Amazon Luna

Can Amazon’s Luna eclipse its rivals?

Amazon has thrown its hat in the ring to be among the first to make cloud gaming a mainstream concern, but how well placed is Luna to navigate these uncertain waters? Chris Wallace finds out

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 allinclusive 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 allinclusive 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.”

Simon Carless, founder of GamesDiscoverCo

Joost Van Dreunen, startup adviser, co-founder of SuperData Research

“One advantage for Luna is that Amazon already worked its way into players’ homes, both physically and digitally, years ago.”

Piers Harding-Rolls, Ampere Analysis

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 browserbased 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 HardingRolls, “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.”

VERTIGO’S VR VISTA

This month Koch Media acquired Vertigo Games for €50m. So just what is the Embracer Group company getting for its money and what does it say about the broader VR Space? Seth Barton talks to those involved.

Koch Media CEO Klemens Kundratitz To quote Richard Branson: “If you want to be a millionaire, start with a billion dollars and launch a new airline.” And the same thinking can also be applied to anyone launching a new games platform. VR technology is undoubtedly exciting, but as Facebook, Sony and Google have found, relatively slow consumer take up has meant championing the space is a longhaul strategy for those with pretty deep pockets.

So what then is the level-headed Koch Media doing moving into the space with its recent acquisition of VR specialists Vertigo Games for €50m of cash and stock? And does the move signify a growing maturity for the segment?

VERTICALLY UNCHALLENGED

For those unfamiliar with the company, Rotterdam-based Vertigo Games is best known for its VR smash hit Arizona Sunshine, A zombie shoot ‘em up it launched back in 2016, generating $1.4m in revenue in just its first month, an incredible figure for the nascent days of the VR segment. Arizona Sunshine has gone on to become a perennial success since launch. It could be

considered the GTA V of VR even, selling ever more units with every new tranche of hardware released, and making more money every year along with it. It’s now available on all major headsets, plus the company created an arcade division, licensing a free-roam version of the game to out-of-home VR installations.

Based on that, it also started a publishing arm. Which last year released A Fisherman’s Tale, from Innerspace VR, to great critical acclaim. In other words, Vertigo is on a high and still climbing.

ELEMENTAL TABLE

Koch Media CEO Klemens Kundratitz has certainly been impressed by its trajectory, likening the company to his own: “When we look at Vertigo they are a bit like a mini Koch in the VR space… I think the organisation is well placed in this very special moment.”

Kundratitz explains that all the necessary elements had come together to make the acquisition work: “There are always a number of components to a decision like this. There is a strategic component, a commercial component, an opportunity component. And in this case, these components aligned.

“On the one hand, we have followed the VR space for some time. And we have always been excited by it, but we had not seen, for us as a company, the commercial opportunity. Now there is this tipping point, where we believe that the new generation of hardware,” referring mainly to the £299 Oculus Quest 2, “will change that picture and grow the market significantly.

“In order to enter a market, you need to enter in the right way and Vertigo are VR experts, they are not only technical experts, which they have proven with Arizona Sunshine and other games, but also commercial experts… they are strong in partnering up with other developers and bringing their games to the market as their VR publisher. That’s the direction we want to go here.”

“So we see this is an interesting entry point into a niche that will grow. And we want to, both on the development and publishing side, grow Vertigo into a substantial force in a growing market and help content providers really make the full potential of their games.

“The other component to the decision is we believe the current platform holders are committed for the long-term, I think that with Sony, Valve and Facebook being there, and maybe other people coming into the space, there are important platform holders. And we are only at the beginning of VR, even though it’s been a number of years in the market, it has a very strong potential to grow far beyond what we see today.”

REACHING FOR THE EYEBALLS

It’s no secret, and not that surprising, that some VR platform holders were heavily funding developers to develop exclusive titles, but Richard Stitselaar, CEO of Vertigo Games, tells us that wasn’t a key to his company’s success.

“Our vision has always been, influenced by Valve in a way, to go for all platforms, to reach as many eyeballs in as many headsets as possible. And I think that’s one of the reasons why we’re so successful.”

