How the cloud will help millions embrace the gaming industry
The pandemic has accelerated the evolution of the cloud gaming industry. As companies remained locked down and people flocked online, the sector became a billion-dollar market for the first-time last year, up from USD$633 mn in 2020, and is on course to reach USD$3 bn by 2023, rising to USD$7bn in 2027.
Arden Partners is a corporate adviser and stockbroker, focused on micro, small, and midcaps on the Main and AIM markets of the LSE (London Stock Exchange).
Manjot Heer has worked in TMT, BioTech and Industrials sectors for the last three years, starting off at NatWest Markets doing rotations in Treasury and since 2020, has been working at Arden Partners as an Equity Research Analyst, where he was part of two successful oversubscribed IPOs in TMT and BioTech whilst looking after corporate clients including 7Digital, Proton Motor Power Systems, Glantus, Mode, Trakm8, CyanConnode, Cordel. Alongside performing due diligence, advising, and helping structure transactions for corporate clients.
He is known for his thought leadership pieces on VR, cloud gaming, and video gaming which have been used in online publications such as UKTN, IT Brief AU, WOM Magazine and PYMNTS.
What is the big shift you’re witnessing in cloud gaming?
Cloud gaming is an innovative technology, allowing users to play games directly from the cloud instead of using or downloading a gaming device or specific hardware. Currently, most video games require physical media to be purchased or downloaded into devices like mobile phones, laptops, tablets, or gaming consoles, with the quality and performance of the game optimised for each specific device.
With cloud gaming, however, content is moved from the consumer’s device onto the open cloud platform. Players can then stream games across multiple formats, similar to the approach and success that we have seen with Netflix, Disney and other entertainment streaming platforms. Because games are hosted in the cloud, they don’t rely on a specific local platform to run. This creates tremendous potential for gaming producers and consumers.
What market changes will we see as a result of this shift to cloud?
Publishers can greatly upscale compatibility by creating new games with only one engine and platform required – potentially reaching millions more customers. And consumers can seamlessly play more games across multiple devices.
By removing the need for local processing hardware and requiring only an input controller and a streaming receiver such as a smart TV, cloud gaming removes a significant barrier to entry and is quickly democratising gaming.
Leaders within the video streaming industry – Netflix, Apple, and Microsoft - see many parallels they can adapt to the market. Independent developers, such as SharkMob, are already building games with cloud hosting infrastructure embedded in them. Both Triple A and independent studios agree that in three to five years’ time cloud gaming will be adopted by mainstream gamers and thus more companies will follow.
Will this lead to higher performance and graphical quality?
Consolidating computing activity in the cloud means that the newest hardware and computing power will be available for cloud gaming to consistently offer the best in-game graphics and intelligence, which standalone hardware won’t be able to match in the future.
Which innovative gaming technologies will thrive?
Leading the pack is the virtual reality industry. The market size of virtual reality hardware and software is expected to increase globally from USD$6.2 bn in 2019 to more than USD$16 bn by the end of this year. Investment into the UK is expected to increase by 31.7 per cent year on year for the next five years.
Not only is virtual reality becoming more affordable, but better in quality, as global technology companies such as Meta invest millions into new products such as its Oculus headset and the virtual reality glasses. Cloud gaming will play an essential role in the acceptance and adoption of the Metaverse, and its virtual space made of several interoperable platforms where people can have shared experiences. Using Extended reality (XR) – incorporating Augmented Reality Virtual Reality and Mixed Reality - will act as a bridge between the current gaming landscape (PC/Console/Mobile) and the Metaverse.
What role do Non-Fungible Tokens play in the cloud gaming industry?
Venly, the blockchain technology provider, recently released its MetaRing, a Non-Fungible Token (NFT), which aims to bring together all potential metaverses. The product represents a unique wearable and digital collectable within multiple virtual worlds, acting as an individual’s unique access pass to exclusive locations, events and games. This is the next step in digital ownership, as players will want to use their own avatars in any virtual gaming space.
Will consumers really embrace this switch to cloud gaming?
Cloud gaming can be a serious alternative to mobile and console gaming, causing a major change in the way consumers experience gaming and triggering a wave of implications for the gaming ecosystem, opening up the industry to a whole new market.
As technology becomes more advanced, it must be conveyed to different users in different ways. For non-gamers, it’s all about tempting them to dip their toes in. Promoting its frictionless benefits - having an app readily available on a consumer’s device, such as a smart TV - allows people to try the offering.
Casual gamers will need to be nudged into cloud gaming as they tend to play mostly on their smartphones. The convenience of the cloud might not be immediately apparent to them, but touting instant access, no need to download updates, no slowdown as the handset ages, and platform access are likely to entice them.
Finally, core gamers won’t need to be convinced about the benefits of cloud gaming, but they will need to see an upgrade on their current experience. Offering a service that focuses on quality, the power of the underlying hardware, latency, and the breadth of the game library through a new medium such as virtual reality will speak directly to them.
Gaming companies are still figuring out how to best market implement cloud gaming but what’s clear is that it has the capability to propel the industry towards a market used by millions as it enters a new era of entertainment.
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