The Big Opportunity for Gaming Developers? The Cloud!

January 18, 2017 • By Atlantic Re:Think • Blog Post


  • Video games are moving into a world where most storage and processing is done in the cloud, rather than in your console

With cloud-based storage and processing, who needs consoles? Actually, that depends on your Internet connection

In April of 2015, Research and Markets, the world’s largest online research vendor, quietly added a new report to its catalogue—“Global Cloud Gaming Market, Trends & Forecast: 2015-2020.” Under that anodyne title, the company announced a major disruption in the gaming industry, one that foresees a broader, more diverse audience, an expanded role for smartphones and other connected devices and increasing reliance on fast wireless networks.

Like other digital enterprises shifting to the cloud, video games are moving into a world where most storage and processing is independent of local hardware—in this case, the gaming console. All manner of connected devices will be able to stream cloud-based video games, in the same way movies and TV are streamed now by services such as Hulu and Netflix.

The report from Research and Markets predicts that the cloud-based video-game business will see a compound annual growth rate of 33.7 percent over the next five years.

Measured by the clock-speed of digital innovation, video games have been relatively laggard. Even if physical discs have been largely replaced by digital downloads, wait times for those downloads to complete can be lengthy, never mind the countless updates that follow. Audio and graphic requirements often translate to high data-storage and processing needs and many games remain specific to certain devices and platforms—Xbox or PlayStation, iOS or Android and so on. Since cloud-based games can be stored, executed and rendered online, they are freed not only from the limited capacity of local hard- and software but also from such compatibility tangles.

Game streaming actually began in 2000 with the founding of G-cluster, the Finnish company that invented cloud gaming as a service. The company demonstrated the technology for the first time a year later, at the Electronic Entertainment Expo in Los Angeles.

“You can say that the teething time for us was very long,” writes Erik Piehl, co-founder and president of G-cluster. “But over the years we became convinced that the technology really works well, the business opportunity is there, the end users love the convenience of cloud gaming, and there is the potential to really change the way video games are offered to end users.”

G-cluster developed not only the technology for cloud gaming but also a new distribution model that included partnerships with major telecoms, allowing those companies’ subscribers to access G-cluster games. By collaborating with game-makers such as Disney, Ubisoft and Warner Brothers, G-cluster has built up a sizeable library of games playable on virtually any connected device.

Thanks to the cloud, that library can also be closely guarded—no small matter for an industry that lost more than $74 billion to piracy in 2014. “Cloud gaming can offer a piracy-free distribution platform,” Piehl writes. “Since all content is stored on servers, it can be tightly managed and controlled… but eventually the most exciting feature is the fact that the platform is future-proof and scales smoothly on the server side.”

What gaming companies can learn from Netflix

But if cloud gaming solves the problems of security, storage, processing and cross-platform functionality, it’s fair to ask why it hasn’t taken over the industry, the way Netflix and Hulu are edging cable television towards antiquity.

The answer resides with the user’s Internet service provider (ISP). Cloud-based games played on less than robust WiFi connections can have more lag and latency gaps and lesser quality generally. They can also lose data if the connection is disrupted. In other words, while cloud gaming sounds perfect on paper, without the right ISP it could still end up being a headache in practice.

At an industry conference in 2013, Gabe Newell, co-founder of the game-tech firm Valve, gave cloud gaming faint praise, “I think there’s a place for cloud gaming, but more as a feature or for things like demos and spectating—but not as core architecture.” Two years later, Jen-Hsun Huang, CEO of the computing and graphics company Nvidia, tentatively agreed, “It’s going to be a while.”

And Nvidia is ahead of the game. A Bloomberg writer who tested its cloud-gaming system concluded that it had “overcome some of the biggest hurdles to creating a cloud gaming experience,” but added, “It doesn’t work well over the Wi-Fi equipment most people own.”

G-cluster can rely on its telecom partners to provide strong, reliable connections to the Internet and progress is being made on other fronts. Besides Nvidia’s hardware add-ons to facilitate smooth streaming, Microsoft is researching technology that can anticipate a player’s actions, providing a leg-up in processing time that could reduce lags and latency gaps. Sony, which has recently acquired leading cloud-gaming services OnLive and Gaikai, rolled out a streaming service called PlayStation Now in early 2015—but confined it, at least for now, to PS4.

The developer opportunity

Piehl urges independent cloud-gaming developers to exploit their liberation from such proprietary platforms. “Cloud gaming is a new market,” he writes. “As a technical platform it has some distinct features which can be exploited to create new kinds of gaming experiences. Thus it offers new ground for creative minds, for example, on how multiplayer games can be handled.”

Cloud-based games will also have a better chance to get noticed outside the crowded marketplace for conventional games, he adds, “As a new market and an emerging market, cloud gaming can provide the needed visibility for great products… this is an opportunity for fast-moving independent developers.”

In other words, the cloud could make gaming a bit more democratic and engaging for everyone involved, whether they’re supply- or demand-side. As John Rose of the Boston Consulting Group framed the advent of cloud gaming to Bloomberg, “Guys who originate content will win, consumers will win, and guys who provide the navigation in the middle will win.”

Additional information on HPE’s resources for developers are available here.


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