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Video games industry looks to the cloud

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Viewing habits have changed significantly over the past decade. The consumer shelved his CDs, DVDs, and scheduled programs for subscription entertainment services like Netflix and Spotify, streamed online from a vast warehouse of servers.

After a slow start, the video game industry is catching up with other entertainment sectors.

The global cloud gaming market is expected to grow from about $1 billion in 2020 to $12 billion in 2026, according to technology research firm Omdia.

Media consultants and analysts attribute this growth to increased consumer demand and increased investment from major console makers (Microsoft, Sony, Nintendo) who want to expand the reach of their games. says. They also point to the rapid increase in internet-connected devices and the impetus provided by the rollout of high-speed fifth-generation 5G mobile his networks.

Initial predictions that cloud gaming could become a “console killer” were misplaced. In fact, cloud gaming is helping console makers diversify revenue and reach new customers. “Ironically, it’s the console makers that are driving the cloud. [gaming]said George Jijiashvili, principal analyst and gaming expert at Omdia.

Cloud gaming broadens the appeal of video games by expanding the number of devices on which games can be played, not just consoles, but smartphones, tablets, PCs and smart TVs. Only a good internet connection is required.

“This is similar to the Netflix business model,” says Jeff Youssef, partner and media expert at consultancy Oliver Wyman. A further advantage, he adds, could be better data collection about customers.

Services range from free with the option to pay for additional features to $10+ per month for new premium games and larger game libraries. Customers can also download games to their consoles.

Microsoft’s Xbox is the clear market leader in cloud gaming, boosted by the popularity of the console and its massive cloud computing business, Azure, said Jijiashvili.

According to Omdia, at the end of 2021, Microsoft and Sony accounted for almost three-quarters of total cloud gaming market revenue.

In April, Microsoft chairman and CEO Satya Nadella said more than 10 million people streamed Xbox games.

The Next Tech Growth Market in Cloud Gaming

Countries to watch 2022-2026

Korea With government support, it excels in both esports and the metaverse. Many developers are now turning their attention to a play-and-earn format that allows gamers to accumulate cryptocurrency.

we It is the largest console market and the source of most innovation in gaming since the gaming industry began.

China Contending with the United States for the overall largest gaming market, China is the clear leader in mobile gaming revenue.

Japan Japan, the home of console gaming, has begun to embrace mobile gaming, with annual mobile gaming revenue expected to grow 40% ($6.5 billion) in 2026 over 2022.

S.source: FT-Omdia Digital Economy Index

Meanwhile, Sony, which manufactures PlayStation consoles and is the first major console maker to offer cloud gaming services, says cloud gaming “will continue to be an important part of our overall business strategy.” Its customers can stream hundreds of games through its “PlayStation Plus Premium” service for $17.99 per month.

As the market grows, console makers face increasing competition from dozens of subscription-based cloud gaming startups, as well as game developers and tech giants. Both Amazon and Google offer cloud gaming services, but Google near early next year, netflixVP of Gaming said the company is looking to build a cloud gaming platform.

According to Omdia, the US is the largest market for cloud gaming, followed by China and the UK. In terms of revenue, the US market for cloud-enabled game subscription services is nearly five times larger than China’s, Gigiashvili said.

Column chart of total paid subscribers for cloud-enabled gaming services (in millions) shows Asia overtaking North America in cloud gaming subscriptions

Chinese game companies are stepping up efforts to expand overseas. Acquisition of Western game companies Partnerships with hardware manufacturers. The expansion was due to a slowdown caused by the domestic market. regulatory restrictions in the industry.

In August, Tencent Games, part of tech company Tencent, until recently most valuable companyand Switzerland-based computer peripheral manufacturer Logitech, have partnered to mobile terminal Supports “multiple cloud gaming services”.

Cloud or Console?

The perfect video game is a matter of endless debate. However, some types of games, such as adventure and role-playing, are better suited to be played in the cloud, said Omdia’s George Jijiashvili.

This is less reliant on the quick “jerking” reactions required by the “shooter” format, where a few millisecond delays between pressing a controller button and landing a shot or punch can ruin a game. It’s for Such “lag” is one of the most common complaints about cloud gaming.

For now, console games have better graphics than cloud games, experts say. But that could change as developers start creating cloud-only games instead of importing console games.

Phil Eisler, vice president and general manager of GeForce Now, Nvidia’s cloud gaming service, said such “native” cloud gaming would take advantage of the cloud’s superior processing power to allow hundreds or even thousands of It states that people may be able to play the same game at the same time. This is also the hardware used to process graphics for video games.

We’re not there yet, but cloud-native games will be a better “inflection point” than console games, says Blacknut’s Olivier Avaro.

Initially, China’s cloud gaming services were primarily focused on the domestic market, but were sometimes bundled into county 5G networks as services. Neil Barbour, Research His Analyst and Gaming Expert at S&P Global Market Intelligence, a financial information and technology provider, said:

A key question for all cloud gaming companies is whether to increase advertising and increase revenue.

Steven Bradley, managing director of Deloitte Consulting and gaming market expert, says it’s become the norm on mobile phones because ads often block gameplay features. .

But for paid “premium” games, he says, there is “more resistance” to advertising among customers.

Even if game players were ready to accept more advertising in exchange for free or low-cost games, experts question whether advertising will be as important to streaming games as it is to TV and music. I am thinking. Olivier Avaro, founder and CEO of French cloud gaming service Blacknut, said:

The sector is expected to grow steadily over the next decade, fueled by 5G, smart TVs and “casual gamers” who want flexibility in how and where they play. However, cloud gaming is unlikely to replace consoles anytime soon.

“It’s still really early [cloud gaming]’ says Omdia’s Gigiashvili. “It will become more and more important [and] Coexist with the console. ”

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