By Sumantra Banerjee
The pandemic has forced people to stay indoors, and one of the few industries benefiting from this is the online gaming sector. The 9th generation of gaming consoles began last November with the release of the PlayStation 5 and the Xbox Series X/S. Aside from superior computing and graphics processing power, the new generation is also characterized by compatibility with cloud gaming services, a trend that has attracted non-traditional players to the gaming space.
Cloud gaming allows players to stream games remotely from a cloud on any internet-connected device – i.e. they do not have to spend heavily on physical consoles or games. Existing cloud gaming services such as Sony’s PS Now, Microsoft’s Xbox Game Pass, and EA’s EA Play offer an extensive library of titles from both current and past generations. Due to its appeal to gamers of all ages, the cloud gaming market will likely grow rapidly. Market analytics firm Newzoo projects that the cloud gaming market, valued at around $500 million at the end of 2020, will grow to $4.8 billion in revenue by 2023.
Moreover, the rollout of 5G cellular network technology will augment cloud gaming’s marketability. 5G enables enhanced network performance and speeds, reducing latency (or lag time) – a development that will attract competitive gamers looking for the fastest online game speeds. Another analytics company, Omdia, predicts that with telecommunications providers collaborating with gaming companies to provide cloud-gaming suitable data packages, the market will grow to $12 billion by 2025, a 460% increase from 2020.
Along with long-established gaming giants, this trend has also seen big tech’s arrival into gaming; aside from the industry’s projected growth, gaming provides another avenue for tech companies to gather consumer data and generate revenue from advertising. Google entered the space first with its service Stadia, which it announced in November 2019. Although the service currently features around 100 games, including popular franchises such as “Hitman” and “NBA 2K,” due to poor marketing and a lack of exclusive content, Stadia underperformed after its launch. This February, Google announced that it shut down its in-house game development division, instead using Stadia as a platform to stream games from third-party developers.
Additionally, Amazon announced its own cloud gaming service, Luna, in September 2020. The e-commerce giant claims that 100 games will be available on Luna, which will also feature integration with video streaming service Twitch, its subsidiary company. Furthermore, Amazon also announced a partnership with Ubisoft, one of the largest game developers, thus giving them a large supply of content, including franchises like “Assassins’ Creed” and “Far Cry.” With such a lucrative partnership early on, Amazon may circumvent the “content problem” plaguing Google and better rival traditional gaming platforms.
Moreover, Facebook also started introducing cloud games to its app last October. The social network, which already boasts 300 million players who play free-to-play games on its app, is utilizing cloud gaming for a slightly different purpose than Google or Amazon. Rather than offering popular franchise titles, Facebook presents cloud games as an extension of current offerings to keep users on the Facebook ecosystem.
NYU Stern’s Professor Joost van Dreunen, who teaches Business of Video Games, claims that Microsoft, with its current and upcoming offerings with Xbox Game Pass, is best positioned to emerge as an overall victor in this market. Additionally, he also asserts that “Microsoft has spent $7.5 billion on [acquiring gaming holding company] Zenimax, and I don’t see Sony, Amazon, or Google matching that. Nobody is going as hard into it as Microsoft.” On cloud gaming’s overall weaknesses, he mentions that “We don’t have a unique catalog in any of the services, maybe Microsoft with Zenimax, but there is no personality in any of them. A service should come with its own intellectual property, like Nintendo consoles with their Mario and Zelda games.”
Ultimately, for big tech to succeed with cloud gaming, exclusive and extensive content is necessary in order for players to choose its services rather than those of existing gaming companies. With Amazon’s Ubisoft partnership secured and Google shutting down its in-house game development, the e-commerce giant may prove more successful with its service. Professor van Dreunen agrees with this contention, adding that Amazon’s long-term outlook on the trend may prove the difference, claiming “Google may abandon a project soon, but Amazon doesn’t care as much about running a huge loss at first. They are targeting mainstream players, and they are doing it quite well. I think in the short-term, Google will maintain its position, even as weak as it is, but Amazon is likely to take over.” Overall, cloud gaming, with its appeal to gamers who seek a high-speed, refined experience, will surely grow, whether that growth is due to big tech’s entry or only the expanded offerings of current gaming stalwarts.