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Halo 2 it was the video game that became a game changer. Released in 2004, it connected gamers around the world with the click of a button, allowing users of Microsoft’s Xbox console to voice chat, play different game modes, or even challenge complete strangers.
Today, game developers are tantalizingly close to another watershed moment: the advent of “cloud gaming.” Thanks to improvements in telecommunications and data storage, significant computing power is no longer required on a local device; instead, games can be streamed from a data center directly to a smartphone.
For the 2.7 billion active gamers around the world, cloud services like these promise unrestricted access to thousands of digitally stored games – titles that previously could only be played on a high-spec gaming console or computer. And this is just the beginning. In an arms race to bring new games to market, companies are experimenting with cloud-enabled designs and features.
It’s an escalation that has been driven by growing demand during the Covid shutdowns. “As a result of the pandemic, we made three to four years of video game adoption in the US,” says Brian Nowak, managing director of Morgan Stanley Research covering the US Internet industry in 2020, Hit by the pandemic, the number of Americans playing games increased by 50 million, compared to a growth of 11 million in a typical year.
However, the need to pay a few hundred dollars for a console had previously been “a sticking point” in moves to encourage more people to play video games, Nowak explains.
Now, the tech giants are looking at the surge in homebound gamers and the growing market for cloud gaming, and they see an opportunity to profit. According to data group Grand View Research, the cloud-based gaming market is expected to expand at a compound annual growth rate of 48.2% between 2021-27, to reach $ 7.24 billion.
Microsoft and Sony’s near duopoly in the game console business has already faced stiff competition in the cloud, where its streaming products, Xbox Game Pass and PlayStation Now, must compete with new entrants like Amazon’s Luna and Stadia from Google.
Even chipmaker Nvidia, whose graphics processing units provide the basic architecture for much of the industry’s products, decided to shore up its position in the PC gaming market by launching its own online streaming platform, GeForce NOW. in 2020. Nvidia has more than two dozen data centers offering a library of 2,000 games to its users.
However, it is not just the usual suspects who seek to relocate to this space. Facebook will benefit from the cloud as it will be able to render more complex games than is currently possible through its web application, suggests Jason Rubin, vice president of gaming for the social media platform.
He adds that Facebook’s 300 million gamers are less likely to think of the social media site as a place to download and install apps, while streaming would be appropriate for the way users interact with the platform on different devices.
At video game publisher Ubisoft, “cross-progression will be a feature of our games going forward,” says Chris Early, its vice president of partnerships and revenue. “You could start streaming from your work computer on Stadia and then upload it to your PC later when you’re home.”
This has led Ubisoft to partner with Amazon to offer its content through a dedicated channel on Luna, a strategy aimed at reaching consumers wherever they are.
If successful, these cloud platforms could spark an industry change, Nowak says, as game publishers will demand a better unit economy from companies, primarily Microsoft and Sony, than the 30 percent cut they charge for run games on their consoles. Amazon says Luna will add more gaming channels “in the coming months.”
Meanwhile, console makers are looking to strengthen their offerings.
Microsoft’s strategy is threefold: content, community and cloud, according to Kareem Choudhry, corporate vice president of cloud gaming.
With the recent acquisition of publisher ZeniMax for $ 7.5 billion, Microsoft has beefed up its arsenal of in-house creative studio teams from 15-23. “Having a core of your own content is critical to our success,” says Tim Stuart , official Xbox chief financial officer, “not unlike how Netflix might think of [TV series] Orange is the new black or Strange things”,
In fact, premium content has been the driving force in converting 18 million of Xbox Live’s 100 million active monthly users into Game Pass subscribers. Your increased engagement is an invaluable resource in its own right, as user data has already inspired gameplay enhancements such as touch controls for mobile devices.
This fuels the community-building element: what Rubin calls “a superpower.” Beyond the usual group of gamers, there are another 400 million people who watch or discuss games on Facebook. Gaming companies view these communities as largely untapped markets waiting to be explored.
But even with all this technology, “it’s still very difficult to make good games,” Nowak says. It signals last month’s departure from Assassin’s creed co-creator Jade Raymond of her role as head of Stadia’s creative studios after Google shut down its internal game development unit. “The only way these cloud gaming platforms are going to take off is if you have differentiated content that you can’t get anywhere else,” he says.
That’s why streaming services must offer truly cloud-native games, where additional computing power is harnessed to create “smarter and more durable interactions with AI that will remember you,” argues Ubisoft’s Early. There is enormous potential for “choose your own adventure” narratives, where the game reacts to your choices in real time.
However, it will take a blockbuster on par with Halo 2 to showcase the cloud as a tool for game design innovation, rather than just another delivery mechanism.
