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As the gaming industry evolves, the world’s technology giants are betting that cloud-based game streaming services are the next big thing.

Consoles have been the mainstay of gaming for decades, but now the $140 billion gaming industry is catching up with other media, namely video and music, in making the transition to internet-based services. With game streaming technology, games are streamed from servers over the internet, rather than being run from a device. Forecasts for the industry are optimistic, and firms are readying for an explosion in Gaming-as-a-Service or GaaS, hoping to be the “Netflix of gaming”.

“Game streaming services will be the ultimate driver of a rapid transition from the sale of games in boxes to digital consumption”, said Yosuke Matsuda, president of game company Square Enix. “Streaming also lends itself to new subscription-based business models, so we believe deciding how to engage with these forthcoming trends will be key to future growth.”

The goal is to shift the heavy computations involved in gaming to data centres, so that games can be streamed to an ordinary laptop, for example, eliminating the need for specialized hardware. Google completed beta testing on its game streaming platform, Project Stream, in January. Amazon is also developing a cloud-based gaming service, and Apple is said to be as well. Microsoft, maker of the Xbox console, plans to release its service, Project xCloud, later this year. Sony, which makes PlayStation consoles, already has a cloud gaming offering on the market called PlayStation Now.

The newer entrants will also compete with smaller incumbents like graphics chip maker Nvidia and startups such as Loudplay and Shadow. In Europe, Italian internet provider Telecom Italia and France’s Orange offer game streaming. Electronic Arts, the world’s biggest game developer, is working on a cloud-based game streaming platform capable of streaming the company’s games to almost any mobile device or computer. It plans to launch in 2020.

In terms of their habits, consumers are primed for the cloud gaming model: They already expect their entertainment to be available anytime, on any device. Plus, subscription-based services offer a cheaper alternative to buying a gaming console or the games themselves, let alone a high-powered PC. This model is cheaper for manufacturers as well, as it releases them from making expensive, loss-leading gaming consoles, then trying to recoup their losses through game sales.

But there are some barriers to mainstream adoption – mainly the technology. Unlike TV or music, video games are interactive. The computer running them has to be highly responsive and lightning fast. This is harder to do when the computing takes place in a distant data centre. As The Economist explains, “If the round trip from a player’s device to a data-centre and back again takes more than a couple of dozen milliseconds, things start to break down”, especially with fast-paced action games.

Faster broadband connections and new video-compression technologies have the potential to resolve such issues. Latency could be further minimised by putting hardware close to customers. Amazon and Google already have numerous data centres, and if they leverage their massive financial and talent resources, they could pose a big threat to gaming industry incumbents.

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