Microsoft (NASDAQ:MSFT) recently enabled local streaming of Xbox One games to Windows 10 computers or tablets. This move, which it announced back in January, could have huge implications for both the PC and console gaming markets. Let's focus on how this feature fits into Microsoft's "One Windows" strategy, and how it could impact other streaming players like Sony (NYSE:SNE), Nvidia (NASDAQ:NVDA), and Valve.
Gaming, "One Windows"-style
Unlike its predecessors, Windows 10 was designed to be a "scalable" operating system that could be installed across smartphones, tablets, PCs, and Xbox One consoles. Cross-platform software like universal apps, Cortana, and Edge can then synchronize data across all those platforms.
Last year, Microsoft demonstrated how "universal" games, like Halo: Spartan Assault, could be "cross-bought" on one platform -- Windows Phone, Windows 8, or Windows RT -- and played across all those other devices. That move was intended to encourage app developers, who shunned Windows Phone's tiny user base, to develop cross-platform apps which could also attract a larger PC user base.
However, that system didn't include the Xbox 360 or Xbox One versions, which had to be purchased separately from the Xbox Store. Windows 10 fixes that issue by giving the Xbox One access to the Windows Store, and enabling complete cross-purchases across all of Microsoft's platforms.
Xbox One-to-PC streaming matters
By allowing gamers to stream their Xbox One games to Windows 10 tablets and PCs, Microsoft leverages the strength of its Xbox One game library to offset the weakness of its PC gaming client, Games for Windows Live (GFWL). GFWL, which closed its marketplace in 2013, had a tiny user base compared to other popular PC gaming frontends like Valve's Steam, EA's Origin, or Ubisoft's UPlay.
That's why Microsoft is letting Xbox One gamers stream their games to PCs -- it enables a one-way cross-buy from the Xbox One to Windows 10 devices, in which games just have to be purchased once on the Xbox One to be played across multiple devices on a local network.
That allows gamers to buy universal games on Windows 10 devices and play them on the Xbox One, or purchase Xbox One games to be streamed on Windows 10 devices. Considering that Windows is installed on over 90% of PCs worldwide, and around 13 million Xbox Ones have been sold, that feature could appeal to lots of gamers.
Microsoft has a big advantage
Letting gamers stream games locally to PCs or mobile devices isn't a new idea. Sony has Remote Play, which lets gamers stream PS3 and PS4 games to its Xperia mobile devices, PSP, PS Vita, or PlayStation TV. Nvidia's GameStream feature lets gamers stream PC games to its SHIELD handheld console, gaming tablet, or set-top box. Valve's in-home streaming for Steam lets gamers stream games between PCs with different operating systems.
Microsoft's streaming solution beats all of these due to the combined strength of the Xbox One and Windows 10. Sony sells more gaming consoles than Microsoft, but there's no way it can match the entire Windows 10 market with Xperia phones, tablets, and other devices. Microsoft has already set a target for installing Windows 10 on a billion devices within two to three years.
Meanwhile, Nvidia hasn't disclosed sales figures for its SHIELD devices yet, but it's unlikely that they'll ever outsell the Xbox One. The same applies to Valve's Steam Machines, which haven't gained much ground against mainstream gaming consoles. This means that the Xbox One could help Microsoft shut down Nvidia and Valve's local streaming efforts on the console front.
The foundations of cloud gaming
If Xbox One-to-Windows 10 streaming is successful, it will establish firmer foundations for an expansion to the cloud gaming market, made up of on-demand games streamed remotely to consoles and other devices -- a Netflix of video games.
Sony and Nvidia have already advanced into this market with PS Now and Grid, respectively. Electronic Arts and Comcast recently teamed up to offer a similar service for the latter's X1 set-top boxes. Steam doesn't offer first-party cloud streaming yet, but several third-party services allow gamers to stream those games.
Last August, reports claimed that Microsoft was developing a next-gen cloud gaming service codenamed DeLorean, but we haven't heard much about the platform since then. But if the Xbox One-to-Windows 10 feature catches on, we could hear much more about that effort in the near future.
Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Netflix and Nvidia. The Motley Fool owns shares of Microsoft and Netflix. 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.