The idea of building a business around videogame spectatorship is one that has been around for decades. While competitive ventures such as Major League Gaming and other purveyors of e-sports are unlikely to achieve the mainstream success of an NFL or MLB anytime soon, streaming platforms like Twitch and fellow content creators like Machinima are showing that there is a real and voracious audience that wants to watch gaming content. The importance of social media and the level of interest surrounding gaming streams have not gone unnoticed by gaming's biggest players. Are spectator platforms a key part of success in the latest console race?
The biggest thing on Internet television?
To give an idea of just how popular gaming streams have become, the broader Machinima network, consisting of 8,674 partner channels, brings in approximately two billion YouTube views a month. Its individual channel currently has the 11th highest subscriber base on the video-sharing website. It boasts the highest number of channel views, with a figure well north of four billion. With this type of reach and influence, it's not surprising that one of the big console hardware manufacturers is pursuing a partnership.
Getting in the game
Microsoft's (NASDAQ:MSFT) Xbox One will launch with an exclusive Machinima app that looks to integrate the watching of streamed content into the immediate player experience. Users will be able to stream walkthroughs and other videos in a subdivided portion of the screen without the need to interrupt their gaming experiences. Through the partnership, Machinima is also creating content to bolster and support the launch of major Xbox One titles.
The explosion of gaming-related user-generated content and the role of online buzz have created new opportunities for advertising and brand building, but have also made the market less forgiving in many respects. The Internet outcry against the original product vision for the Xbox One forced Microsoft to reassess its position. The Machinima app could be a smart way to get the vocal Internet crowd working in the system's favor.
Sony (NYSE:SNE) is also targeting gaming streams with its PlayStation 4 advertising efforts, and the company seems to view user-generated content as a big part of the next gen race. The company recently paid Twitch to allow viewers to access content almost entirely free of advertising for a 12-hour period. The one remaining bit of promotional material just so happened to be a reel for the soon-to-debut PlayStation 4.
The PlayStation 4 controller features a "Share" button and will allow users to upload gameplay to sites like PlayStation Network, Facebook, and Twitch. It is still unclear as to whether such content will be directly uploadable to YouTube. What is almost guaranteed is that the features of the PlayStation 4 and Xbox One will further the trend of game-related streaming. The PS4 will continually record the last 15 minutes of gameplay, while the Xbox One will record the last 5 minutes.
The rise of user-generated gaming content has raised many questions about ownership and monetization, and not all companies have been quick to embrace the trend. This past summer saw Nintendo (NASDAQOTH:NTDOY) successfully staking copyright claims on a number of YouTube "Let's Play" videos that featured users narrating their ways through the company's software. The company appears to have changed its tune, perhaps realizing the inherent futility in attempting to stop videos from being posted on the Internet or finally seeing that these videos have value as free promotion.
If Nintendo's bobbling of the situation seems characteristic of the frequently tone-deaf company, it's worth pointing out that it is not the only one struggling to define the implications and outcomes of this relatively recent development. Microsoft has laid out strict rules for its user-uploaded Machinima and YouTube videos that prevent user monetization and stake ownership claims on certain types of content. Whether these rules will de-incentivize user interest and participation will depend on their application.
Winners and a loser
Sony and Microsoft are in much better positions to facilitate and benefit from user-generated content than Nintendo. The company's lack of online focus and failure to create a service on par with PlayStation Plus and Xbox Live means that it is likely to miss out on many of the perks created by the new trend. The growth of Microsoft's Xbox Live program pushed the company's Entertainment and Devices division to a profitable fourth and 2013 fiscal year. The fourth quarter's Xbox Live transactional revenue jumped approximately 20%. After seeing what an excellent revenue stream Live has been for Microsoft, Sony's PlayStation 4 will require a paid subscription to Plus if owners wish to play online.
By building online communities and generating buzz, entities like Twitch and Machinima have the potential to drive the adoption of (and revenue generated by) Sony's and Microsoft's services. As digital distribution and service-based models continue to become increasingly important to the industry, streaming platforms and channels will play a major role in driving consumer interest and the gaming ecosystem as a whole.
Keith Noonan has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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