Cloud Gaming

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Contents

Introduction

What is Cloud Gaming?

Cloud gaming is a type of online gaming where players stream games through remote servers to their devices [1]. “Cloud” refers to the server network that delivers content including games, video, and audio via the internet. Players pay for access to have games streamed to their devices without downloads or installations [2]. For many cloud gaming platforms, users do not need a gaming console or gaming PC as they are accessible on a wide range of devices such as mobile phones and smart TVs [1].

There are three ways to deploy cloud computing services: public, private and hybrid cloud [3]. Cloud gaming is deployed through public cloud, where third-party service providers possess cloud resources such as servers and storage, and deliver these resources through the internet to multiple users [3]. Users, or “cloud tenants”, are sharing the same storage, network devices and other supporting infrastructure [3].

The delivery of games through public cloud functions similarly to video streaming[4]. Netflix is an example of a public cloud service that delivers movies and television to subscribers. Such similarities in how the content is delivered has led to people dubbing cloud gaming the “Netflix of Gaming” [1]. This comparison is very common, and many cloud services have tried to imitate features of Netflix, such as their simple user interface, to attract customers[5].

How it Works

When playing games, players are constantly inputting commands through their devices. Inputs are sent to the game server over broadband internet, which sends video back to the player displaying their actions[1]. This whole process happens within milliseconds, and is a continuous cycle to operate a game [6]. Because of this, the speed of the network connection is essential for players, especially enthusiasts. Latency more than 75 milliseconds can cause player’s actions to be out of sync, seriously affecting their gaming experience [1]. For multiplayer games the problem is amplified, as thousands of players can play the game at once while using in-game messaging and audio chat functions [1], resulting even more data transmission and greater demand for broadband internet connectivity.

A graphic illustration of how cloud gaming works.[7]

History

Cloud gaming technology was first revealed to the world at E3 in the year 2000 [8]. The original demo, put on by Finnish company G-Cluster, consisted of PC games being streamed over local Wifi to mobile devices. The demo was impressive on a technical level, but suffered from significant lag issues and the technology would not become available to the public for another 10 years.

In 2010, the first widely available cloud gaming service, OnLive, launched. The service was heralded as revolutionary at first, with COO Mike Garvey describing their goal as a “30-year platform” that would eliminate console cycles entirely [9]. The company used a combination of pay-per-game and a flat rate streaming service, coupled with a “microconsole” to connect to users’ televisions or monitors [10]. The service’s complicated pricing structure failed to connect with many consumers and its delivery suffered from a great deal of latency issues, leading to a poor reputation and low revenue. In 2015, OnLive shut down and sold its patents to Sony. Sony used OnLive’s technology, along with that of its one-time competitor Gaikai, to launch Playstation Now [8].

Key Characteristics

As cloud gaming is still a developing market, there is no standard model. Service providers manage their platforms in a variety of ways [5]. Across all platforms, however, there are certain characteristics that consistently affect the quality and reception of the platform.

1. Usability is one of the key components of any cloud gaming service [5]. When a cloud gaming platform is easy to use, it encourages players to subscribe and reduces churn rate [1]. High usability consists of a good user experience from initial installation to game selection and gameplay. Installation time and support for various devices are critical. Once the service is running, the user interface plays a major role. Consumers are used to the clear and simple interfaces of video streaming platforms like Netflix, and value an interface that makes using the service enjoyable [5].

(Click and watch two sides separately) The comparison of 30 fps (left) and 60 fps (right). The left scene with 30 fps shows delays and fractures as the camera and animated character move.[11]

2. Performance is widely regarded as the most important aspect of cloud gaming, as it directly impacts the consumer's ability to play and enjoy games [5]. To compete with traditional gaming hardware, cloud gaming must offer comparable performance. Performance to the level gamers expect includes a high frame rate (at least 60 frames per second preferred for PC gaming [12]), high display resolution (1080p/Full HD is the most popular for gaming [13]) and as little latency and input lag as possible.

