Why Does Amazon.com Inc. Want to Make Original Video Games?

June 16, 2015 - Kindle Unlimited

Amazon.com (NASDAQ: AMZN  ) is reportedly building a own strange PC game. Although it’s misleading what kind of diversion Amazon is planning, a association has hired developers who formerly worked on obvious titles including BioShock, Half-Life 2, Left 4 Dead, Halo, Far Cry, and The Last of Us.

This doesn’t come as a outrageous surprise, given Amazon has been investing a lot into games recently. Last year, Amazon acquired Killer Instinct developer Double Helix and live video game-streaming site Twitch, and done games a vital concentration for a Fire TV set-top box. Amazon also protected Crytek’s CryEngine, that powers high-end PC games such as Crysis 3, and partnered with diversion studios to act as a “pseudo-publisher” for aloft quality, non-free-to-play mobile games.

Amazon’s Fire TV. Source: Amazon.

Amazon is also rumored to be building a cloud gaming platform, identical to Sony‘s (NYSE: SNE  ) PS Now, on top of a Amazon Web Services cloud offerings. U.S. video diversion let association GameFly also recently launched a cloud gaming platform, famous as GameFly Streaming, exclusively for a Fire TV.

It competence seem peculiar for an e-commerce hulk like Amazon to make strange video games. But it indeed creates ideal clarity in a context of Amazon’s plan of formulating strange content.

Why strange calm matters
In 2010, Amazon determined Amazon Studios, a multiplication that develops strange shows, movies, and comics. TV shows and films are distributed by Amazon Instant Video and comics are delivered to Kindle e-readers and apps. Amazon also encourages self-publication of e-books by Kindle Direct Publishing.

Amazon develops strange calm to revoke a coherence on calm providers such as film studios and publishers. Streaming services contingency compensate high kingship fees to calm providers to tide their content. For example, Netflix‘s streaming calm obligations (what it promises to compensate film and TV studios) rose 38% annually last entertain to $9.8 billion.

Book publishers also don’t wish Amazon to set low prices for a e-books, given it reduces direct for pricier earthy copies. Therefore, enlivening authors to tell their books directly on Amazon eliminates a con of traffic with mainstream publishers.

Original calm also helps Amazon build a walled garden to deflect off both e-commerce rivals like eBay and digital ecosystem rivals like Google.

But since make video games?
Amazon already has several ways to close users into a Prime ecosystem, for that membership costs $99 per year. Members get giveaway two-day shipping on name items, discounts, giveaway e-books from a lending library, giveaway streaming videos and music, total cloud storage for photos, and other perks.

By putting Kindles in their hands and planting Fire TV boxes in vital rooms, Amazon hopes to keep users heavily contingent on a services. That’s since it is also introducing same-day smoothness in certain areas and contrast out Dash bar-code scanners and buttons for present (and mindless) smoothness of common domicile items.

Amazon’s Fire TV isn’t a gaming powerhouse same to a PlayStation 4 or Xbox One. But cloud gaming, that streams games like interactive HD videos, especially relies on bandwidth instead of tender horsepower. Considering that Amazon’s AWS is one of the world’s largest cloud services, it could simply tide on-demand games to homes and give a good new digital perk to Amazon Prime members.

Massive marketplace potential
Amazon will substantially launch a strange games for giveaway to Prime members. For example, if Amazon launches a World of Warcraft-like MMORPG and gets players hooked, they substantially won’t consider twice about renewing their Prime memberships.

If these multiplayer games grow in popularity, Amazon competence modify some-more non-Prime members into members. That acclimatisation is intensely important, since Prime members spend as most as 68% some-more on Amazon than non-Prime members annually, according to RBC Capital estimates.

Amazon Prime. Source: Amazon.

If Amazon sells a possess non-free-to-play games, it can also keep a most bigger cut of a sale. For an normal $60 video game, a developer and publisher slot scarcely half of a revenue, while a tradesman usually keeps about 20% to 25%. By building and edition a possess games, Amazon could beget significantly some-more income from diversion sales. However, it would also shoulder some-more risk, deliberation that “triple-A” video games mostly cost tens of millions of dollars to produce.

Should console makers be worried?
In a gaming industry, there’s a widespread faith that gaming consoles will eventually die out. As publishers try to maximize income with cross-platform releases, a line between dedicated consoles and PCs is apropos blurred. As bandwidth speeds increase, it’s utterly probable that cloud-based games — that can be streamed on intelligent TVs or set-top boxes — will reinstate visual disks or extensive digital downloads. That’s since Sony is aggressively expanding PS Now to intelligent TVs and other non-gaming platforms.

Amazon’s skeleton for strange games are still unclear, though they could be really disruptive when they arrive. The association already has copiousness of attention talent, a large cloud backbone, a foothold in vital bedrooms with Prime and Fire TV, and really low pockets. 

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Leo Sun owns shares of Apple. The Motley Fool recommends Amazon.com, Apple, eBay, Google (A shares), Google (C shares), and Netflix. The Motley Fool owns shares of Amazon.com, Apple, eBay, Google (A shares), Google (C shares), and Netflix. Try any of a Foolish newsletter services free for 30 days. We Fools might not all reason a same opinions, though we all trust that considering a different operation of insights creates us improved investors. The Motley Fool has a disclosure policy.

source ⦿ http://www.fool.com/investing/general/2015/06/15/why-does-amazoncom-inc-want-to-make-original-video.aspx

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