Niko Partners attended E3 again this year to discover the latest and greatest gaming products and trends for this year and beyond. One of the highlights was catching a glimpse of Shigeru Miyamoto, the legendary Nintendo creative force. Nintendo’s recent announcement of plans to launch Switch in China was exciting, and seeing him in person was also exciting. For the most part, Asia is not a focus of E3 and vice versa. Companies in Asia send people to E3 to source games, acquire licenses and see what the trends are. Yet, Tencent held meetings offsite (as did Microsoft, and the absence of Sony, Activision and EA was notable), and Cyberpunk is in hot demand in China thanks to Keanu Reeves (read more on that below). That being said, many insights emerged from the meetings and events we attended throughout the week.
Streaming services take off in 2019
Google has unveiled that its Stadia game streaming platform will launch in November 2019 with more than 30 game titles. Gamers will be able to stream games from any device that supports Google Chrome or via a TV using Chromecast. Whilst convenience and being able to play a game at any time and on any device may be seen as the killer app itself, we believe that Google will need to build up a strong library of titles, including exclusive content, in order to attract the largest audience. Google has confirmed that its service will first launch in 14 countries worldwide, none of which are in Asia. We note that Google Stadia is not viable in China due to the ban on Google services there.
Microsoft has also confirmed that it will start public trials for Project XCloud in October 2019. The first phase of its cloud gaming rollout is akin to Remote Play which is currently available on PlayStation too. Timing regarding a full launch for XCloud has not yet been confirmed. We believe Microsoft has a significant advantage over Google by allowing console gamers to take their existing games library on the go with XCloud. We expect Microsoft to take more of a global approach than Google from day 1 due to its already existing install base of consoles in Asia.
In Asia, cloud gaming is a necessity to efficiently serve the hundreds of millions of users and enable the market to continue to grow. We note that Asian companies such as Tencent and Huawei have announced similar products for the East. Tencent recently confirmed that it was working on a new cloud game streaming service called Instant Play which is currently being trialled In China. Huawei has expanded its cloud game streaming service to mobile. Both companies plan to utilise 5G to allow players in China and Asia to stream HD quality games to mobile devices.
New Console Generation starts in 2020
Microsoft announced that it would release Project Scarlett, its next generation console, in Holiday 2020. The console will launch alongside a new flagship Halo game and aim to push console graphics and gameplay to the next level. Sony also confirmed prior to E3 that it would launch its next generation PlayStation in 2020 but no release window was given. Nintendo is rumoured to be releasing a new SKU for its Switch console, but no such device was shown at E3 this year.
Backwards compatibility was a big feature of both consoles with Microsoft touting that gamers would be able to play 4 generations of Xbox content whilst Sony noted that its next generation console would support PlayStation 4 games. We believe that the addition of backwards compatibility, something that was missing at the start of the current console generation, will help soften the transition to next gen and give players more of a reason to upgrade.
There is a lot of talk of consoles and console games at E3, but very little console usage in Asia as of yet. We will await what Nintendo will do in China and see how Xbox and PlayStation progress there as well as throughout the region. We plan to release our latest Console and TV Based Games Report for China this month which will explore in depth the opportunity for console hardware and software in the region.
New software helps drive hardware sales
Content is king and E3 2019 had plenty of it. Nintendo announced a sequel to its hit game The Legend of Zelda: Breath of the Wild, Ubisoft introduced a new Watch Dogs game and Electronic Arts will launch Star Wars: Jedi Fallen Order this fall alongside the new movie in the franchise. Cyberpunk 2077 was a hit at the Microsoft press conference as it was confirmed that Keanu Reeves would be a character in the game. We note that Cyberpunk 2077 is currently the #1 most pre-ordered game on Steam in China, which means that E3 does have an impact in Asia.
Whilst E3 primarily focuses on titles that are popular in the West, we note that there was a more concerted effort to promote games developed in Asia at the event. Microsoft dedicated an entire segment to CrossfireX on its stage, the latest entry in the series from Smilegate Games, a Korean developer. Crossfire is an FPS game that has been likened to Counter Strike in the West. The title is huge in Asia with more than 650 million registered users and a peak concurrent player count of over 8 million, which isn’t too far off Fortnite’s peak.
We believe CrossfireX has a chance to succeed in the West as the sequel has made a number of key changes to appeal to Western gamers. Unlike its predecessor, CrossfireX is being developed on Unreal Engine 4 with realistic and high-quality graphics to appeal to Western gamers. The new title will also have a Story mode to appeal to single player gamers in the West. Whilst Crossfire is available on PC and Mobile devices in Asia, CrossfireX will launch on console to reach the more than 150 million console gamers in the West.
Other trends at E3
Esports was highlighted at E3, with an esports stage, matches, and some great panel talks (such as by ReadyUp). We saw some of the western streaming video platforms but none of the big platforms from Asia.
We heard many people express worries about China’s regulatory environment for games and game hardware. This should be improving now, but we do understand the frustration. Watch for the upcoming 2019 Chinese Games Industry Regulatory Landscape Report, written by Pillar Legal in conjunction with Niko Partners.