3. Price is another key factor that impacts how consumers choose a service [5]. Cloud gaming providers offer various billing plans to gamers. There are two main types of billing plans for access to services. Most providers allow deals based on duration, such as PlayStation Now which has monthly, quarterly and annual plans [14]. Other service providers have deals according to the number of players on each account. For instance, Blacknut provides individual plans (restricted to one screen) and family plans (up to four screens allowed) [15]. Gamers with family plans can install the game application in multiple screens, either playing the same game or different games simultaneously. While these plans cover access to the platform, many services like Google Stadia also charge per game on top of subscription plans [16]

4. Service coverage is an important measure as it determines whether consumers can even access the service, and can impact performance. Coverage is determined by the number of data centres the service provider has and number of locations that each data centre covers [5]. The more data centres the provider owns, the more locations covered. Providers must also balance their coverage with the number of data centres in an area, to ensure that the cloud resources are sufficient to support each location.

5. The number of supported games from the service provider influences the consumer's satisfaction with the service[5]. Offering a library with a broad selection of games from different genres means people will find more to enjoy on the platform. The quality and recency of games also matter as much as the quantity. Some services like Playstation Now offer a large library but lack the ability to play the latest games as they come out, limiting their usefulness to consumers [17].

6. Special game features offered can be crucial to making services stand out [5]. One example would be how GeForce Now supports a variety of controllers and gamepads, allowing users to continue using whatever they are used to. Features can also be targeted to a specific group of consumers. Blacknut targets consumers with children by offering a “kids’ mode” that users can enable to limit the selection of games and requires a four-digit PIN to access the adult content [15]. Stadia’s upcoming Crowd Play feature integrates with Youtube to allow creators and viewers to play together in the same match through live streaming [18].

Market Trends Worldwide

The forecast of the cloud gaming market growth rate by region from 2019 to 2024. [19]

Asia-Pacific

The Asia-Pacific region is estimated to have the highest growth rate for cloud gaming in the coming years [19]. Multiple pilot projects for cloud gaming are already making progress in Asia. For example, in 2019 NVIDIA partnered with SoftBank and LG to deploy cloud gaming servers in Japan and Korea with its chips [20], while Tencent launched a trial of its cloud gaming service “Start” in collaboration with NVIDIA the same year [21]. 5G infrastructure in the Asia-Pacific region is well-developed, and people in the region are projected to become the largest 5G network adopters by 2025 [22]. This high-level of 5G adoption in the area means networks are better equipped to support cloud gaming, giving providers a big opportunity for growth [19].

North America and Europe

A moderate growth rate is estimated for the regions of North America and Europe [19]. Major players including NVIDIA, Stadia and Blacknut are delivering their services in much of these areas and working on expanding. Government adoption of cloud technology, increased investment of cloud related technologies, and the rising adoption of 5G networks are projected to drive continued growth [23].

South America and Africa

Very low growth is projected in South America and Africa [19]. While gaming itself is projected to grow due to an increasing youth population [24][25], the regions have insufficient network coverage to support cloud gaming services.


Key Players

The cloud gaming market has developed significantly in recent years, with some of the biggest players in tech and gaming making attempts at a viable cloud gaming service. These services differ greatly in terms of their business models, libraries, pricing, and compatibility, with no single model dominating the market as of yet.

Playstation Now

Arguably the most established cloud gaming service is Sony's Playstation Now. Launched in 2014 and built from OnLive and Gaikai’s technology, the service allows customers to stream a back catalogue of Playstation games for $9.99 USD per month [26]. It is available on PS4 and Windows 10, and offers over 800 games to stream. While the service has a large library, it does not offer any new releases at launch, so those looking to play the latest games will still need to purchase them through traditional means [17]. In terms of latency, recent reviews note that it functions far better than its predecessors, but that there is still a long way to go. Sony recommends a minimum connection speed of 5Mbps, but higher connections are needed for stable gameplay, especially in more graphically intensive games [17].

Overall, Playstation Now is a stable platform with a strong value proposition, but very limited scope. It has a vast back catalogue, available through a simple subscription model that is easy for the everyday consumer to understand. However, the lack of mobile capabilities and new game releases means it is unlikely that Playstation Now or any service like it will replace game consoles. Sony has positioned it as a convenient add-on service to its Playstation consoles, not an industry disruptor.

