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How gaming companies can utilize the full potential of cloud

Portrait photo of Thomas Pyschny
Thomas Pyschny

EY Global Product Lifecycle Management/Innovation Excellence Leader Partner, Client Service Partner | EY Switzerland

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15 Aug 2023
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Technology
Media and entertainment
Digital

Developers and telcos can together leverage cloud paradigm to revolutionize the gaming experience and explore new growth avenues.

In brief

  • Developers have an unprecedent opportunity to leverage cloud gaming value proposition and explore new revenue opportunities.
  • Telcos must collaborate with developers to utilize the ever-growing consumer base of gamers and devise strategies to encash their 5G investments.
  • Developers must leverage data analytics to identify the target audience and the content to be included in their catalogue.

Cloud gaming has been around for a while now and with the emergence of 5G and other technological advancements it is on the course for a rapid growth. In 2022, the global cloud gaming market witnessed an estimated 31.7 million paying users, spending a combined US$2.4 billion on cloud gaming services and games streamed via the cloud. In the past, the adoption of cloud gaming among the hardcore and devoted gamers did not pick up mainly because of latency and high-speed connectivity issues. However, the landscape has significantly transformed, driven by the increased usage of cloud infrastructure as well as ongoing efforts from cloud gaming vendors to provide players hardware-free and on-the-go gaming experience.

Cloud gaming, also referred as on-demand gaming or gaming as a service (GaaS), enables gamers to access high-quality games on any device with a stable internet connection for a subscription fee. Games are no longer needed to be downloaded digitally or purchased physically to access them on the player’s console, computer or smartphone. Cloud gaming provides a wide array of services and offerings, including alternative pricing structures, diverse gaming repositories, different performance categories and varied device accessibility, catering to all categories of gamers. Moreover, it equalizes the playing field for game play by eliminating the performance advantages long enjoyed by those with the fastest hardware.

In our recent articles, in-game advertising and hybrid monetization, we touched upon the various monetization strategies that can be leveraged by game developers. In this article, we will explore how cloud gaming is paving the way to make the gaming experience device- and environment-agnostic. We will also look at how gaming companies as well as CSPs can together explore new growth opportunities along with enabling the transformation of the hardware-tied product-based business model to “as-a-service”.

Cloud gaming landscape is evolving quickly and is on course to become an integral part of the gaming market

  • Cloud gaming vendors are proactively collaborating with telcos and putting forward attractive offerings to lure in more gamers to this space. The rapid deployment of 5G infrastructure and hi-speed connectivity prospects across the developed markets are acting as a catalyst for this uptake. For instance, in January 2023 Blacknut, a European cloud gaming service provider, collaborated with Saudi Telecom Company (STC Group) to promote its offerings across MENA region.
  • Content is the key to attract and retain gamers as they tend to follow the titles irrespective of the delivery medium. Cloud gaming vendors are making efforts to add-in more AAA titles with larger fanbase in their offerings to attract skeptical hardcore gamers (whales), who are also the major revenue-contributing customer group in the gaming space. Moreover, to make the prospect more attractive for core gamers and drive their transition to the cloud, new waves of AAA cloud-native games (games specifically built for cloud gaming that cannot be processed locally due to high technological requirements) are also expected to be launched. Recently, Kojima Productions and Xbox announced a partnership for their upcoming cloud-native game.
  • With the increasing traction around the cloud gaming, more non-gaming players are entering in this space and the existing vendors are fine-tuning their offerings to target and attract more gamers to cloud. For instance, Netflix, after taking a bigger leap in the mobile gaming space last year, now plans to seriously explore the cloud gaming offerings, with 55 new games in development to reach subscribers on TVs and PCs.

Cloud gaming service providers

Cloud gaming services
Cloud gaming services

In the next section, we will look at how developers/publishers/studios and telcos/CSPs can leverage cloud gaming to unlock new growth opportunities.

Cloud gaming services

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CSPs and telcos can monetize their 5G investments by offering multiple differentiated services to enable cloud gaming

Telcos/CSPs with 5G offerings play a critical role, acting as enablers to drive the transition to cloud gaming. Recent trends demonstrate that gamers may shift away from console and PC upgrades, as “82% of gamers would skip purchasing new gaming hardware in favor of the cloud if connectivity guarantees performance.” Moreover, cloud gaming has the potential to unlock access to more subscribers for CSPs, as cloud gaming’s serviceable obtainable market (SOM) was said to be around 38 million people in Europe alone by the end of 2022. While enabling the cloud gaming transition, telcos have this unrivalled opportunity to monetize the 5G services. Telcos can either offer their own cloud gaming platform with white-label offerings, act as a service aggregator and bundle cloud gaming services with the different 5G plans, or act as an edge service provider to move access closer to the user and improve performance.

 

AI and Metaverse to further disrupt the cloud gaming space

 

AI technology combined with cloud computing is not only offering advanced gaming graphics and enhanced processing power, but it is also capable of providing hyper-personalized gaming experience to players. Adaptive AI, based on gamers’ playing patterns and skill sets, can match players to play together and gradually evolve their skill levels. Companies are leveraging AI to find new ways to reach more gamers at more touch points. Recently, Nvidia GeForce Now announced to bring their cloud gaming service to connected cars. With gamers preferences shifting more towards the interactive gaming, cloud gaming technology is expected to find an important role in enabling metaverse experience, as discussed in a recent EY article. The upcoming decentralized cloud gaming platforms are enabling user to move to Web3 metaverse at a low cost and access truly immersive virtual worlds with any device, anytime and anywhere.

 

Key pointers to consider for gaming companies/studios

 

Gaming companies must be mindful while deciding how aggressively they should make investments in cloud gaming services. Cloud gaming does bring an exciting prospect for gaming companies, but they must thoroughly scan every aspect of this space before considering entering it.

Summary

Right from selecting attractive gaming content, developing a distribution strategy and offering an attractive value prospect, gaming companies have much to consider as they begin or advance their cloud gaming journey. With the right strategic plan in place, companies can unlock new opportunities and drive value from this evolving medium. Moreover, adoption of emerging tech (AI and data analytics) can provide them an edge over the existing modes and help them design their content strategies and integrate advanced features.

Acknowledgments

We would like to thank Christian Plesca, EY Senior Consultant, and Shrikant Gosavi, EY Global TMT Analyst, for their valuable contributions to this article.

About this article

Portrait photo of Thomas Pyschny
Thomas Pyschny
EY Global Product Lifecycle Management/Innovation Excellence Leader Partner, Client Service Partner | EY Switzerland
Thomas is a former professional esports athlete supporting organizations to step up their innovation game.

Contributors

Related topics
Technology
Media and entertainment
Digital

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