Mary Collins | Cloud Gaming Poised For Growth Spurt

Quarantine is one of the precautions intended to slow the spread of COVID-19. It may also provide a boost to video gameplay and be a boon to the nascent world of cloud gaming.

This prescription for isolation provides an ideal growth medium for a media business focused on immersive storytelling and social media interaction. Couple that with the recent suspension of most live sports and the resulting hole in television (and some radio) schedules and growth is almost inevitable.

Cloud Gaming Lowers Barriers To Entry

Cloud gaming, which has been around longer than one might imagine, is getting a lot of attention in the world of video games. Last year, two of the world’s largest digital companies — Microsoft and Google — each announced the pending launch of a cloud gaming service. If successful, such services can make video gaming more accessible and help companies get more value out of their title libraries.

Right now, most game play is device-specific. Some games are played on gaming consoles, while others are loaded onto personal computers. All require significant computing power to create player views and experiences.

Think of cloud gaming as a streaming service for videogames. As is the case for streaming video services, the game is hosted in the cloud, not at the local level. The difference between cloud gaming and video streaming is that the game requires the server to provide a different view for each player. Players are constantly inputting commands to which the game should respond.

Chris Arkenberg, research manager at Deloitte’s Center for Technology, Media and Telecommunications, wrote an article about cloud gaming for the March/April 2019 issue of MFM’s member magazine, The Financial Manager. He believes that cloud gaming will “lower the barriers of entry for would-be gamers.”

Hosting a game in the cloud could also provide a new and better gaming experience for users. Arkenberg says: “Games could become much larger and more immersive, running on the unlimited resources of the cloud, potentially hosting vastly more people.”

More Complicated To Host Than Video Streams

He does caution that hosting cloud gaming is more complicated than providing streaming video. While the video is the same for every viewer, video gaming is highly interactive. Each player command elicits a response from the game and each player expects to see a view of the game world appropriate to where that person is in the game. In addition, latency, the time between a player’s command and the game’s response, can ruin the experience.

Games require significant bandwidth, so Arkenberg suggests that customized content delivery networks (CDNs) might be the solution for cloud gaming. He also comments that providing such CDNs could be an attractive business proposition for telecommunications companies. Cloud gaming might also be another potential use case for the 5G mobile standard.

In my Sept. 6, 2019, TVNewsCheck column, “Dissecting the Possibilities for 5G,” I explored the potential opportunities inherent in the new standard. One of these opportunities is that 5G technology is expected to provide consumer devices with connectivity up to 20 times faster than that currently available with 4G. This means lower latency and faster data transfer. Part of this is the result of having servers that are physically closer to the customers.

Poised For Growth

A report by MarketsandMarkets, released in December of last year, predicts the cloud gaming market will be worth $3.11 million by 2024. The report bases this prediction on the entrance of big name players including Microsoft, Amazon Web Services and Google, which announced its Stadia service just one year ago.

Of course, these numbers are small, particularly when compared to results for the overall gaming industry. In his sidebar piece “Analyzing the Numbers,” Arkenberg notes there are 2.5 billion gamers supporting the $150 billion global video game industry.

Potential Challenges To Growth

The question is whether the gaming industry will find sufficient incentive to change how it does business. After all, the revenue potential for cloud gaming is not predicated on having expensive hardware and allows games to be streamed to any device. This will negatively affect the console market, currently an important part of some games companies’ revenues. Arkenberg comments: “As we’ve seen with video, changing the distribution model can be disruptive, but once the dust settles, content is usually still king.”

He expects a growing number of game companies to seize the cloud-based opportunity. In fact, “some have already announced plans to develop their own cloud gaming services.” For those companies that do not develop their own technology, he predicts a wave of mergers and acquisitions focused on accessing new content along with a surge of new studios to develop new content.

He goes on to say that, “this would likely amplify competition — and innovation — suggesting that the changes animating the video game industry may not subside anytime soon.”

Despite the advantages both to players and to the companies producing the content, there is a real risk that gamers may not see the value in cloud gaming or will not see how it could enhance their current experience.

That too could be a consequence of a negative experience now with a cloud gaming business still in its infancy. Certainly, a telecommunications infrastructure that cannot quickly respond to a consumer request for a piece of OTT content is not up to the demands from thousands of people seeking an immersive gaming experience while quarantined.

Considerations For Other Media Businesses

One clear take-away from Arkenberg’s piece is that “games companies may be starting to think like broadcasters.” He says cloud delivery is just one of the developments that point to this conclusion. In his sidebar “Beyond the Clouds,” he takes a deep dive into the emergence of esports franchises, the sale of downloadable content, and investments in exclusive experiences and events. He sees all of this as an additional challenge to broadcasters and MVPDs also investing in new delivery methods to reach younger generations less inclined to watch linear TV.

There is certainly a lot more to say on this topic. For that reason, MFM has a full track dedicated to the business of video games at its upcoming Media Finance Focus 2020, May 18-20 in Los Angeles, California. We have also planned tracks devoted to: accounting; AI and RPA; credit; digital; internal audit; newspaper; radio; tax; television; and video content companies.

As of today, the conference is still on schedule. However, we are sensitive to, and very aware of, the news about increasing travel restrictions and the spread of the coronavirus. With that, and you in mind, we will continue to monitor the virus outbreak and communicate with you directly if our plans change.

Mary M. Collins is president and CEO of the Media Financial Management Association and its BCCA subsidiary, the media industry’s credit association. She can be reached at [email protected] and via the association’s LinkedIn, Twitter or Facebook sites.