The Gaming Planks of the Amazon Platform

Last time, I looked at the film and television franchise ambitions of Amazon Studios. In this post, I’m focusing on video game initiatives across the Amazon platform, with overviews of hardware, software and retail. Overall, I argue that, despite some struggles, video games represent the next frontier for Amazon’s media expansion.

In 2012, Amazon established Amazon Game Studios (AGS) and became one of the only companies—along with Microsoft, Nintendo, and Sony—to create both gaming hardware and software. Specifically, AGS has developed and published titles for Amazon devices, like the Fire TV set top box and the Kindle Fire tablet. With involvement in hardware and software, Amazon can control the platforms through which consumers buy content, such as by prioritizing its own content in its Appstore. Synergizing hardware and software represents a lucrative combination for Amazon because, like Google and Apple, the company retains a portion of the revenue of each app sold through its storefront.

Despite this potential, Amazon has faced a number of challenges with its video game strategy. First, AGS had recruited a strong roster of talent, including Portal (Valve Corporation, 2007) designer Kim Swift, only to lose Swift and other high-profile recruits in 2015. Notably, this exodus took place around the same time as the publication of a New York Times report on Amazon’s cut-throat work culture.

Second, the company’s hardware has failed to catch on. In 2015, Amazon signaled its gaming console ambitions with the release of the Fire TV Gaming Edition, a bundle featuring the second-generation Fire TV along with a proprietary controller and two games. Future Fire TV iterations, however, have not carried a “Gaming Edition.” This suggests that consumers have rejected the Fire TV as a gaming device. With Amazon announcing in September 2018 a software update that no longer supports the controller, the Fire TV’s gaming future appears grim. The Fire TV had failed to make for an optimal gaming experience, having been positioned as a “microconsole”—or a device that bridges the gap between mobile devices and consoles (e.g., Microsoft’s Xbox One and Sony’s PlayStation 4). While smartphones and tablets remain more ubiquitous than consoles, a number of microconsoles (e.g., Ouya and PlayStation TV) reported disappointing sales around the release of the Fire TV Gaming Edition. With Amazon no longer positioning the Fire TV as a gaming device, the microconsole market has grown increasingly niche, limited to the Nvidia Shield and retro plug-and-play consoles (e.g., Nintendo’s NES Classic and Sony’s PlayStation Classic). Furthermore, the Nintendo Switch, introduced in 2017, provides a hybrid console/portable gaming experience along with the power of Nintendo’s brand and franchises (e.g., Super Mario and The Legend of Zelda).  

Third, perhaps in part due to troubles with its creative team, AGS hasn’t released many games. At first, the studio said it would focus on mid-budget titles—those with costs between “AAA” blockbusters and independent projects and whose presence had already faded due to industry consolidation and the growing viability of mobile development. As of this writing, the AGS website lists only two titles—the in-development online multiplayer games Crucible and New World. Curiously, the site omits previous products, like 2014’s Fire TV exclusive Sev Zero, and the upcoming Grand Tour: The Game. Moreover, the AGS Wikipedia entry shows that no games have released since 2015. One of the most ambitious projects from AGS had been Breakaway—the first AGS game to feature integrated Twitch livestreaming; however, the studio unexpectedly cancelled development in early 2018 for unspecified reasons.  

Even with all of these struggles, video games still hold a lot of potential for Amazon. In August 2018, 2K Games co-founder Christoph Hartman joined AGS as vice president, demonstrating that games industry veterans maintain confidence in the studio. Additionally, while Amazon has reduced its gaming hardware commitment, its software lineup remains promising. Grand Tour: The Game, for instance, will become the first AGS title to appear on non-Amazon consoles, specifically the PlayStation 4 and Xbox One. This game also will tie-in to the third season of Amazon Studios’s The Grand Tour (2016-Present) and innovatively will do so with episodic content released alongside individual episodes. In addition to bringing together AGS and Amazon Studios, Grand Tour: The Game uses Amazon’s Lumberyard game engine, which leverages Amazon Web Services cloud computing and enables built-in Twitch integration. Although Grand Tour: The Game will appear on competing platforms, Crucible and New World could still release exclusively for the Fire TV and reignite its gaming ambitions. Proprietary, high-profile titles (i.e., “killer apps”) could drive sales of Amazon hardware, as games consistently generate more profits than any other app category (e.g., video, music).

Like its films and TV series, Amazon leverages video games to support planks across its platform. For example, games drive traffic to Twitch—which generates advertising and subscription revenue—and fuel device and content purchases. Killer apps can strengthen the platform because each new device acts as a gateway to Amazon’s ecosystem, with the company’s ecommerce business at the center. Going forward, Amazon will continue to integrate AGS and Twitch, but it remains to be seen if it will rejoin the console wars or introduce

video games into its physical retail locations.

The closure of Toys “R” Us and mounting losses for GameStop demonstrate that the video game retail market continues to undergo change in the face of digital distribution and competition from Amazon. Although the company in 2018 ended its popular 20% discount for Prime members, the action apparently took place to appease publishers seeking a greater revenue split (the end of a similar discount at Best Buy months prior likely influenced the decision as well). The loss of the discount has led to the gain of major games, strengthening Amazon’s game retail presence.

Across content, hardware, and retail, Amazon continues to iterate its approach to video games. Grand Tour: The Game especially emphasizes how the company can innovatively bring together multiple platform planks—from AGS, Amazon Studios, and Twitch as well as the opportunity to drive merchandise sales through its online and physical stores. As Amazon continues to embrace franchise film and television content, video games represent a highly lucrative revenue stream.

In the next post, I’ll look at Twitch as a component of Amazon’s platform and its connections to the broader esports market.

Posted by James Fleury

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