows Why AI, Quantum Physics and Eastern Mystics All Agree We Are in a Video Game.“] 

From science fiction to science?

But first, let’s back up.

“The Matrix,” you’ll recall, starred Keanu Reeves as Neo, a hacker who encounters enigmatic references to something called the Matrix online. This leads him to the mysterious Morpheus (played by Laurence Fishburne, and aptly named after the Greek god of dreams) and his team. When Neo asks Morpheus about the Matrix, Morpheus responds with what has become one of the most famous movie lines of all time: “Unfortunately, no one can be told what The Matrix is. You’ll have to see it for yourself.”

Even if you haven’t seen “The Matrix,” you’ve probably heard what happens next — in perhaps its most iconic scene, Morpheus gives Neo a choice: Take the “red pill” to wake up and see what the Matrix really is, or take the “blue pill” and keep living his life. Neo takes the red pill and “wakes up” in the real world to find that what he thought was real was actually an intricately constructed computer simulation — basically an ultra-realistic video game! Neo and other humans are actually living in pods, jacked into the system via a cord into his cerebral cortex.

Who created the Matrix and why are humans plugged into it at birth? In the two sequels, “The Matrix Reloaded” and “The Matrix Revolutions,” we find out that Earth has been taken over by a race of super-intelligent machines that need the electricity from human brains. The humans are kept occupied, docile and none the wiser thanks to their all-encompassing link to the Matrix!  

But the Matrix wasn’t all philosophy and no action; there were plenty of eye-popping special effects during the fight scenes. Some of these now have their own name in the entertainment and video game industry, such as the famous “bullet time.” When a bullet is shot at Neo, the visuals slow down time and manipulate space; the camera moves in a circular motion while the bullet is frozen in the air. In the context of a 3D computer world, this make perfect sense, though now the camera technique is used in both live action and video games.  AI plays a big role too: in the sequels, we find out much more about the agents pursuing Neo, Morpheus and the team. Agent Smith (played brilliantly by Hugo Weaving), the main adversary in the first movie, is really a computer agent — an artificial intelligence meant to keep order in the simulation. Like any good AI villain, Agent Smith (who was voted the 84th most popular movie character of all time!) is able to reproduce itself and overlay himself onto any part of the simulation.

“The Matrix” storyboard from the original movie. (Photo by Jonathan Leibson/Getty Images for Warner Bros. Studio Tour Hollywood)

The Wachowskis, creators of “The Matrix,” claim to have been inspired by, among others, science fiction master Philip K. Dick. Most of us are familiar with Dick’s work from the many film and TV adaptations, ranging from Blade Runner, Total Recall and the more recent Amazon show, The Man in the High Castle.  Dick often explored questions of what was “real” versus “fake” in his vast body of work. These are some of the same themes we will have to grapple with to build a real Matrix: AI that is indistinguishable from humans, implanting false memories and broadcasting directly into the mind.

As part of writing my upcoming book, I interviewed Dick’s wife, Tessa B. Dick, and she told me that Philip K. Dick actually believed we were living in a simulation. He believed that someone was changing the parameters of the simulation, and most of us were unaware that this was going on. This was of course, the theme of his short story, “The Adjustment Team” (which served as the basis for the blockbuster “The Adjustment Bureau,” starring Matt Damon and Emily Blunt).

A quick summary of the basic (non-video game) simulation argument

Today, the simulation hypothesis has moved from science fiction to a subject of serious debate because of several key developments.

The first was when Oxford professor Nick Bostrom published his 2003 paper, “Are You Living in a Simulation?” Bostrom doesn’t say much about video games nor how we might build such a simulation; rather, he makes a clever statistical argument. Bostrom theorized that if a civilization ever got the Simulation Point, it would create many ancestor simulations, each with large numbers (billions or trillions?) of simulated beings. Since the number of simulated beings would vastly outnumber the number of real beings, any beings (including us!) were more likely to be living inside a simulation than outside of it!

Other scientists, like physicists and Cosmos host Neil deGrasse Tyson and Stephen Hawking weighed in, saying they found it hard to argue against this logic.

Bostrom’s argument implied two things that are the subject of intense debate. The first is that if any civilization every reached the Simulation Point, then we are more likely in a simulation now. The second is that we are more likely all AI or simulated consciousness rather than biological ones. On this second point, I prefer to use the “video game” version of the simulation argument, which is a little different than Bostrom’s version.

Video games hold the key

Let’s look more at the video game version of the argument, which rests on the rapid pace of development of video game and computer graphics technology over the past decades. In video games, we have both “players” who exist outside of the video game, and “characters” who exist inside the game. In the game, we have PCs (player characters) that are controlled (you might say mentally attached to the players), and NPCs (non-player characters) that are the simulation artificial characters.