What if cloud gaming doesn’t catch on?
Gaming industry professionals, observers, and fans used to rhapsodize about the promise of cloud gaming as an inevitable game-changer for the video game business. For more than a decade, the idea of streaming the latest AAA games at their highest quality to whatever hardware you happen to own has been teased as technology that’s going to be huge.
We’ve been here before with the rise and fall of OnLive from 2010 to 2015. But now, with Microsoft’s xCloud launching last month, Google Stadia approaching its first anniversary, and other players such as Amazon’s newly announced Luna service, PlayStation Now, and Nvidia’s GeForce Now providing these kinds of offerings, it seems like that cloud gaming promise is finally being delivered, right?
Cloud gaming’s history of false starts and promising reboots
Not exactly. None of these services have become essential for gamers by offering exclusive titles, and none have had huge successes in terms of subscribers. It might be years before they are a significant business for any major game publishers or hardware makers. There are still lots of obstacles to overcome before cloud gaming can really catch on, industry analysts and leaders say. For one thing, building out the platforms is just the beginning. If gamers don’t show up, and if they remain unwilling to pay a monthly fee to use cloud gaming, these services are unlikely to last or grow.
U.K.-based Juniper Research has been tracking data on digital services since the dot-com crash of 2001. In early September, the firm refreshed its projections from two years ago for the cloud gaming market amid a flurry of changes in the space. Lead analyst James Moar told Polygon there was plenty of activity from which to draw data, like Microsoft adding xCloud to its Xbox Game Pass program, as well as price hikes in AAA games, which could make subscription-based cloud gaming services more compelling.
“If that price goes up [to $70-$80 per game], then cloud gaming almost becomes a no-brainer for people who can’t regularly afford to spend that much money to get access to the games that are tentpole franchises, like Call of Duty,” Moar said in an interview.
In Juniper’s report, cloud gaming is not expected to make up more than 25% of subscription gaming services’ revenue by 2023, and it’s only predicted to catch on in regions with strong internet infrastructure. A lot of the success of cloud gaming will have to do with overcoming technical hurdles and pricing the subscriptions in a way that makes them attractive enough to players.
At least for the foreseeable future, “gamers are still going to be buying games as well as what they can access through a cloud service,” Moar said. If access to games isn’t included in a cloud gaming subscription, Moar went on, “then it’s going to need to be a lower price point,” say something in the $10.99 range, comparable to a Netflix subscription.
Cloud gaming gets compared to Netflix a lot, but it’s a comparison that actually doesn’t favor cloud gaming. You may be able to justify spending $8-$15 a month for a Netflix subscription by cataloging the sheer number of movies or television seasons you can consume in that amount of time. With video games, you’re unlikely to cover that kind of ground.
“Unless you play video games a lot, you’re not going to be able to do the same mental calculation and say, ‘I got through three games.’ The economics are a bit different,” Moar said.
Cloud gaming providers could counter that mentality by adding exclusive games, or by combining with other services, as Microsoft will do in November when it integrates Electronic Arts’ EA Play into Xbox Game Pass.
What Juniper is seeing, Moar said, is a lot of hype and interest in cloud gaming that could still be hamstrung by connectivity woes, competition from free-to-play games, and weird business models such as Google Stadia (more on that in a bit).
Cloud gaming “will grow absolutely, but it won’t be that huge relative to the rest of the gaming industry,” Moar said.
Photo by Jaap Arriens/NurPhoto via Getty Images
How good is the Wi-Fi here?
Cloud gaming’s biggest challenge? Good internet service.
Video game streaming services haven’t been slowed down in the U.S. because of connectivity, but because the most advanced games require not only high speeds but connection consistency and low latency to be played well via the cloud. In other words, only areas with top-notch internet access are likely to latch onto the technology.
The industry has pinned its hope on the rollout of 5G networks, but that has been slow going, and devices that take advantage of 5G still aren’t likely to be in most consumers’ hands for a few more years. And woe to gamers who have bandwidth caps; cloud gaming services can be bandwidth hogs. At launch, Google Stadia was using up about 4.5 GB to 20 GB of data per hour for streaming, depending on whether a user was gaming at 1080p or 4K. Those additional data demands have some environmentalists concerned about the energy impact cloud gaming could have.
