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IHS: Cloud services revitalised by gaming market

March 14, 2019

Microsoft, Tencent and other cloud service providers have many of the attributes that make a successful entrance into the cloud gaming market, according to a report from global business information provider IHS Markit. That seems to be a prudent decision, since consumer spending on cloud gaming content subscriptions reached $234 million in 2018 and is forecast to grow to $1.5 billion by 2023.

“Competitive differentiation in the next wave of cloud gaming services will be focused on two key areas: cloud infrastructure and content,” said Piers Harding-Rolls, games research and analysis director, IHS Markit. “Microsoft is well positioned in both these critical areas. It has ready access to its own Azure cloud data centers situated around the world, plus it has a strong portfolio of content to draw upon, for its upcoming cloud gaming service.”

According to IHS Markit, there are many types of companies circling the cloud-gaming opportunity. The report identifies cloud service providers as potential tier-one competitors in this market, due to their infrastructure advantages. In addition to Microsoft, Google and Tencent are preparing to launch their own services.

Like telecommunications companies, technology companies and media companies, cloud service providers want to extend their influence in the games content and service market, which was worth $128 billion in 2018. “Cloud service providers already offer cloud-based tools to game developers,” Harding-Rolls said. “Being active in cloud gaming allows cloud service providers to synergise their infrastructure investments with their consumer facing content and services. As the momentum builds behind a revitalized cloud gaming market, cloud service providers recognize the disruptive potential of the technology and their cloud infrastructure competitive advantage.”

Compared to the other major cloud service providers, Tencent’s cloud services have less geographical coverage, but the company has a strong portfolio of games content and it dominates the games market in China. “As with Microsoft, this combination of cloud infrastructure and content means it is well positioned to take advantage of the cloud gaming market as it builds momentum,” Harding-Rolls said.

In contrast, although Google’s cloud business is more extensive than Tencent’s, owning the Google Play storefront and YouTube, it does not have a comparable games content portfolio, so the company will have to purchase exclusive content — and even acquire games developers or publishers – if it is fully committed to extending its role in the games-sector value chain.

Due to their cloud infrastructure and service delivery capability, cloud service providers have a significant commercial advantage over many companies already operating in the cloud gaming market or seeking to enter it. “If they build a compelling portfolio of games content, cloud service providers could potentially start to disrupt the established order of the console and high-end PC games markets over the next three to five years,” Harding-Rolls said.

Categories: Articles, Games, Markets, Research