Project xCloud

Sony’s biggest competitor in the console space, Microsoft, has a promising cloud service of their own called Project xCloud launching September 15th, 2020. The platform will be powered by Microsoft’s Azure data centres, providing widespread coverage and enabling cloud saves across devices [27]. While Microsoft has claimed the service will outperform competitors like Google Stadia, it remains to be seen how it will run once it leaves beta and becomes available to the public.

The service is similar to Playstation Now in that it is meant to supplement rather than replace traditional gaming hardware, with Microsoft stating the service exists to help open up console gaming to those unable to afford hardware [28]. While similar in concept, the two services diverge significantly in delivery and business model. xCloud will stream games to mobile platforms as well as consoles and PCs . For pricing, it will be bundled with the Xbox Gamepass subscription service for $14.99 USD per month and provide streaming access to that service's library [29], with plans to eventually allow streaming of any Xbox One games a player owns [27]. What this means is that the service will come with 100+ games that are currently on Gamepass, as well as all of Xbox’s exclusive titles as they launch [30].

The addition of new titles on day one is a significant departure from Playstation Now’s offerings, which consist of older titles [26]. What Xbox is offering is even closer to Netflix, as they will have a back catalogue of third-party content, but consistently release first-party titles on the service. Microsoft does not appear interested in forcing subscribers to purchase their new first-party games at full price. Instead, they are bundling all new exclusives, such as the upcoming Halo Infinite, in their service to drive subscription revenue. This tactic is unique among xCloud’s competition, and has the potential to shift game sales towards a subscription model, as well as drive competing cloud services to develop their own big-budget first party titles.

Google Stadia

In October 2018, Google revealed their cloud gaming platform (then known as Project Stream) with a demo showing the newly released Assassin’s Creed Odyssey running in a Chrome tab. The demo highlighted that unlike past services like OnLive, or current competitors like Playstation Now, Stadia could operate in a browser, which helped generate a great deal of hype for the service [31].

The service launched in November 2019, with the ability to play games on a Chromecast, Pixel phone or Chrome web browser on any desktop [2], and has since added compatibility for most Android devices [32]. The launch of Stadia was hindered by a complex pricing model and very limited lineup of games. It was $130 USD up front for the “Founder’s Edition” which included a controller, plus $9.99 USD per month for the service itself and access to a limited number of games, plus up to $60 USD for new premium games [31]. Today Stadia is open to the public with a freemium storefront model. Anyone can sign up for free, and from there can purchase games to stream on the Stadia store. For $9.99 USD per month, customers get access to a small library of games, 4K streaming, and discounts on game purchases [16].

Stadia is ambitious in its scope, and has improved its pricing and library over time, but still suffers from a lack of games. In interviews with Business Insider, many developers shared fears and frustrations that had kept them away from the platform. Key takeaways were that Stadia did not offer significant enough financial incentives, nor a wide enough audience, to make the effort worthwhile for many developers [33]. Stadia seems caught in a “chicken or the egg” scenario, where they need players to attract games, and games to attract players. Their failure to invest enough into developers and reassure them they won't abandon the platform like they have many projects in the past [33] is holding back an otherwise promising platform.

NVIDIA GeForce Now

NVIDIA, the largest makers of graphics cards for the PC gaming market, launched their cloud gaming service this past February [34]. Their platform focuses mainly on PCs, and their business model works very differently from their big competitors. Instead of selecting games from a library like Playstation Now, or buying them from a storefront like Stadia, GeForce Now lets gamers stream games they already own on Steam, Epic Games, or UPlay [34]. These games can be streamed on laptop or desktop computers running Mac or Windows, most Android devices, and NVIDIA's own Shield smart TV devices [35]. The service is free with a one-hour play time cap, or $4.99 USD per month for unlimited streaming. This business model targets gamers who own PCs and want to enjoy the latest games without having to upgrade to expensive hardware, as well as those who want to play their PC games on mobile.

