"On-demand." "Streaming." "Anywhere, anytime." These words define the world of music and movies today. Technologies like cloud computing make these concepts possible. Another entertainment segment which is fast evolving into adopting the same concepts are video games, sometimes referred to as "Netflix for games." While cloud gaming has been around for a few years now, latency and other issues made it a non-starter for serious gamers. However, things are fast changing—not only has the cloud infrastructure become ubiquitous, there are also many companies working on providing an alternative for gamers free from CD discs.
Here’s an overview of cloud gaming, and how it is evolving.
What is cloud gaming?
Thanks to the processing power of the cloud, video games allow games to run on remote servers, while streaming them directly to a users' device. This shifts all the heavy lifting of the processing power from their device to the cloud. In other words, it means you don’t need to have the most up-to-date hardware in order to enjoy the best of games.
“The multimedia content is streamed through the network from the server to the user. This service requires low latency and a large bandwidth to work properly with low response time and high-definition video,” reads a paper on network analysis of cloud gaming. There are different models on which cloud gaming works; while some work on a monthly fee for a full access to a library of games, others are on per game basis. Different companies have their own ways to operate and utilize the network.
Gaming, and some projections
While cloud gaming is currently a miniscule part of the video gaming industry, its scope could be huge. Today, video gaming engages around 2.8 billion people globally, and this number is expected to exceed 3 billion by 2023. Over time, the number of gamers and the amount of time spent playing and watching video games has increased. According to an Entertainment Software Association (ESA) report, 64% of U.S. adults regularly play video games. In 2021, the total video game industry is projected to reach $189.3 billion in revenues. According to another estimate, the global gaming market is expected to reach a value of $256.97 billion by 2025.
It is estimated that cloud gaming revenues will exceed $1 billion for the first time 2021. The global cloud gaming market size is projected to reach $ 7.24 billion by 2027, expanding at a CAGR of 47.9% over the forecast period (2020-2027).
Who's doing what so far?
Sony (SNE) made its cloud gaming debut back in 2014 with the launch of “PlayStation Now.” Sony’s acquisition of Gaikai Inc., a leading interactive cloud-based gaming company in 2012, set its course towards cloud-based gaming. Currently, PlayStation Now offers hundreds of PS4, PS3, and PS2 games, ready to play on demand. For many years, Sony went unchallenged, but now more and more players are entering the arena.
Microsoft (MSFT) acquired PlayFab, a complete backend platform provider of services to build, launch and grow cloud-connected games in January 2018. Later that year, Project xCloud was announced, with the aim of delivering a “quality experience for all gamers on all devices that is consistent with the speed and high-fidelity gamers experience and expect on their PCs and consoles.” Within a year, Microsoft announced a public preview in the U.S., United Kingdom, and Korea. In September 2020, Microsoft launched cloud gaming (beta) for Xbox Game Pass Ultimate members in 22 markets.
Nintendo (NTDOY), best known for the beloved video game character Mario, launched a cloud version for its games on the Switch. Games are streamed from a server and requires a download to launch.
Introduced in September 2020, Luna is Amazon's (AMZN) cloud gaming service, built on AWS and harnessing the power of the industry’s broadest and deepest cloud platform. Players can subscribe to the Luna+ game channel, which offers a growing library of games. Additionally, Amazon announced a new gaming channel with leading global video game publisher Ubisoft, available directly through Luna.
In March 2019, Google (GOOG, GOOGL) announced Stadia—its video game platform—delivering instant access to games on any type of screen. Stadia made its formal debut in November 2019, “Starting today, playing games on your TV in 4K without a console, streaming games to a Chrome browser on a simple laptop, or enjoying the biggest games ever made on your phone is a reality.” Since then, many more additions have been announced.
NVIDIA (NVDA) has been actively developing cloud gaming technology. The result of its research and development was the launch of GeForce NOW in beta for Macs in mid-2017. In January 2018, GeForce NOW cloud gaming PC beta was released. In February 2020, GeForce NOW was opened for all. Towards the end of 2019, Tencent and NVIDIA collaborated to bring PC gaming in the cloud to China.
In 2018, Electronic Arts (EA) announced Project Atlas—"A platform designed from the core to harness the massive power of cloud computing and artificial intelligence and putting it into the hands of game makers in a powerful, easy to use, one-stop experience.” The company has now its technical trials.
Final Thoughts
Overall, advancements are enabling faster adoption of cloud gaming models. The rollout of 5G technology will further catalyze the power of cloud computing.
An excerpt from a Microsoft blog post captures the essence of cloud gaming: “The future of gaming is a world where you are empowered to play the games you want, with the people you want, whenever you want, wherever you are, and on any device of your choosing.” More and more companies are working towards making that goal a reality.
Disclaimer: The report has been carefully prepared, and any exclusions or errors in it are totally unintentional. The author has no position in any stocks mentioned. Investors should consider the above information not as a de facto recommendation, but as an idea for further consideration.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Prableen Bajpai
Prableen Bajpai is the founder of FinFix Research and Analytics which is an all women financial research and wealth management firm. She holds a bachelor (honours) and master’s degree in economics with a major in econometrics and macroeconomics. Prableen is a Chartered Financial Analyst (CFA, ICFAI) and a CFP®.
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