Over the last few years, there has been a renewed interest in offering cloud gaming services that replicate Netflix or Spotify’s value proposition by allowing consumers to stream games over the internet, across multiple platforms, and without having to download files or use local processing power.
Cloud gaming expands the audience for premium games beyond the current console and PC audience by making them accessible anywhere, at any time, and on any device. That huge addressable market is creating a lucrative and growing opportunity for companies gearing up to enter the space, providing a long runway for growth.
In fact, according to research from Parks Associates, the US cloud gaming market could generate nearly $3 billion in annual subscription revenue, as 30% of US broadband households currently express interest in this service. This study, titled “Cloud Gaming Demand and Preferences,” reports 74% of US broadband households play video games for at least one hour per week. Gamers play for an average of 22 hours per week, a number skewed towards heavy gamers, and PC gaming shows the biggest gains as a result of Covid-19 pandemic.
“We estimate, based on consumer interest in these services, the US cloud gaming market stands to generate nearly $3 billion in annual subscription revenue, with the opportunity to generate more revenue via service stacking and add-on sales, provided these offerings are designed and targeted correctly,” said Kristen Hanich, Senior Analyst at Parks Associates.
The research company considers that multiplatform gamers are the key consumer segment to target for initial rollouts. The data also notes the average number of hours played per week has increased since the Covid-19 outbreak. PC gaming in particular saw a large increase in the number of hours played weekly, while gaming consoles were the only platform to show a decline in usage among heads of household from Q3 2019 to Q1 2020.
“Cloud gaming services enable providers to leverage this increased gaming on connected devices, including smart TVs and streaming media players, where gaming is often secondary to their main value proposition,” Hanich said. “The continued improvement of internet networks and the cloud, as well as the rollout of 5G with its promises of improved latency, enables companies to offer high-performance cloud gaming solutions across multiple platforms without taxing their limited processing power,” she added.
Amazon, the first one to invest in the cloud
Amazon was the first company to really invest in the cloud computing industry, and has played a crucial role in its shaping. As a result, Amazon Web Services (AWS) is the industry leader by a large margin.
Now, Amazon is preparing a cloud gaming platform. Apparently, this platform, which has been showing rumors for a long time, has the internal name of "Project Tempo". With it, Amazon will have to compete with two other telecommunications giants, Microsoft and Google, which have already been in the sector for some time: Microsoft with its "xCloud Project" and Google with "Stadia".
To succeed, cloud gaming services like "Project Tempo", "xCloud" or "Stadia" depend heavily on technology and connectivity. Advancements in connectivity standards and hardware functionality, new benefits to the end user over traditional gaming experiences, and the ability to meet gamers' evolving tastes are playing — and will continue to play — a significant role in helping cloud gaming reach its full potential.