Analyzing game-streaming services in two-sided markets: Direct selling and cloud alliance models

Abstract

This study analyzes the profit of a cloud console provider facing competition from a hardware console provider in a two-sided market composed of game developers and consumers. The cloud console provider can either sell its subscription package to consumers independently or organize a cloud alliance with an ISP to market. As compared with the direct selling model, the cloud alliance model with full coordination can yield greater total revenue if the benefit the game developers receive from the consumer side is higher than the value the consumers receive from the developer side. However, the overall profit of the cloud alliance declines when this condition is reversed. This undesired result can be resolved by leveraging the game-streaming subscriber base to yield a moderate amount of additional revenue for the cloud console provider.