GeForce Now has garnered a positive reception and large user base by giving users convenient streaming access to the games they own [34], but their approach is starting to face considerable opposition. Since launching its paid option, GeForce has had several major publishers such as Bethesda demand their games be taken off the service [36]. The publishers took issue with the fact that while the players had paid for the game through platforms like Steam, the license they obtained did not pertain to streaming the game through a third-party like GeForce Now. These complaints have become so common that NVIDIA now has publishers opt-in before streaming their games. Many have theorized that large publishers want to keep their games off open platforms like GeForce NOW so they can keep the option to launch their own cloud services in the future [36]. The lack of support from publishers brings into question the long-term viability of open platforms like GeForce Now, as their value proposition becomes more diminished with every publisher that rescinds access.


Shadow pricing graphic showing the different hardware tiers.[37]

Shadow

Launched in 2017 by French company Blade, Shadow is a small player in the cloud gaming market with a unique approach. Shadow is not a strictly gaming platform, what they offer is more akin to remote desktop [38]. Users pay a monthly fee for a virtual machine hosted on cloud servers. The service comes in multiple tiers, starting at $11.99 USD per month, which are priced based on computing power. Each tier offers the equivalent of a PC build including a graphics card, CPU, RAM and storage level, with higher tiers offering the equivalent of more powerful computers [39]. The service does not include any games, users instead install their usual services like Steam or Epic Games directly onto their virtual machine as they would with a standard gaming PC. The virtual machine functions as a full Windows 10 desktop computer, with all processing and storage residing in the cloud. Users can access the full computer interface from Windows or Mac laptops and desktops and can launch directly to their game libraries through apps on Android phones and smart TV devices [39].

Shadow's greatest strength is in its unique and flexible model. Giving users a full cloud computer that can be used for activities like school and work in addition to gaming helps balance out their comparatively high pricing. Their model has also allowed them to avoid the legal issues that have plagued GeForce Now. Both offer streaming of games players already own, but because Shadow has players use their usual game launchers in the virtual desktop instead of bringing the games into their own proprietary launcher, they have not faced the same licensing complaints [39]. This distinction is also what allows Shadow to operate on the iOS App Store while platforms like Stadia and xCloud are banned [40]. Apple has asserted that because games must be individually submitted for review to be on the App Store, services like Stadia that sell users access to a multitude of games are in violation of App Store policy. Because Shadow is a remote desktop where users can choose to install game software or not, it is exempt from this policy as long as it does not allow users to launch directly into games [40].

Shadow's flexible model paired with strong reviews for features and performance [5] [41] make it a contender to watch in the market. That being said, the company could run into similar problems to GeForce Now as it gains more attention. They have gotten by so far on what are essentially loopholes, which publishers have not had incentive to close since Shadow is a small player. As the company grows and competition in the cloud gaming space heats up, we will see if Shadow can maintain its tenuous position.

Blacknut

Blacknut is a small company that have positioned themselves as a gaming service for families [42]. They offer a single screen option for $12.99 USD per month or a four screen family option for $19.99 USD per month [15], mirroring Netflix’s pricing structure closely. Their family features also mimic the video streaming giant, with each user having their own profile. These profiles can be set to a kids’ mode that limits games to the ESRB’s E10+ rating and below. Full access accounts can be locked with a PIN code to keep children out [15]. In terms of content, Blacknut is fairly limited. They offer over 300 games with the subscription, but most are lower-budget or older titles. The service has native applications for PCs, Android devices, and Amazon's Firestick smart TV devices [43].

Blacknut’s unique positioning in the market could be to its benefit. They are the only cloud gaming platform to specifically target children and families. Children in particular are a large and lucrative part of the gaming market overall [44], and their heavy use of mobile devices for games [45] could make them an ideal target for mobile-compatible services. That being said, Blacknut’s lacking library, weak performance, and low profile significantly limit its potential.

