What are the advantages to a capture card over ShadowPlay or OBS? To sum it up: CPU-encoding puts quite a heavy load on the system. This probably doesn't matter much if you're streaming games such as Minecraft, however if you're planning to stream more demanding games (such as Battlefield 4), you'll need a very high-end processor with six or eight cores, or you'll lose gaming performance.
However manufacturers of graphics cards have implemented features that benefit streamers, in the form of built-in encoders. Since this a specialized part of the graphics card, it does not slow the card down whatsoever, while the load on the CPU is lowered significantly. Encoding on a hardware-level works especially well on Nvidia cards (NVEnc), as it produces only a minimal extra load for the CPU.
The most important downside to this method is that GPU-encoding results in mediocre image quality, especially at lower bit rates and moving images. The worst efficiency of the encoding, in other words the ratio between image quality and bit rate, suffers for this reason. This problem is one of the reasons why ShadowPlay is only able to stream at a resolution of 1280x720.
In addition to the lower image quality of GPU-encoding, the streaming features are also very limited if you use a console. You can only stream the game and a face cam. Overlays and other extras are not supported.
Lastly, free streaming programs allow you to choose between functionality and user-friendliness, but not both. ShadowPlay doesn't offer more than the bare minimum in terms of functionality. OBS offers the most features, however it's not very easy or intuitive to use. XSplit combines a bunch of features with a more user-friendly design, however you'll need to purchase a license if you want to use the full versions of the program.
Not using a capture card means that you have to choose between performance (GPU-encoding) and image quality (CPU-encoding). Capture cards allow you to maintain maximum performance while streaming with the best possible image quality. For these devices to work optimally, you'll have to send the signal from your PC or console to a second PC, so that the first PC will have no extra load. Some cards have a built-in encoder, while some other models require the second PC to do the encoding. The advantage to this setup is that the gaming system will literally not be impacted in terms of performance, since a different device is doing all the work related to streaming. This allows you to use software encoding (with better image quality) without affecting performance. Another advantage is that your stream will not go offline if the gaming system crashes.
Console users can also benefit from this. You're no longer bound to the limitations of your console if you use a capture card.
An evident downside is of course that you need a second system for capture cards to operate optimally; if you capture on the same PC you're gaming on, you'll have to keep in mind that your gaming performance will be lowered, especially with software encoding. Of course we measured the amount of processing power and memory required by the capture cards.