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Daily Reaction: Is GameStop’s Cloud Service a Threat to Gaikai and Consoles?

August 16, 2012 Written by Sebastian Moss

Daily Reaction is a PSLS exclusive feature where Sebastian Moss & Dan Oravasaari discuss today’s most hard-hitting topics every single weekday.

On today’s edition of Daily Reaction we talk about GameStop’s upcoming cloud service with Spawn Labs, which the company has now revealed will launch next year on PCs, tablets, and online-connected TVs. As a cloud gaming service, the product will be in direct competition with Sony’s Gaikai platform, as well as posing a risk to consoles as a whole if cloud really does hit it off. But are we getting scared over nothing? Or could GameStop really be set to dominate the games industry? Read on to hear our reactions.

Seb: First off, I’ll quickly go over the topic of whether cloud is going to be a part of the future. I’ve discussed it before, multiple times, so I won’t go into too much detail, but it’s a fact that every other entertainment industry has seen physical be replaced by digital download, and then replaced by cloud. Internet speeds are increasing globally, and eventually – in 10+ years – a sizeable proportion of gamers will have speeds that could easily support cloud streaming.

So, with that in mind, should Sony be scared of GameStop’s cloud service? Simple answer: Yes. GameStop saw the rise of digital early and they’ve been planning and preparing: they’ve started selling mobiles and tablets that have their apps pre-installed, something that has been very successful for them. That makes it incredibly easy for them to pre-install their cloud app and guarantee an install base. Then, of course, they have a huge presence in retail, with millions of gamers entering their shops and perusing their products. Once cloud heats up, guess what’s going to get premium placement? (Hint: it’s not the PS4). GameStop can, and will, heavily push their service above all else, give people advice on its set-up, and quickly gain a huge market share in the cloud market. There’s even rumblings that they’ll give their cloud version of a game away for free when you buy the console version. Plus, they already have incredibly strong publisher relationships and will find it easy to get games on their platform.

Dan: I agree that Sony really should be mindful of the GameStop’s cloud based system, although if they can push Gaikai into the mass market within a year, they should be ok. While GameStop may be able to put devices in the hands of gamers in various countries around the globe, they are not going to be able to reach the same population Sony can by using their already established retail connections. GameStop has a very strong grasp on the gaming retail market, and that target audience – but it’s still too early to say whether they can reach beyond that market. Even still, brand loyalists are not going to back GameStop because they are GameStop. They choose to purchase from their stores simply because its widespread, and they are able to discount products that run on their Sony, Microsoft, and Nintendo consoles. Those are the true brands that bring in the customers, and it’s what sells millions of copies. GameStop might be able to enter the market with their cloud, but so far it’s just a lot of vapor.

Seb: I disagree, there aren’t many GameStop brand loyalists, sure, but there aren’t that many Sony loyalists either. There are COD loyalists. Assassin’s Creed loyalists. Farming Simulator loyalists. Just look at console trends, the rise and fall of the Ataris, the Segas, the Nintendos. Most people just care about the games, and as long as GameStop is competitive and doesn’t suck, that’s all that matters. Sure it won’t end up having a monopoly on the market, especially in the regions they don’t have much of a presence in, but they could definitely put a big dent in Sony’s ambitions.

But I’ve talked about how GameStop is leveraging all its assets to enter the cloud market, but the great thing about Sony is that they have finger in nearly every pie out there. The only real question is if they’ll be able to work with themselves, something they have struggled with before. Bring Gaikai to PS3, PS4, PS Vita, every Sony mobile, every Vaio, every browser, every smart TV, every 3rd Party PS Mobile, release it on Android as an app, make it available over Safari on the iPhone. Sony trying to close off the platform would stunt growth, something they can’t afford with such a powerful competitor (and it’s only a matter of time before more join in). If Sony manages to bring their full force to bear, even adding in Sony movies and Sony music, then they’ll be a force to reckon with.

It’s estimated that the Smart TV gaming market is set to hit $1.6 billion by 2016. That’s just TVs, so all the platforms Sony commands combined is truly mind blowing. Sony needs to be aggressive, and they need to be fast at establishing a market while they’re the only one with a strong library of games.

Dan: I think you underestimate just how much people hate change. With the market bulging like never before, consumers are having a hard time keeping up with the amount of quality products hitting the street every week. So, when cloud finally starts making its appearance, they are going to keep with the names they know – Sony, Microsoft, and Nintendo. This is not to say GameStop cannot make a name for itself in time, it’s just with the power of the big 3, they are not going to become king over night. While it is true that gamers do care more about the actual game franchises, than even the console manufacturers – there is an attachment that you failed to recognize. With this last generation of home consoles, the biggest factor for most gamers has been connectivity to their friends. Which service (PSN or XBL) housed the majority of their friends was the deciding factor for many gamers’ console of choice. By now the lines have been drawn, and GameStop hasn’t established an online ecosystem for people to group up with friends and earn awards.

As Sony is fully capable of integrating an ecosystem that incorporates Gaikai and PS Mobile into their lineup of hardware devices, and 3rd party products – they have the best chance of taking over the cloud based market. The only question that really needs to be asked is: will Sony mess up the best chance they have had since dominating the gaming industry with the PS2? While Sony hasn’t had the best track record of capitalizing on future markets for years, they have been setting themselves up for this final win for a long time.

What do you think about the cloud, and whether new rivals like GameStop or OnLive could pose a risk to Gaikai or consoles as a whole? Share your musings in the comments below, and be sure to follow Seb and Dan on Twitter to hear stuff you can never unhear.