The pandemic has catapulted the gaming industry to new heights, and new players are joining the race to advance cloud gaming and streaming technology.
The global gaming industry was expected to boom during the COVID-19 pandemic, given the masses of house-bound consumers in need of indoor entertainment. Roughly 10 months in, it has exceeded all expectations. According to Tom Wijman of games industry analytics firm Newzoo, revenues have shot up by an estimated $17 billion this year and are projected to reach an annual total of $175 billion, an increase of 20% over last year.
Two of the leading players are Sony, maker of the PlayStation console, and Microsoft, which makes the competing Xbox. Sony’s third-quarter results showed that video gaming, the Japanese electronics giant’s largest division, was its top performer. Gaming revenues went up 11.5% year-on-year. American rival Microsoft also reaped the benefits of consumers being quarantined, as its gaming revenues shot up 30% in the third quarter. Similar gains are being seen across the industry.
Sony bested Microsoft in the hardware segment, selling over 100 million of its PlayStation 4 consoles, along with more than 1 billion games. PlayStation has the advantage of a particularly avid brand following, which Sony reinforces with a strategy of marketing exclusive, big-budget games to existing gamers. Because Sony relies on gaming and is having trouble elsewhere in its empire, the success of PlayStation 5, released November 12, will be crucial.
Microsoft also released a new console, the Xbox Series X on November 10, but it is generally more focused on mobile games. It is also keener to expand the market, and sees mobile gaming as a way to entice millions of potential new users. Phil Spencer, Executive Vice President of Gaming at Microsoft, estimates that only around 200 million households worldwide are willing and able to splurge on a gaming console. In contrast, more than 3 billion people already own smartphones, and games are the most popular type of app.
Microsoft is currently promoting a subscription game streaming service, Xbox Game Pass, which at the highest tier includes access to its Cloud Gaming platform, often referred to as xCloud. This eliminates the need for a gaming console, as it allows users to stream games on Android mobile devices. As The Economist points out, “In poorer countries, where smartphones are common and data plans are cheap, it could bring console gaming within the reach of millions of new players.”
Cloud gaming is not new, but with advancements in cloud computing, high-speed broadband and 5G mobile networks, competition in the space is heating up. Sony and Nvidia have their own versions, and more recently, heavyweights like Amazon, Facebook and Google have entered the arena. All are looking to do for gaming what streaming has done for music and video. The gaming industry will not be instantly transformed, however. Piers Harding-Rolls, Games Research Director at Ampere Analysis, describes the market as “embryonic”.
The potential is enough for many to chase the dream. “If you can make streaming work, you could grow the gaming market tenfold,” says Michael Pachter, an analyst at Wedbush Securities. Who might lead the next entertainment revolution? Many analysts place their bets on Microsoft. Its Azure cloud business is second only to Amazon’s AWS, and unlike Amazon, it has decades of experience in games. What Amazon does have is about 150 million Prime members, who already stream video and music. Google has its own vehicle in YouTube, and Facebook has a gargantuan platform. This game is far from over.
