Amazon (AMZN) has ramped up its expansion into the games industry with Wednesday’s release of Crucible.
The free-to-play shooter – which incorporates elements similar to popular games like Activision Blizzard’s (ATVI) Overwatch, Epic Games’ Fortnite and Riot Games’ League of Legends — is Amazon’s first big-budget game since Amazon Game Studios, the company’s gaming branch, was created in 2012. With Crucible, Amazon Game Studios has finally deviated away from the tablet-based games it produced for years to deliver one of the PC titles initially announced in 2016.
Gaming is not a cornerstone of Amazon’s business. Live-streaming platform Twitch, which Amazon acquired in 2014 for $970 million, is the company’s only big foothold in the gaming space.
But Wedbush analyst Michael Pachter speculates that the company is looking to enter games distribution “in the same way that they got into books and music.” Crucible could be an early step towards achieving that goal.
“If they go further into games, it makes sense that they will offer a streaming service, and they probably want ‘exclusive’ games for that service,” he wrote to CNBC.
All about Prime
Amazon’s content strategy has been historically been geared toward boosting subscriptions to Amazon Prime, the company’s subscription program. Prime customers tend to be more loyal to the company and spend more money: According to Jan. 2020 estimates from Consumer Intelligence Research, Amazon now has more than 112 million Prime subscribers in the U.S. As of 2019, those customers spent about $1,400 per year, compared with about $600 per year for shoppers who weren’t members, according to the research firm.
Although Prime started out with services tailored to e-commerce shoppers, such as free shipping, it gradually added a wide variety of offerings, including discounted and exclusive video content.
Twitch Prime became one of those offerings in 2016 when Amazon launched the service, which gave Prime members access to exclusive features on the live-streaming platform.
Adding more gaming could help Amazon build a “holistic package” to gain more young customers, says Loup Ventures’ Doug Clinton.
“When you win the younger consumer, that’s a way to [permanently win] the whole household,” he said.
But Amazon has showed only mixed commitment to the space. Last June, the company confirmed that it had laid off “dozens” of game developers, this as reports circulated that a number of unannounced titles had also been cancelled.
Nevertheless, Crucible’s launch means that Amazon is the first tech giant other than Microsoft (MSFT) to release a big-budget game. Other companies are gradually crowding into the space.
Google (GOOGL) is opening its own in-house games studio in Montreal to make games for its streaming service, Stadia. Apple (AAPL) launched its Arcade subscription service last fall, and Facebook (FB) has been solidifying its foothold in VR games with two notable studio acquisitions in just the past few months.
Crucible’s release does come in a particularly competitive year for shooter games. Activision’s Call of Duty: Warzone, released in March, hit 50 million downloads in its first month alone while League of Legends publisher Riot Games, is gearing up for the highly-anticipated release of its Valorant game sometime this year.
Pachter notes it’s a “crowded” market, and Crucible might not even be able to measure up to now older titles like Fortnite and PlayerUnknown’s Battlegrounds (PUBG).
However, even if Crucible flops, Pachter thinks it won’t be the end of Amazon’s gaming ambitions.
“Games is a hard business, so it makes sense that it takes a while to develop a hit and [it] makes sense that they will tweak their model and headcount as they evolve,” said Pachter. “If they can’t compete with Crucible, they’ll try with New World. If that doesn’t work, they’ll try again.”
New World, a massively multiplayer online (MMO) role-playing game, is Amazon Game Studio’s next release. It was initially set for a May release date, but was delayed until August as the coronavirus outbreak disrupted development.