He notes that some platforms went down an exclusive-based strategy, “they poured a lot of money into products, but then the product needed to survive on that specific platform. But the market was so small, the studios became entirely reliant on the funding they got from [such deals].”

That was the opposite of where Vertigo wanted to be with Arizona Sunshine, which also stood out thanks to breadth and depth of its content. “In the early days of VR, there were a lot of ‘VR experiences’, it was a novelty, you shoot a couple of things, and 15 minutes later, you’re done,” Stitselaar recalls, “And me personally, speaking as a gamer, I want to play games, I don’t want to have ‘an experience.’

“So we went for a full game with six hours of content, multiplayer, co-op, horde mode, the whole package, and I think combining these things together, you can make a lot of money in VR, if everything sort of aligns.”

HEADSETS AS A SERVICE

Arizona Sunshine has made a lot of money, for a VR title anyway, and that was without the kind of forward planning that most modern games

Richard Stitselaar, CEO of Vertigo Games

Kimara Rouwit, marketing director at Vertigo Games

benefit from in regards to serving their audiences. As Kimara Rouwit, marketing director at Vertigo Games recalls.

“When we launched Arizona Sunshine, back in 2016, we hoped that it would become the game that it is now… most recently, the numbers are around one in every ten VR players owns a copy of Arizona Sunshine.

“So that was like the dream. But realistically, that wasn’t what we had expected. we didn’t expect this amount of success. So, to be honest, we didn’t really plan for a service model with Arizona Sunshine, because nobody knew how big the player base was that you might be servicing.”

Of course since then, the company has raced to launch DLC and free updates to the title in order to keep the community happy. “I think that scratches what servicing is, but it wasn’t like we went into it with that plan,” Rouwit adds.

VR: ESCAPING 2020

The VR industry, like many, has done pretty well out of the pandemic in terms of sales. After all, who didn’t want a bit of escapism in 2020? But with out-of-home setups to consider it’s been a bit more of a mixed bag.

“Everybody’s at home playing games in VR, and in non-VR, so yes, there’s a huge lift for us… In VR specifically, I think the limiting factor is the amount of headsets they can produce. I think if there’s more production capacity, there would have even been more VR players. With Quest 2 to now out, the coming months are looking really good,” says Stitselaar.

To specify that, we’re seeing a 10x lift in our revenue since last Tuesday,” adds Rouwit. “Which was the Quest 2 launch. And for us, it’s consistent. it’s just like Richard said, the math is constrained by hardware. And now that there’s an influx of new hardware, we see software sales go up.

“As for the arcade business, yes, there was a huge impact in the amount of sales because the arcades closed down, says Stitselaar. In reaction to that the company waived its licensing fee for the game for four months. “We know they’re struggling, and we don’t want them to go down.”

However the market for out-of-home continued to grow in terms of locations. “Even though the arcades were closed, we were still selling those licences, and those are very expensive licences, 10s of thousands of euros,” reveals Stitselaar. “For example, we sold one in an arcade in Madrid in the peak of their lockdown, so we gave them extra months in their annual licencing fee. But basically, there is a demand, people are still positive that once we’re out of this crisis, arcades will open up.

“And, by the end of August sales are pretty much back to where they were in February for room scale sessions. So, yes, there was a huge dip, but we’re back on track, and it’s actually growing again.” Although he honestly admits that they’re “not sure what will happen in the coming months with the second wave.”

That’s all changed now, with the benefit of hindsight and a good idea of the size of the addressable VR market, Vertigo’s next game is coming fully prepared for life after launch. Or rather life after the apocalypse in this case.

“Next year, we have our new game, After the Fall, on the schedule. And that is a title which is very much focused on multiplayer content and also post launch support.” Although Rouwit notes in reply to our query that it’s still a premium title, and a complete game at launch, just with a better thought out DLC and support roadmap.

“Free to Play is probably not the dominant model going forward at this point. VR is still a subset, a rather niche subset, compared to the overall install base of gamers.” A subset that doesn’t yet have the massive numbers, and massive competition, that engenders free to play.

