Market Insight

Nvidia's GRID Gaming Cloud Gaming Service Launches on Shield Devices

December 12, 2014

Piers Harding-Rolls Piers Harding-Rolls Director – Research and Analysis Director, Games, IHS Markit
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On November 13, 2014 Nvidia announced the preview launch of the Nvidia GRID Gaming on-demand gaming service would hit on November 18, 2014. The service landed first in the US and UK, with Continental Europe coming online in the first quarter of 2015, and Asia to follow in the second quarter.

The GRID gaming service is only available for Nvidia's Shield products - the original Shield handheld and the recently launched Shield tablet - and this service preview is free for Shield owners until June 2015 with the aim of generating more Shield customers and driving service engagement. Nvidia suggests that gamers have at least 10Mb of dedicated bandwidth available to use the service to its full potential. Users also need to have a 5GHz rated wireless router to get the optimum experience.  

While the company does not have a sales or pricing model set right now, representatives say they envision a subscription plus retail service being implemented in the future. The back catalogue is likely to be available for a low monthly fee much like the Netflix model, but users will pay full-price for premium content such as recently released AAA games. Twenty games are currently available, including Batman Arkham Asylum, Borderlands 2 and Saints Row The Third. The company aims to have 100 titles on deck by the end of next year. Multiplayer gaming will not be available at launch, only campaign modes.

Nvidia claims its service infrastructure is 12x faster than what is available today via the older PlayStation Now infrastructure. It will have a quicker start time, offer 60 frames per second gaming, and also enable advanced GeForce-related graphics effects. The service is delivered through Amazon's EC2 G2 instances, allowing the GRID computing service to be rolled out globally. 

Along with the GRID Gaming announcement the company revealed that Nvidia Shield Tablets would be updated to Andriod 5.0 (Lollipop); it also announced the next version of its art program, Dabler 2.0, and a refresh of the Shield Hub UI, including that addition of the GRID Gaming service “tab”. The company also announced Half Life 2 and Half Life 2: Episode One are coming to Shield products. Additionally, purchasers of the 32GB Shield Tablet will get The 'Green Box Bundle' for free which includes the two Half Life games and Portal.

The Shield Tablet and controller hardware are available in the US and Canada, Europe, Russia, Japan and Korea. Pricing is $299 for the 16GB +WiFi tablet, $399 for the 32GB+LTE tablet, $59 for the Shield controller and $39 for the Shield Cover.

Our Analysis

It is clear Nvidia has an understanding of why cloud gaming services have not taken off in the past; service delivery challenges, limited content, limited value proposition to the consumer, a lack of popular monetisation models and a lack of a marketing campaign from a known brand. Will the company be able to provide a commercially robust and popular solution with its own service?

Content-wise there are no stand out games in the current catalogue that will instinctively sell this service to the consumer. With the service available for free it will of course gain usage, but the challenge remains putting in place a successful value proposition to the consumer based on both content and pricing when the period of free usage comes to an end. At this stage it is unclear whether Nvidia can deliver this - its recent track record for the Shield devices in relation to content can be described as hit and miss. The announcement that Valve's titles will be making their way to the service has some mileage but most gamers will have played these titles already. The current lack of multiplayer support is quite a dampner as well.

Commercially, on-demand services have also been a challenge not least because of the cost of infrastructure associated with service delivery. The launch of Amazon's EC2 G2 instances towards the end of 2013 means that the infrastructure challenges are not as crippling as before. Nvidia's in-house service holds some commercial advantage compared to the third-party competition that either run their own platforms or use Amazon's solution in that it has already driven revenue from sales of its GeForce GPUs to Amazon for its instances and the license fee associated with the GRID computing solution is not part of the commercial equation as it is for these other companies.

However, the bandwidth, ping rate and client-side demands for accessing this service are much higher than in the past. This is likely due to the decision to deliver the service via Amazon's instances, Nvidia's aim to deliver 60fps gaming and the decision to enable the GeForce high-end effects across the supported games. The need to have access to 10Mb of dedicated bandwidth reduces the addressable market considerably even across well penetrated broadband markets.  

At this stage, Nvidia's decision to make this only available to Shield customers appears a way to drive the company's device ecosystem outside of PC gaming. While the decision was framed as being non-competitive to existing cloud gaming partners using the GRID solution - G-Cluster and Playcast for example - there has been minimal uptake of full-streaming games services on the PC platform with most implementations being delivered over managed IPTV networks. Nvidia has not confirmed the installed base of Shield devices in the market, althought it is clear that with the Shield tablet the company has delivered a more mass-market device than the original Shield handheld console but we expect neither to have sold in large volumes. With a minimal installed base of Shield products, a full streaming gaming service could add a needed push for these devices.

Is this the only reason that Nvidia has declined to launch the service on the PC at this stage? There could be a number of other reasons for this decision: it is unwilling to canabilise sales of its consumer PC GPUs by offering a cloud-based alternative; it may be already talking to the major player(s) of the PC digital distribution segment (i.e. Valve) about its GRID cloud gaming solutions and may be taking a wait and see attitude to see how the PC-based opportunity evolves; and it may be wanting to test the implementation across a small number of users before opening it up to a much larger group of user across the PC-based opportunity.

Marketing and brands-wise Nvidia holds an advantage over the existing full-streaming games companies and is also a much larger entity with deeper pockets when it comes to marketing. While Nvidia has stated that its Shield products and its cloud gaming service must stand on their own feet commercially, we still believe that these consumer facing services are as much a proof of concept as a long term direct strategic growth plan. In this sense these offerings will act as in-direct sales activities and will drive the adoption of Nvidia technologies by a larger group of consumers, service providers, telecommunication companies, OEMs and device manafacturers. This broader ecosystem aim means that the commercial need to build profitable and large scale consumer offerings from Shield and GRID is not as entrenched for Nvidia.

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