Comparison with Traditional Gaming

Market Analysis

According to a study conducted by market intelligence company Newzoo, mobile games have dominated the gaming market since 2018 with over 50% market share, while console and PC
Study conducted by Newzoo reveals that mobile games have an over 50% market share while console holds 22% and PC 19%.[46]
gaming trailed behind at 22% and 19% respectively [46]. The study also shows that the gaming market overall is growing steadily. Cloud gaming was not yet on the radar, but its capability to be playable across multiple platforms has helped it gain more popularity in recent years. The cloud gaming market is forecasted to experience growth at a rate of 37% between 2020 to 2027 and reach almost $4 billion USD valuation, making it a potentially lucrative business to pursue [47]. Cloud gaming is often referred to as "Netflix for Games", referencing a growing trend towards streaming services that has already taken over the film and music industries [48]. Despite some companies having already invested in cloud gaming, whether the gaming industry at large will join the streaming revolution remains to be seen, as there are many factors that could facilitate or impede cloud gaming’s widespread adoption.

Traditional Gaming Pros & Cons

One of the key advantages of traditional forms of gaming is game ownership. After making the purchase of a physical game disc for a fixed price, the game belongs to the player and their rights to play the game cannot be taken away [48]. In contrast, subscribing to a cloud gaming service does not grant ownership to the games provided by the platform, and if games are pulled from the platform or the platform closes, access to games could be lost [49]. This was the case for GeForce Now, when multiple game publishers such as Activision Blizzard and Bethesda pulled their games from the cloud gaming platform citing dissatisfaction and licensing disputes [50]. Even though many people nowadays run games from digital distribution services such as Steam, the likelihood of Steam closing as a very well established platform is slim to none compared to the likelihood of a new cloud gaming service closing due to lack of users [51]. Another perk of traditional gaming is its ability to be played offline in single player modes, unlike cloud gaming which always requires a stable internet connection [52]. In particular, the offline functionality of many traditional forms of gaming means that games can be played through poor network connections or even power outages, and there are no data usage concerns for extended offline gaming [53]. For gamers with poor internet or low data caps, traditional gaming is thus very attractive. Traditional gaming is also considered to have more stable and generally superior performance compared to cloud gaming, as top of the line hardware can boast up to 4k resolution and 240 frames per second with far less latency, which is very relevant in competitive gaming settings [54]. This is vastly better than what the current generation of cloud gaming services can provide [48]. The cons of traditional gaming are its typically higher initial cost for high quality hardware [55], long download times for installation and updates[56], and lack of backwards compatibility where some older games may not be compatible with newer platforms[57]. Compared with cloud gaming, traditional forms of gaming also tend to be less mobile because they are tied to hardware.

Pros and Cons of traditional and cloud gaming, summarized.

Cloud Gaming Pros & Cons

Despite cloud gaming’s various shortcomings, it has a strong advantage on the aspect of convenience. Cloud gaming is accessible on a variety of platforms ranging from personal computers to mobile phones, making it an attractive option for gamers who like playing on multiple devices [48]. Gamers who have to travel a lot will also find the portability of cloud gaming services very convenient, as they can enjoy stunning visuals and smooth gameplay even on mobile phones over wifi [41]. Furthermore, cloud gaming eliminates the need for installation and updates on the player's side due to the games being stored on the cloud [48]. Rather than having to load the games on the player’s own system which could take hours through installation and updates, games are streamed directly to the player’s device from remote servers that keep its most updated version, allowing for dramatically reduced launch times [58]. Finally, perhaps the most important perk of cloud gaming is that game performance is unhindered by the player’s own system [59]. It used to be that if one did not own a high-end gaming PC, many games that require heavy processing would be unplayable; however, cloud gaming allows the user to bypass all these restrictions by performing the bulk of graphics processing, rendering, and other resource-intensive tasks from online servers [60]. As a result, cloud gaming is an excellent choice for people who cannot afford expensive gaming setups but still want to play graphically demanding games such as Assassin’s Creed, Destiny 2, and Tomb Raider [61]. On the other hand, the cons of cloud gaming are its relatively low selection of games compared with established platforms [48], reliance on stable internet connection to reduce latency [62], and intensive data usage which may place a limitation on gaming time for people with data caps [63]. Lack of game ownership is also a considerable risk of cloud gaming especially if subscribed to services like Stadia, as Google has a penchant for dropping unsuccessful tech ventures [64].

