Gaming: cloud upstarts need top content to dethrone consoles

Cloud gaming makes perfect sense. Instead of hardware, the processing power required can be run on remote cloud servers, meaning players can stream games. Assuming high-speed internet connections are available, gaming could attract a far bigger audience if untethered from pricey consoles.

Yet multiple attempts to launch streaming for video games have failed. OnLive debuted more than a decade ago, declaring that any internet connected device could become a gaming interface. Users moaned about fuzzy graphics and the consumer service was shuttered by buyer Sony. Google’s technical proficiency solved these problems when it launched cloud gaming service Stadia a few years later. Yet Stadia has since shut down.

Companies are still trying. Amazon Luna, Nvidia’s GeForce Now and Microsoft’s Xbox Cloud Gaming all compete for users. Netflix plans to join them. Newzoo says revenues for the cloud-based gaming sector rose 73 per cent last year to $2.4bn. But this accounts for only about 4 per cent of the console games market and is just 2 per cent as big as mobile gaming. Both the market and the business model are a work in progress.

Microsoft might have ignited the sector. It cannot compete with Sony on console sales. In the last quarter, Microsoft Xbox sales fell while Sony shipped three times as many PlayStation 5s as the previous year. It has a better chance in cloud gaming.

But the UK antitrust regulator rejected its bid to buy Activision Blizzard, worried that Microsoft could use popular Activision games such as Call of Duty to corner the market. US watchdogs are also fighting this deal.

Cloud services still lack compelling, exclusive titles. Netflix gained popularity because it was convenient and because it had popular shows to stream such as House of Cards.

Cloud gaming services need something similar. Users do not want to pay $15 per month or sit through in-game ads to play the same old thing. Cloud gaming might still take over the sector — but only when it supplies better content.