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Embrace the Future of Gaming: GameFly Introduces Video Game Streaming Service

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Video game rental company GameFly has launched an online game-streaming subscription service by partnering with aspiring media giant Amazon (AMZN - Free Report) .

GameFly is adopting the Netflix (NFLX - Free Report) business model by expanding from a mail delivery based rental service to incorporating the online streaming services. All one needs to use this application is an HDTV, an Amazon account, and the Amazon Fire TV device. Currently, the pricing for video game packages range from $6.99 to $9.99 per month. Some of the games included in these packages are the acclaimed Batman Arkham series, Darksiders II, Dirt 3, and LEGO Lord of the Rings.

According to a report from Fortune.com, Wedbush Securities analyst Michael Pachter claims GameFly has had roughly 1 million subscribers consistently for “quite some time.” GameFly’s most popular game-plan is $22.95 per month, which allows U.S. gamers to rent two video games at once for as long as desired by mailing the discs to and from a subscriber’s home.

The Future of Gaming?

This announcement is on the heels of GameFly acquiring Israeli cloud gaming platform company Playcast Media Systems Ltd. Before the merger, Playcast Media had a pre-existing deal with Samsung to stream its games to Samsung Smart TVs. These deals with Amazon and Samsung create an outlet into the global marketplace for GameFly to provide its game streaming service.

GameFly CEO Dave Hodess is quoted regarding the merger, stating, “Amazon has some deals in Europe with telecom and cable providers and we’ll significantly expand distribution to MSOs, telcos, and streaming media players because we want to make the service available to gamers in every format around the world. We’ve had a good business in the U.S. for a long period of time and cloud gaming has made it much easier to scale globally.”

Heavy Competition

This new streaming service is in direct competition with Sony (SNE - Free Report) and its “PlayStation Now” game streaming service. In July 2012 and this past April, Sony acquired game streaming companies Gaikai for $380 million and multiple assets, including a large patent portfolio, of the troubled OnLive for an undisclosed price .

The components of these two companies were repurposed to create the PlayStation Now streaming service. For $19.99 per month, owners of PlayStation4, PlayStation 3, PlayStation Vita, Sony TVs and PlayStation TV devices can stream a larger collection of PlayStation 3 games, compared to GameFly’s streaming service, which include the Uncharted series, Final Fantasy XIII, and NBA 2K14.

According to Pachter, both GameFly and Sony face challenges regarding their abilities to add current games to their streaming services. “Publishers think all of their games are worth $60 for a year or so, then $40, then $20, and few will agree to unlimited use for only a couple of bucks,” Pachter comments. “That’s the problem with PlayStation Now, and I think it will be a similar problem with the GameFly service. Neither is likely to attract a lot of great content without paying up, and neither can succeed if the subscription cost is too high.”

As for Amazon, the introduction of a somewhat niche service may help separate it from the stiff competition in the streaming-media device market. According to a report from cnet.com, Amazon’s rivals have dominated the market. Roku made up 29% of the sales, Google’s Chromecast made up 20%, and Apple TV made up 17%. Amazon Fire TV went on sale in April of last year, held only 10% of this market.

Bottom Line

The concept of streaming media has gained serious popularity, primarily due to the successes of Netflix, Spotify, and Pandora ( . In order for this Amazon/GameFly partnership to be successful, not only will the streaming service have to be buffer and delay-free between the user’s controller and the game, they must find an adequate price point for the subscriptions to be affordable, yet cover the cost of having the latest and most popular games. Either way, it appears as if this ‘Netflix of Games’ could be the future of gaming once some of the initial wrinkles are ironed out.

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