Google's Stadia Pro subscription costs $10 per month for 4k resolution and 5.1 surround sound. [65]

Pricing Structure Comparison

In terms of pricing structures, traditional and cloud gaming diverge in a few key ways. Aside from the cost of purchasing individual games that both models usually require, traditional forms of gaming such as consoles usually entail a higher lump sum payment for the hardware, followed by small monthly payments for memberships or multiplayer capability [66]. Cloud gaming services tend to use a lower one-time payment followed by a monthly subscription plan [26]. At first glance, cloud gaming seems to be the less expensive option, but consoles may end up being cheaper if the player uses it for a longer period of time [53]. For example, the initial cost of the Xbox One X console is $499, followed by a $5 per month fee assuming the user purchases Xbox Live Gold for multiplayer functionality [67]. xCloud by contrast will cost $59 for an Xbox One controller and $15 per month for a subscription [68]. Over a five-year period, the Xbox One X will cost $799 overall while the xCloud costs $959, making the Xbox console cheaper for long-term gaming. However, it is important to take into account that within five years, consoles such as the Xbox One X will likely be obsolete while xCloud will presumably be updated to keep up with the hardware needs of newer games [69]. Other cloud gaming services have strived to be more competitive by lowering monthly costs, an example being Google Stadia charging only $10 per month for a pro subscription that includes 4k resolution and 5.1 surround sound [65].

As cloud gaming is still a relatively novel technology, there is high potential for growth in terms of the number of games available and improved performance. Nevertheless, given all its challenges, major players like Google must continue to innovate in order to allow cloud gaming to compete with traditional gaming.

Industry Analysis

Roger's Five Factors

Roger’s Five Factors is a framework that seeks to explain why some technological innovations spread while others fail. The framework was developed by Everett Rogers based on research he conducted which found “49% to 87% of the variance in new product adoption stems from the differences in products” [70]. As such, the framework focuses on how an innovative new product differs from existing products in the market.

Rogers Five Factors explain's how Product differences impact the rate of Adoption [70]

The Relative Advantage of a product is the "degree to which an idea or product is perceived as better than the existing standard" [70]. Consumers compare new products with the existing standard and the relative advantage quantifies how large of an improvement the new product provides. The larger improvement over the existing standard, the greater the potential for consumers to adopt the product [70].

The Compatibility refers to how the new product aligns with the consumer's existing experience of the standard. The higher the similarity of a product, the easier it is to transition, leading to a higher adoption rate. Products that fundamentally change the way a consumer interacts with it tend to be considered ahead of their time. An example of this type of innovation is the Dvorak keyboard which provided faster and more ergonomic layout but failed to achieve mass adoption due to the significant change required [71].

The Complexity of a product refers to how easy it is for a consumer to understand how the new product works [70]. As the complexity of a product increases consumers tend to shy away from adoption rather than spend the time to understand what it does and how they are meant to use it.

The Trialability considers how easy it is for a consumer to try the product out. If a consumer can try the product, they are more likely to dismiss concerns about the product and its complexity. This factor is diminished as the effort that required to try the product increases [70].

The Observability of a product is how noticeable the results of using the product are. When new products are highly visible they create conversation and drive people to adopt them. For example, Apple's white headphones are easily identifiable during use and other consumers instantly know someone is using an Apple product [72]. The more observable a product is the more likely it is to stimulate interest and potentially adoption.

Applied to Cloud Gaming

By applying the Five Factors to cloud gaming we can identify the aspects of the technology that will help and hinder its widespread adoption.

Relative Advantage for cloud gaming is primarily in the flexibility it provides. Traditional consoles like the PS4 have a read speed of 27Mb/s and installing a 50GB game takes approximately 30 minutes [73]. This is, however, only the first hurdle as updates themselves can take up to 50GB and occur frequently, leading to long waits to launch games [74]. Cloud gaming allows instant access, as up-to-date content is kept on the servers. Adding to the flexibility is cloud gaming's ability to be accessed on browsers, TVs, and smartphones. This broadens when the service can be used and reduces the required upfront investment. Overall, cloud gaming has a fairly strong relative advantage.

