Recently, Globant (GLOB) – Get Globant SA Report announced that it will partner with Amazon (AMZN) – Get Amazon.com, Inc. Report to develop a new game development platform, called AWS for Games. Globant is a global software development company that uses its IT expertise to improve other companies’ business models.
Why is this partnership good for AWS? In simple terms, because implementing AWS technology in any business model requires a skilled tech team — which might be expensive, especially for small companies. Globant’s role is to simplify AWS technology solutions for its clients in the gaming industry — and that could be the start of a revolution.
Figure 1: Amazon's Globant Partnership: Why It's Good News for AWS Bulls
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It's no secret game development technologies have become more sophisticated — and more expensive. Investments in gaming are reaching Hollywood production levels. For instance, the most expensive game ever made, Grand Theft Auto V, cost $265 million — only $10 million less than the most recent Star Wars movie.
Continually rising costs and the constant demand for innovations usually create barriers of entry for small businesses. The AWS-Globant partnership should change this equation because it allows small developers to stay competitive by accessing the most cutting-edge technologies.
"As more games offer live services and connected experiences in their games, developers need a diverse set of solutions to use. Having Globant as a strategic collaborator on AWS for Games allows developers to focus on creating fun player experiences," said Rob Schoeppe, head of Game Tech Solutions at AWS.
In order to understand why having a large number of small developers could be the key to AWS’ success in the gaming industry, we must first remember how Meta (FB) leveraged Instagram to beat Snapchat (SNAP). Instagram stole Snapchat users by launching its own version of the disappearing photo app: Instagram Stories.
But just copying a feature isn’t enough to beat its creator. You must do it better, and Snapchat still had better filters. That changed when Instagram allowed its massive user base to create its own filters. More filters being launched every day means users will spend more time on the platform.
The AWS-Globant partnership has the potential to create a similar effect. Amazon Games alone can’t compete with established players such as Sony (SONY) – Get Sony Group Corporation Sponsored ADR Report Microsoft (MSFT) – Get Microsoft Corporation Report, Nintendo, Activision (ATVI) – Get Activision Blizzard, Inc. Report, and Tencent. But it can leverage an army of small gaming companies to steal a portion of their customers.
The Amazon Maven has previously given its take on how cloud gaming could be the future of video game distribution. Microsoft’s head of gaming, Phil Spencer, has mentioned how he doesn’t want to compete against Sony and Nintendo while “Amazon and Google are focusing on how to get gaming to 7 billion people around the world.”
As small game publishers start to master AWS technologies, we could witness some games by these low-profile companies becoming popular around the world. In this scenario, big players could have much more than Amazon and Google to worry about.
(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Amazon Maven)
Equity research contributor for DM Martins Research, covering Amazon and the retail space at large. Economics and accounting background from the University of Sao Paulo, one of the top finance universities in Brazil.