IHS Markit’s latest research on cloud gaming shows a growing market generating $387 million in consumer spending in 2018, which is forecast to expand to $2.5 billion over the next five years
The cloud gaming market is an aggregated total of cloud gaming content services and cloud gaming PC rental services where users bring their own games
Disruption incoming: Cloud as a platform is the next major competitive dynamic of the games sector
Recent service announcements and market acquisitions from Microsoft, Amazon, Google and Tencent highlight that the next competitive dynamic of the games sector is centred on the cloud. Companies with access to cloud infrastructure and the operating cost benefit this offers, with a scaled and efficient service delivery capability, are well positioned to succeed in this next wave of disruption in the games industry. Most recently this has driven Sony to partner with Microsoft to access its Azure cloud platform.
There is a wave of disruption heading for the high-end gaming sector, but it will be felt first at the industry level. Existing platform companies expanding their strategies, games publishers seeking to compete more directly with incumbent platforms, and new market entrants, are all a threat to the existing status quo. However, we believe there will be a significant lag between industry disruption and market transition. This lag is reflected in the market outlook - IHS Markit forecasts a $2.5 billion world cloud gaming market by 2023; less than 2% of the forecast total games market at this time.
Which cloud gaming services won in 2018?
Out of the 16 active cloud gaming and cloud gaming PC services operating at the end of 2018, Sony’s PlayStation Now service was the market leader with 36% share of the $387 million market opportunity. While Sony is the leading operator in the market, it has taken a very measured approach to rolling out the service and has only become more aggressive on user acquisition in the last 12 months. The service remains centred on catalogue content. Both factors mean it remains a relatively small opportunity for the company, although it has built deep expertise in cloud gaming as a result.
Perhaps surprising to some, the collection of games streamed to Nintendo’s Switch console in partnership with Taiwanese company Ubitus made it the second biggest ‘service’ in cloud gaming in 2018. The relative success of the strategy suggests this experiment will continue and may expand to overseas territories in due course. Closing out the top three services was Yahoo! Japan’s cloud gaming service which is also operated in partnership with Ubitus.
Which markets offer the biggest opportunity?
Japan was the leading cloud gaming market in 2018 with $178 million in consumer spending. The roll-out of services in Japan has been aided by the availability of high-speed fixed and mobile broadband services in the market. Cloud gaming on Nintendo Switch has also bolstered the market significantly during the last 18 months.
USA was the second biggest cloud gaming market driven largely by Sony’s PS Now but also a collection of start-ups targeting the cloud gaming PC service market. France, renowned for incubating cloud gaming start-ups and for its highly competitive market of cloud gaming services offered by major domestic IPTV players, was third in market size in 2018.