Subscriptions to cloud gaming services currently account for a small proportion of digital payments. Still, their growing adoption amongst a new generation of online players should ensure more gamers fund purchases using their smartphones in the future.
Research company Newzoo noted a global spike in cloud gaming platform sign-ups during 2020 as people spent more time playing computer games during long periods of social and economic lockdowns. The surge in interest has led the company to estimate cloud gaming revenue will grow from US$669m in 2020 to US$1.57bn in 2021. By the end of this year, it expects there will be 23.7m paying users of cloud gaming services, up from 13.5m in 2020, with average revenue per paying user (ARPPU) hitting US$66.3.
In its third annual Global Cloud Gaming Report: Infrastructure Edition, Newzoo defines cloud gaming revenue as all consumer spending on cloud gaming services and games played via the cloud, including digital full-game purchases, in-game spending and monthly fees to use cloud services and subscription services.
Cloud gaming means the ability to play a game on any device without owning the physical hardware required to process it or needing a local copy of the game itself (also called gaming on demand). Instead, games are processed remotely on cloud or edge servers and streamed directly to a user’s device, which could be a cheaper, comparatively low spec desktop PC, laptop, smartphone, tablet, console or any other device.
Dedicated gaming hardware is expensive and difficult to source
Indeed, the cost of dedicated gaming hardware in the form of souped-up PCs and graphics cards or dedicated gaming consoles such as Microsoft’s Xbox and Sony’s PlayStation may be one reason why cloud gaming is gaining in popularity. Irrespective of the actual purchase price, many gamers had trouble sourcing that hardware during the coronavirus pandemic as economic restrictions disrupted supply chains and GPU/CPU manufacturing timetables.
Those issues are unlikely to be ironed out before 2023 when the launch of cloud-native titles from Microsoft and others should help propel the growth of cloud gaming further. Google announced it would no longer build games specifically for the cloud in February 2021 when it shut down its internal Stadia games development division[i]. Still, Microsoft looks firmly committed to doing so.
Telcos keen on cloud gaming
Games built explicitly for cloud streaming rather than adapted from existing PC and console titles will take a while to develop. Still, other factors could provide the platform’s impetus to bring in new players in the meantime. The increased marketing efforts are also driving a rise in consumer awareness of cloud gaming and service launches worldwide, most often due to business to business (B2B) partnerships between cloud gaming service providers and local telecommunications carriers.
Newzoo noted a particular enthusiasm for cloud gaming amongst mobile network operators (MNOs) keen to show off the capabilities of their newly launched fifth-generation (5G) networks and use those services as an enticement for subscribers to upgrade their mobile subscription plans.
In China, for example, Huawei has partnered with NetEase and Tencent to develop a cloud gaming service optimised for 5G connected smartphones and VR/AR devices. China Mobile has forged a similar alliance with cloud gaming specialist Ubitus K.K as has Chunghwa Telecom with Gamestream in Taiwan, Anstream with Starhub in Singapore. And Microsoft with SK Telecom in South Korea.
APAC generating lion share of interest and revenue
The APAC region is forecast to deliver 41.6% of the 23.7m paying users by the end of 2021, significantly higher than Europe (26.8%) and North America (22.9%). Players in Western markets will contribute a higher percentage of the overall revenue (30.2% in North America and 28.8% in Europe). However, APAC participants will still account for the single largest share (36.1%), calculates Newzoo.
China is growing fast to claim a large share of the cloud gaming market after the recent expansion of available services, notably the launch of Tencent’s Start cloud gaming service in December 2019[ii]. The continuing success of Haima Cloud, a full-stack cloud service provider for cloud gaming in the country that counts more than 30m unique devices per month accessing its services, is also having an impact.
Newzoo also attributes players in the APAC region with higher levels of cloud gaming awareness than those in western markets. At the same time, people in emerging economies are more likely to see the high price of dedicated gaming PC components and consoles as a barrier to their adoption.
[i] Google is shutting down its in-house Stadia game development studios, The Verge, 1st February 2021
[ii] Tencent launches its Start cloud gaming service, gamesindustry.biz, 20th December 2019