What is cloud gaming? A deep dive into the heart of the $138bn video games industry

Adara Ventures is proud to partner PlayGiga, the leading B2B cloud gaming solution, that has developed a proprietary technology that allows telcos, publishers, media companies, and retailers to offer a cloud gaming solution to their customers.

We sat down with Javier Polo (CEO) to discuss the megatrends driving cloud gaming adoption and the attractive market opportunity it presents for independent tech players like PlayGiga.

What is cloud gaming and how is it affecting the overall videogame industry?

First, it is important to put videogaming into context, because it is often underestimated. The videogames industry has a double digit growth and generated $138 billion in revenues in 2018 (according to Newzoo 2018 Global Games Market Report). Videogaming is larger than both film and music and is growing in every region of the world.

Within this huge market, the way we purchase and play videogames varies dramatically from region to region, but has traditionally involved purchasing consoles, or games, upfront, which can be prohibitively expensive for the consumer. Cloud Gaming saves the user time and money by eliminating the need to download, install or upgrade games or to spend significant sums on consoles or hardware. With cloud gaming, the consumer doesn’t need physical (or even virtual) space to store games, as the whole gaming experience is cloud-based.

It is not just us at PlayGiga that think this. Electronic Arts (one of the worlds largest publishers, and creator of Fifa 19, Battlefield V, Madden NFL 19) believes cloud gaming is “the greatest disruption” to the world of entertainment in the last 5 years. That is why they acquired Gamefly’s cloud gaming technology in May 2018.

And it is not just Electronic Arts, now all the major publishers are facing the dichotomy of either developing their own solution or licensing it from a tech provider to compete in this new paradigm of the video games industry.

Why is cloud gaming different to downloading a game from an online store, like Steam for example?

The majority of gamers cannot play the best games on their PCs. Steam, the main video games online store, estimates that 53% of existing PC gamers that have purchased games through Steam, are unable to play the latest AAA games, as their PCs do not meet the minimum hardware requirements. This affects most of the bestselling games such as Assassin’s Creed® Odyssey or Fallout 76® the most. Cloud gaming eliminates this barrier, as the game is streamed online, meaning that all of gamers who were previously unable to play these games can be brought back to these titles.

Therefore, streaming games from the cloud is significantly increasing the total addressable market of videogaming.

But how does cloud gaming impact the gamers experience?

We believe we improve the gamers experience dramatically, for three reasons:

1. Access to previously unavailable games, without any specific expensive hardware, via a Netflix-of-games catalogue to the mass market
2. Platform agnostic gameplay, meaning that the same game can be played, saved and continued via multiple devices
3. Access to previously unavailable in-game content, allowing gamers to get access to the latest version of the game, regardless of their device, given faster cloud based processing power.

So is 2019 the year that cloud gaming becomes a reality?

It already is a reality! PlayGiga already has a fully deployed cloud gaming service in four different countries with blue chip partners such as Telecom Italia (TIM) and Turner Broadcasting and has been live for a few years! However, it is clear that recent market developments provide a platform for acceleration in 2019:

• 1. Microsoft announced in March-18 that they were getting their new cloud gaming division ready with the objective of reaching 2 billion gamers in the world.
• 2. Electronic Arts also began to move into the cloud gaming space by acquiring Gamefly subsidiary for cloud gaming in May 2018. Other publishers have reacted, pursuing partnerships with tech players like PlayGiga.
• 3. In June 2018, Ubisoft CEO, Yves Guillemot, went further and declared that “cloud gaming will replace consoles”. Google and Amazon have since announced their own plans to enter the market.

One interesting point is that the market is not only beginning to recognize the opportunity that cloud gaming presents, but also just how difficult and time-consuming it is to develop the service in house.

Will the advent of 5G be beneficial to cloud gaming?

5G combined with cloud gaming will be a gamechanger for videogaming due to four reasons:

1. Premium games will be as easily played out of home as at home. Gaming on mobiles has been limited so far to casual low-spec games. With 5G this will radically change, converting millions of mobile devices into hi-spec game-ready consoles.
2. Seamless user experience, from device to device. As noted above, cloud gaming allows the gamer to continue their game across devices. With 5G, the connection means that the gamer will be able to play anywhere, anytime.
3. Telcos will help to increase the gaming market. By offering simple, subscription based gaming access, Telcos will be able to open a previously untapped market opportunity.
4. 5G will make wireless Virtual Reality (VR) possible via cloud gaming. Wireless VR powered by cloud gaming removes the need for a PC, meaning that gamers will have even less reason to spend on updating their hardware.

We are already seeing major developments in the US and South Korea. By the end of 2018, Verizon began to offer 5G services in five cities in the US. South Korea is even more ambitious, targeting access for 30% of mobile subscribers by the end of 2020 (according to their government’s Ministry of Science and ICT).

For PlayGiga in particular 5G is really speeding up the transformation of the cloud gaming space. Since May 2018, we have been invited to collaborate with leading Telcos, such as ATT Foundry, or tech giants like INTEL, to research 5G performance using our technology to stream virtual reality games (as VR is an extreme stress case for 5G networks). We are also in discussions with leading US and South Korean Telcos to potentially launch our service in their markets leveraging their 5G network deployments.