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Summary

With the buzz around cloud gaming reaching fever pitch, those who have followed this space over the past decade might be experiencing a strong sense of déjà vu. Although the list of companies involved today is different than it was eight years ago, the premise that cloud gaming is bringing new opportunities and disrupting the video game industry remains the same.

Second time's a charm?

Back in 2011, Ovum highlighted the initial emergence of cloud gaming in its Cloud Gaming Begins Mission to Scale report. It proposed that cloud gaming offered opportunities across the TMT industry: pay-TV providers could look to deliver high-end gaming on their set-top boxes, network providers could look to expand their bundled content offerings, and game publishers could see reduced development costs and reach much wider audiences thanks to the elimination of the requirement for consoles or powerful PCs. Eight years later, these still ring true.

The whole industry is now giving cloud gaming another wholehearted attempt. Unlike on the first try, most of the leading technology companies are now involved, including Google, Intel, Microsoft, and Nvidia. Their investments in this space have been instrumental in refining the cloud architecture and video-compression algorithms in order to deliver a significantly improved cloud gaming experience.

Existing cloud gaming service providers such as Hatch, PlayStation Now, Nvidia’s GeForce Now, and PlayGiga are about to be joined by heavyweight contenders EA Project Atlas, Google Stadia, and Microsoft Project xCloud. The anticipation of consumer uptake of cloud gaming services has set off a frenzy of partnerships between the cloud gaming companies and leading network operators, content providers, and technology companies (see Figure 1).

 

Figure 1: Cloud gaming service provider partnerships

Cloud gaming service provider partnerships 

Source: Ovum

 

Cloud gaming’s biggest challenge lies in delivering stable gaming experience to users with varying internet speeds and latency. These issues are what led to the downfall of the original cloud gaming services, such as OnLive. The other – equally important – uncertainty is the business model. Existing services use a subscription model, but it's unclear if top-tier game publishers would be open to the idea of completely moving away from lucrative single-copy sales. Overall, most of the pieces are coming together, and there are many reasons to be positive about this second attempt – for cloud gaming, it’s now or never.

Appendix

Further reading

Cloud Gaming Begins Mission to Scale, IT006-000230 (May 2011)

"Google puts cloud gaming center stage at GDC," CES003-000465 (March 2019)

Author

George Jijiashvili, Senior Analyst, AR/VR and Video Gaming

george.jijiashvili@ovum.com

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