Dear Expert

Stepping Up Their E-Game

JOOST VAN DREUNEN explains the significance of two of the newer behemoths in the esports business.

Dear Expert, What are your thoughts about Microsoft’s Project xCloud and Fox’s investment in Caffeine.tv? Will either one be a game changer? Streaming in Seattle

Dear Seattle,

Microsoft’s xCloud promises to deliver on what I think is the holy grail of cloud gaming: delivering console-quality gaming that is platform agnostic. What we’ve seen so far is a lot of PC gaming services that involve a lot of extra steps. We haven’t seen the ultimate (and arguably only) form that matters: console-quality games that can be played around the world on mobile devices.

Project xCloud is a tactical response to Google’s Stadia release. To not have Google dictate the narrative and set consumer expectations around cloud gaming, it is critically important that Microsoft keeps pushing.

For us mortals, it is a great benefit to have an eager and well-funded tech firm trying to muscle its way into this category. It puts everyone on notice and makes them, quite possibly, try a little harder.

It’s easy to dismiss the Microsoft’s foray as a reaction to Google’s imminent release in November. But team Redmond has been working on this for years. When Phil Spencer, Microsoft’s executive vice president of gaming, started reporting directly to CEO Satya Nadella, the company showed how serious it was about gaming as a cornerstone of its long-term strategy.

There are some key questions here: once the tech kinks have been worked out, what type of offering can audiences expect? Whenever I log into my cloud service, will I find a HBO-type experience (high-end content with superstar creatives, OMG Big Little Lies, #swoon) or a Netflix-type experience (“I bet you I can find something in here to keep me entertained right now”)?

As for Caffeine.tv: I never expected one of the Murdochs to say they’re planning to “deliver compelling experiences in esports, video gaming and entertainment.” 21st Century Fox’s $100 million investment in Caffeine includes funding for Caffeine Studios, jointly owned by Fox Sports and Caffeine, which will produce esports and live entertainment content for the social broadcasting platform.

It’s a bit on the tardy side, given that Disney+ is launching this month (November); AT&T’s WarnerMedia recently dropped $500 million on The Big Bang Theory; and Apple TV has stepped up its game.

The strategic question is obvious: does it make sense for Fox to go it alone, or will it find out 18 months from now that it should just syndicate its content through a more popular platform? An important part of the answer will have to do with whether it will be different enough. Fox does have a lot of live sports, although much of that may already be tied to services like Fox Sports Live and Fox Go. Nowadays everyone has their own subscription video on demand offering. (It’s much more exciting to bring new services where there currently are none, like Apple Arcade, the iPhone game subscription service. But I digress.)

There's another question: will Caffeine convince the existing audiences for Twitch and YouTube to move over. Just recently we saw Ninja packing up and moving over to Mixer, which worked well for Microsoft. And Twitch barely skipped a beat. I believe that the pedigree of Caffeine’s leadership will likely result in the most beautiful, intuitive live streaming interface as one would expect. Last year Caffeine snagged Jen Folse, a lead designer of Apple TV, and installed her as vice president of product. (Caffeine was founded by two other former Apple

TV designers, Ben Keighran and Sam

Roberts, in 2016.) Since Folse’s arrival, the emphasis at Caffeine seems to be on delivering the coolest product. But who’s going to watch it? And, most importantly, what are they going to be watching?

Yes, there are currently around 900 million people that watch gaming video content globally. And yes, this audience is an obvious early adopter that will help media companies work out the kinks as they transition away from traditional broadcasting to internet-based television. But that means Caffeine will be competing head-on with YouTube, Twitch, Mixer and every other media streaming widget.

Fox is investing in a product that is not even live yet while every single one of its competitors has already fleshed out a multi-billion-dollar content strategy. I suggest they order themselves a triple shot of espresso and catch up.

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Microsoft's xCloud is expected to feature Halo 5.

Joost van Dreunen leads the global games team at Nielsen and teaches at the New York University’s Stern School of Business. He can be reached at joost.vandreunen@nielsen.com.