Goodbye Video Games Consoles and Welcome Cloud Gaming

Cloud-based video gaming is going to be the next big thing

Giuseppe Leonello, Msc
May 13 · 3 min read

The gaming industry is currently valued at $159 billion worldwide with over 2.5 billion gamers. Traditionally, gamers have had to purchase hardware (e.g. a console) and software (either a physical disc or a downloaded digital copy) to play.

Recently, the acceleration of cloud technology has allowed the development of a cloud-based gaming platform which would enable gamers to play their favorite video games across their mobiles, laptops, and TV screens instantaneously, without the need to download games.

Instead of running on the console, the games run on data centres. The service allows consumers to Livestream games the same way they stream videos on YouTube or Netflix. The figure below shows how cloud gaming works.

Cloud gaming represents a great opportunity for Venture Capital investors and Tech Entrepreneurs. The main reasons are discussed below.

Technology: 5G

The cloud gaming experience is affected by the quality of the user’s internet connection. Games (especially multiplayer games) require fast connection with ultra-low latency. Further, cloud gaming is interactive and requires lower latency compared to video streaming. The current widely available technology (4G) struggles to provide a high-quality experience. However, the recent introduction of 5G connectivity (which is faster and has lower latency) will substantially improve the quality of the cloud services allowing them to express their potential.

Social factors: The Impact of COVID-19

Since March 2020, the Covid-19 pandemic has forced people to stay at home encouraging the use of digital activities including live streaming and gaming. The Figure below illustrates the percentage of US people that tried a new gaming activity during the pandemic extracted from a Deloitte Report.

The percentage of US people that tried a new gaming activity during the pandemic.

Economic factors: Gaming Industry Trends

The video gaming market has been growing at pace in the last few years and is expected to continue growing. The Figure below shows the global revenues in the last 5 years and a forecast for 2023 extracted from Statista.

The global revenues in the last 5 years as well as a forecast for 2023.

The chart above shows that the entire video gaming market is expected to be worth over 200 billion U.S. dollars by 2023. The cloud gaming offering is a new proposition which currently accounts for a small proportion of the industry. However, the market is growing very fast, as shown in the Figure below. The cloud gaming market was worth around $45 million. In 2023, it is estimated that the industry value will be $450 million. The data has been collected from Statista.

The growth of the cloud gaming market between 2017 and 2023

Investors and Entrepreneurs should look into the Cloud Gaming space as this will undoubtedly represent an opportunity for impressive returns in the next few years.

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