For cloud gaming on mobile devices in particular, those considerations are going to limit the market. “You’re going to be limited to countries and areas where there is good and fast phone coverage,” Moar said.
Who is cloud gaming for?
Juniper Research cites competition from free-to-play games such as Fortnite and Apex Legends as another roadblock for cloud gaming, as well as the ongoing philosophical debate about whether it’s preferable to own games or, in effect, rent them digitally.
The biggest hurdle of all, however, may be that cloud gaming is a compelling technology in search of an audience that may not exist in large numbers.
Sony and Microsoft are urging gamers to invest in a new generation of gaming hardware this fall, and the PC gaming industry is rallying around the next iteration of graphics cards from Nvidia and AMD. The message to gamers seems to be: Buy new hardware. By contrast, the pitch of cloud gaming is that it’ll work on lower-performance devices if you can’t afford those upgrades.
Yet cloud gaming may not even be on the radar of the gamers who won’t be buying the latest hardware, such as more casual players who don’t want to spend money on $499.99 consoles and $69.99 games. “The people who have mid- or low-range devices won’t necessarily be the ones that will be able to take out the subscriptions or know about cloud gaming,” Moar said.
They also may not be able to pay for another streaming service in their life, or the hardware and games required to use services like Google Stadia — a service that, given Google’s track record, may not even be around in two years.
“Stadia’s business model is very, very strange, as far as I’m concerned,” Moar said. “You have to buy the hardware and then you have to buy the games, which kind of belies the entire point. Stadia isn’t going to get too far because you’ve got too much initial buy-in in order to play games in the first place.
“It isn’t necessarily the best way to sell cloud gaming,” he said.
Take-Two Interactive CEO Strauss Zelnick expressed similar skepticism, telling the website Protocol that he doesn’t believe cloud gaming will be “transformative.”
“If you can make in a frictionless way console video games available to everyone who has a PC or a tablet or a phone, then your market size automatically would be 20x just mathematically,” Zelnick said. “Of course that doesn’t make any sense at all. Because the implication is you are super interested in video games but you were just unwilling to buy a console.”
Photo: Peter Summers/Getty Images
A more practical path to success
If cloud gaming is a technology that won’t be mainstream anytime soon, why are so many game companies launching cloud gaming services, creating what’s starting to feel like the gaming version of the streaming wars? Cloud gaming could end up as a very niche, single-digit-percentage slice of game-industry revenue. Worse, it could fall by the wayside like former sure bets that didn’t generate enough interest to last: 3D televisions, Neil Young’s Pono digital audio player, and Google Glass.
The best path for cloud gaming may be somewhere in the middle: not an end-all, be-all for delivering games, but a supplemental technology that could slowly help transition us into a hardware-agnostic future. There is a chance that video game publishers will each start their own cloud gaming services. Some of the publishers that have pulled their games from platforms like GeForce Now certainly have the resources to do it. Amazon’s Luna seems like the place for publishers who don’t want to do a full-court press with cloud gaming to start small, and get their services seen and subscribed to on the back of someone else’s giant distribution network.
Apart from Xbox Game Pass, which seems to get more compelling every day, the majority of cloud gaming services haven’t yet hit the market with a killer reason to pay. That killer reason could be a set of exclusive games you can play only via the cloud and access exclusively via a subscription, similar to Apple Arcade, but with a better long-term strategy. Or, cloud gaming could soar with a game-changing service from a beloved company that has so far stayed out of the fray, like Nintendo, with next-gen titles that wouldn’t typically be able to run on its existing hardware except through streaming. Maybe cloud gaming would work best as a more modest add-on to gamers’ existing subscriptions, such as PlayStation Plus or Nintendo Switch Online, than an insular walled garden like Stadia. That’s not the grand vision of cloud gaming we were once promised, but it seems like a more realistic next step.
What very likely won’t happen, Moar said — at least not anytime soon — is a Netflix vs. Amazon Video vs. Disney Plus-style war for subscribers. Cloud gaming, for the time being, will remain niche, and publishers may decide it’s not worth launching their own services for such a small slice of the industry’s revenue pie.
Source: Read Full Article