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Cloud video games have a rocky history, but could have a bright future – Yahoo Finance

Video games

Cloud gaming is a bit of a divisive topic in the video game community. Some love the instant access to titles and ability to play virtually anywhere. Others complain that the performance doesn’t measure up to games that are downloaded onto a console or PC hard drive. But even critics of the technology acknowledge that it’s likely to become a major delivery vehicle for the industry in the years to come.

It has been a rocky road thus far. Earlier this year, Google threw in the towel on its Stadia game streaming division, announcing plans to shut it down completely on Jan. 18, 2023. The company is taking the extraordinary step of refunding subscribers for all the hardware they purchased through the Google Store as well as games and add-on content bought via Stadia.

“While Stadia’s approach to streaming games for consumers was built on a strong technology foundation, it hasn’t gained the traction with users that we expected, so we’ve made the difficult decision to begin winding down our Stadia streaming service,” Stadia vice president and general manager Phil Harrison said in a blog post.

While Google was unable to make a dent in the market, Microsoft has had notable success. In May, the company announced its Xbox Cloud Gaming program had attracted over 10 million players spread over 26 countries since opening its beta up a year prior. And the numbers are growing.

“You’re going to see a multipronged approach from everyone,” says P.J. McNealy, CEO of Digital World Research. “You need to have a console solution and you need to have a cloud solution, because as gaming continues to expand, you’re going to need multiple options for each market.”

Gaming’s third age

If the days of lining up for new video game releases outside a GameStop were gaming’s first age and the dawn of digital downloads the second, cloud gaming could easily be considered the third age of gaming.

Taking a cue from other entertainment mediums like music and TV—which have found great success with streaming models—console makers and, initially, video game publishers began to explore ways to deliver a wide selection of titles instantaneously and on-demand to players.

The concept is pretty simple: Games live on a cloud server and players access them from pretty much any device with a screen. Within seconds of selecting a title, they’re in the game—and they can stop playing on one device and pick up the game on another in exactly the same place they hit pause. The services are built to work with an internet connection speed of just 10 megabits per second (Mbps) or greater, but faster is, of course, preferred.

It’s because of services like this that Epic Games was able to get Fortnite back on iPhone and Android devices. While there’s arguably still bad blood between Epic and Apple (and Google), the publisher has put the game on the Xbox store, which makes it accessible to mobile players once again—without having to navigate the app store.

Early days

While cloud gaming is having a moment these days, initial efforts with the technology did not go well. OnLive, one of the first cloud companies, made its debut in 2010, turning heads with its promise to make virtually any screen a gaming device. In the days when core PC gamers were spending thousands of dollars for a gaming system, that was shocking.

But two years later, critics were complaining the service had a notable lag, which made it difficult to play action games, often ruining the fun. Then the company laid off virtually all of its employees after failing to find additional funding. In 2015, Sony purchased the company’s patents and promptly shut down all its consumer-facing operations. It absorbed OnLive’s tech into its PS Now service, which, as of last May, had 3.2 million subscribers.

Sony also purchased, in 2012, the assets of a similar cloud streaming company called Gaikai.

Several game publishers flirted with the technology themselves. Electronic Arts launched a technical trial of cloud gaming in 2019, saying, “Cloud gaming…has the potential to open even more doors around social interactions in games.” The company has not actively pursued its own service in subsequent years, though.

And Ubisoft, in 2019, announced its own game streaming service called Uplay+, with access to over 100 of its own catalog games.

What’s next?

Microsoft is certainly leaning heavily into the subscription gaming model. Its Game Pass service gives players access to an enormous catalog of hundreds of titles, many of which are available via Xbox Cloud Gaming.

The bet is that by offering this catalog of streaming games, which include the newest Xbox favorites without the need for a $500 console, Microsoft will be able to attract an audience that hasn’t explored gaming before—or gave it up as prices increased. In the streaming age, monthly charges of $15 for hundreds of titles are a lot more palatable than $70 or more for a single game.

It’s hardly a sure thing, of course. In a recent response to the U.K. Competition and Markets Authority (CMA), as part of its proposed acquisition of Activision Blizzard, Microsoft itself acknowledged, “This is a new and immature technology which the CMA has recognized faces significant challenges, particularly on mobile devices…Cloud gaming currently accounts for a de minimis proportion of consumer spend on gaming…While this may grow, particularly on mobile devices, adoption is not expected to be rapid as it requires a significant change in consumer behavior.”

The company is working on a separate hardware device, which will be dedicated to game streaming, but it’s questionable how necessary that will be as subscribers are currently able to launch Xbox cloud games through apps on Samsung TVs (with more brands anticipated in the months to come).

Sony is expected to expand PS Now as well, though experts say it will need to find a partner with sufficient cloud servers, like Amazon or even Google, to compete on the same level as Microsoft.

“Microsoft is playing the long game,” McNealy says. “As global gaming moves from mobile to streaming, you want to have both solutions, so they’re going to be there when new markets open up. This is very much a long-term play for Microsoft and not just about the next console or hardware cycle.”

This story was originally featured on Fortune.com

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