Getting to the future of gaming with cloud

A blog post by Michael Vovk, managing director, Deloitte Consulting LLP. 

The global video-gaming industry is huge, at an estimated $149 billion, and it’s growing at 10 percent annually.¹ However, the industry is undergoing a seismic shift. Recently, cloud gaming—where both games and data are completely cloud based and games stream to and from devices—has been slowly gaining market share. This nascent world of cloud gaming presents many opportunities for both gaming companies and gamers, but it’s also fraught with complexity. Will the payoff be worth the challenge?

A new gaming universe—and new challenges too

Gamers are as diverse as the games they play. Broadly, there are casual mobile gamers, immersive gamers, and esports players. Each group has different needs and different sweet spots that gaming companies will need to hit to win them over to cloud gaming. Overcoming these challenges and delivering a smooth experience will be key to cloud gaming success.

Mobile gamers may be the easiest to satisfy with cloud gaming. They’re also a huge audience—accounting for 74 percent of mobile spending²—and, technically, they’re the easiest segment to provide services to, as mobile games typically require less bandwidth.³ However, they’re also notoriously fickle.⁴ It could be difficult to justify developing the cloud infrastructure and gaming experiences for customers that are so subject to churn.

On the other hand, immersive gamers—those who play multi-player games that feature narrative experiences with warfare, world-building, etc.—and esports players will be more challenging to provide for. Latency is the key issue, as all players must be in sync with each other for the experience to be satisfactory. Any latency over 75 milliseconds can cause synching issues and ruin the gaming experience.⁵ And because data transfer is bi-directional, these games require enormous bandwidth, as well as good connectivity, for gamers to have an optimal experience.

A further challenge lies in the market structure for immersive and esports games. PCs are customized to deliver a very rich Esport experience and the next generations of consoles are due to release in the next 12 months–both conditions that could make gamers hesitant to switch to cloud gaming.

Meeting the cloud gaming challenges

These challenges are daunting, but not insurmountable. For mobile gamers, where the issue is mainly churn, companies could offer subscription-based models that provide new games at regular intervals, or monetary or points-based incentives to try new games. Indeed, some top titles have become so popular that they’ve managed to endure for several years,⁶ so a sampling strategy may potentially pay off well.

Further, telecoms could offer new or renewing subscribers bundled subscriptions to game services. Many console companies are already adding mobile versions of top games, recognizing that mobile gaming as yet another element of their gaming universe.

The issues with immersive and Esports gaming may be more complex to solve. To address latency issues, cloud gaming companies could partner with cloud providers and telecoms to build an infrastructure that meets cloud-gaming requirements. And, the race to capture the market for cloud gamers could also create competition among telecoms that may change pricing models and induce them to offer incentives to attract—and keep—more gamers.

Telecoms could also use cloud gaming as a way to incent people to upgrade to 5G services, because 5G would be more likely to meet the connectivity and speed requirements of cloud gamers. Indeed, some industry pundits see China’s expansion of 5G as a critical enabler of its cloud-gaming industry,⁷ so broad adoption of 5G may fuel, and be fueled by, cloud gaming.

As for non-technical issues like console loyalty, cloud gaming companies could offer seamless, cross-platform playing experiences that enable cloud gamers to switch platforms, from console to cloud to mobile, without losing games—or with the ability to play modified version of them—to entice them to make additional investments in cloud-gaming subscriptions. However, as a recent Deloitte survey suggested, some gamers may have “subscription-fatigue”⁸ and companies will need to offer great value to overcome that fatigue.

Is the payoff worth the challenge?

The potential for profit in gaming is huge and the market continues to grow rapidly. Savvy cloud gaming companies will look for ways to team with cloud providers and telecoms to build the infrastructure it takes to move those gamers to cloud. However, they’ll have to overcome more than technical issues. They’ll have to convince gamers to give up their beloved consoles, or they’ll have to overcome subscription fatigue and offer them enough incentives to make the switch And those companies who can chart that course will be well positioned to cash in the payoff.

There’s much more to the story! If you’d like to know more about cloud gaming, and its challenges and potential, you can read the Deloitte Insights article, “Cloud gaming and the future of social interactive media.”

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