LAYERING IT ON

Another aspect of Arizona Sunshine’s continued success were numerous ports of the game, Stitselaar tells us: “We’ve basically rebuilt the game three times… actually three and a half times with Quest 2 now.”

Beyond the original version, for Vive and Rift, it was then “built for full room scale, and then for PlayStation VR – with its different tracking systems and a little bit more limitation on the hardware side, a lot of optimization. And finally for Quest, which is basically a mobile device, we had to do it all over again.”

The stark differences between those platforms, and the ongoing rapid evolution of the hardware – remember, the original consumer Oculus Rift was only four and a half years ago and we’ve numerous headsets since then – makes covering them all significantly more work than putting out an indie title on say PC and consoles.

And that’s a problem that Vertigo is now fully prepared for: “With After the Fall, we have this sort of new SDK, let’s call it a technical layer of tools that we’ve built over the years. The programmers will shoot me for saying it like this, but we can basically export to three platforms with a mouse click, but there’s all this technical stuff going on to make that actually happen. But that makes it so much easier to launch a game that runs on all three platforms,” says Stitselaar.

And with that comes a big prize: “One thing I want to point out is with After the Fall, we have cross platform play.”

Cross-platform was something which simply wasn’t possible with the iterative approach to Arizona Sunshine’s release, and something the fragmented player base of VR headset owners really needs in order to achieve the critical mass required for a perennially successful multiplayer title.

Vertigo Games believes that its technical knowhow will make other aspects of its business plan succeed.

“We’re not just a publisher, we’re also a developer… we can offer a developer that we work with all these tools that we’ve been investing in, whether they work with Unreal or Unity, it’s platform agnostic, certain tools, at least. We can say: ‘Hey, we can publish your game, but we can also offer you this technology to speed up your development.’”

And that toolset covers both the consumer and outof-home markets. “And if you want, we can bring the same game to arcades and generate even more revenue on that side of things. You do a 30 minute unique experience for arcades, with free roam.

“So having that offer makes us unique in the market. And now adding Koch Media we can also use its physical distribution network, if you want to go to PlayStation, or its marketing muscle – they have local offices everywhere. We can scale and make it as big as we potentially want to.”

TWO-WAY STREET

Vertigo Games also allows Koch to add VR to its existing publishing capabilities in a way that simply wouldn’t have been possible had it decided to go it alone. And there’s also the possibility that such expertise could be called upon by developers at Koch’s Deep Silver arm, and beyond that right across the full Embracer Group, including THQ Nordic and Saber Interactive. “Yes, there is big interest from various studios now to engage and how that will materialise in VR games, we need to see,” says Kundratitz cautiously. “We run our company in a sort of decentralised way, where the studios have a lot of autonomy on the one hand, but also are part of the family. And we’re gonna play it the same way with VR. Nobody will be forced to do the next game in VR. But on the other hand, if the idea is suitable, if there is an appetite from the development point of view, then we now have great opportunities to not only dream of it, but actually make it.”

We can’t resist naming Metro as a possible target, with the games already having had various mods to get them working in VR:

“Yes, Metro is certainly an important IP that we have, Kingdom Come Deliverance is another big one, Dead Island is a big one. So there are good opportunities in our stable of IPs,” replies Kundratitz. Some tantalising possibilities there for VR, but it is way too early to expect any commitment from those teams.

And Kundratitiz rounds things off with an invitation to developers who are working in VR.

“We want to engage with people that are serious about VR. We believe that VR lives off big games, high-end hardware, and that the immersive experience will ultimately win over a big portion of all gamers… It’s important to underline our commitment to build this publishing portfolio, people should know that we are open for business,

“This is not strictly a sales and distribution type of conversation,” he clarified, “If it’s just exploring ways of what can be done together. We are totally open and welcoming, we want to help.”

So, now you know where to go. And, all being well in the world, we can see Vertigo Games becoming a fantastic addition to the already buzzing Koch and THQ Nordic stand at Gamescom next year.