Big Tech's New Street Fight

The next frontier for video games is streaming— and it promises to be an all-out brawl among companies with the Internet infrastructure to back it up.

At stake? Billions of dollars and the future of a fast-growing industry. What, you thought this was a game?

- Jonathan Vanian

WHERE IS JOHN? THAT’S THE QUESTION hanging over you as your team of armored soldiers methodically searches this foreign vessel for a comrade—and war hero—seemingly gone rogue. It’s the year 2558; humans are under attack by alien forces. The last thing you need right now is to have one of your trained killers switch sides.

You cautiously step through the cramped corridors of the spaceship. It’s dark—distressingly so—but for an eerie blue light emanating from the ship’s walls. Your teammates would be in complete silhouette but for the cobalt glints on their weapons. You see shadows you don’t recognize and quietly extend your finger toward your rifle’s trigger. A sapphire streak ripples across its scope.

But they hear you! The aliens’ weapons burst with a kaleidoscope of lethal laser fire that ricochets off the ship’s panels. You sidestep in an effort to get a clear shot—if only you had a little more room—but it’s too late. Before you can return fire, a well-placed beam sends you to a rainbow-coloured grave. Game over. (Start again?) For nearly two decades, scenes like this one have unfolded in living rooms across the globe, thanks to Microsoft’s long-running video game franchise Halo, playable on the tech giant’s ever-popular Xbox home console. But the rich gameplay described above, which Fortune witnessed during a recent visit to the company’s headquarters in Redmond, Wash., needed no brawny consumer electronics to run with the speed and splendor expected of a modern first-person shooter, as such computationally intensive games are known. It required only a smartphone—in this case, paired with a conventional Xbox controller.