Cloud gaming is weak on the Compatibility factor. Cloud gaming services struggle to provide the level of performance consumers are accustomed to on current networks [62]. Even consumers who do have a fast connection must now worry about exceeding their data caps by playing games [63]. Another drawback is the lack of a large game library. Gamers are used to being able to select from a wide variety of games, but cloud services compare poorly in this aspect. For example, Stadia's library is limited to approximately 106 games compared to 4882 games on PS4[75].

The Complexity of cloud gaming is relatively high. There are a variety of business models, many of which have different tiers and combine subscriptions with outright game purchases[26]. Unlike the incumbent systems, there is no single dominant model consumers can easily understand. This increases the likelihood a consumer will stick with what they know until a dominant model exists.

The Trialability factor can help reduce the impact of complexity. The majority of cloud gaming services offer free trials, giving them an edge with this factor. It should be noted, however, that extra hardware like controllers are often needed for a good experience, increasing the effort consumers may have to make and decreasing the chance that they will give the service a try.

Observability is limited since cloud gaming’s core value is in its ability to game anywhere without the need for a console. This can be counterproductive since when consumers see a PlayStation or gaming PC it can subconsciously impact their purchase decision [70]. Thus, the invisibility of cloud gaming could end up limiting its adoption.

The 9x Effect

The differences in how consumers and companies see innovation leads to a 9x mismatch [71]


The 9x effect is a framework that focuses on the psychological aspects of product adoption, describing the difference between how consumers and companies approach new products [71].

Innovative products aim to provide value over their existing substitutes through product change. Product change describes the benefits provided by a product through new features that reduce pain points and solve problems the consumer faces. The 9x effect proposes that companies overvalue the benefit of solving these problems by a factor of 3 [71].

The ratio of behaviour change to product change provides insight the resistance a consumer faces in adoption [71]

Product change often requires Behaviour change from consumers as innovative features will require the consumer to change the way they interact with a product. When consumers consider new products they are often satisfied with what the existing incumbents provide and are unlikely to see potential benefits of something new. This leads to consumers overweighting the benefits of the status quo by a factor of 3 [71]. The larger the behaviour change required the greater resistance to adoption.

These difference in expectations result in a 9x mismatch between what companies believe people want and what they truly desire [71]. Innovative products that are unable to overcome the 9x mismatch are likely to fail to achieve mass adoption. Following this logic, innovative products can be categorized into easy sells, smash hits, sure failures, and long hauls by the degree of product change and behaviour change required [71]. These categories of products help explain why some products spread rapidly while others fail and can help identify potential strategies to minimize the resistance.

Applied to Cloud Gaming

Cloud gaming creates value for consumers through product changes like the ability to play games instantly without updates, continue playing on multiple platforms, and play on hardware that won’t be outdated. It also requires behaviour changes, such as the inability to own your games, lack of offline play, and limited product library.

9x Effect Applied to Cloud Gaming

When considering the difference between the behaviour change required, and the amount of product change provided cloud gaming can be classified as a Long Haul product. Long Hauls offer significant technological advances but require a significant amount of behaviour change [71]. This category tends to have slow adoption rates but once they overcome resistance they can become the standard. For cloud gaming, much of the resistance involves the limits of current networks and small game libraries. These issues can be addressed with time and new technology, but in the present there are two strategies the industry can use to get around these issues.

Many cloud gaming services have focused on replicating the traditional gaming experience for hardcore gamers, but this is difficult to do with today's network limitations [62]. The first strategy is to focus on casual segments of the market who likely are not interested in spending $500 acquiring a new console. This segment would be well served by a subscription service that allows them to play a variety of titles on their mobile devices, as they are less focused on performance and tend to churn from new games quickly [76]. In 2018 51% of total gaming revenue came from mobile games and the ability to play big name games on mobile could be very attractive [77]. The alternative strategy is to reduce the behavioural change required. Cloud gaming models like Shadow do this by allowing users to play games they already own and simply rent PCs based on the specs they need without being locked down to a single service provider [38]. This model is closer to what consumers are used to with traditional gaming, and the milder behavioural change required could encourage adoption by more of the enthusiast market.

Future Potential

Based on industry publications, reviews, market research, and our own hands-on testing, we have determined that the real-time gaming experience is essential to the success of any cloud gaming service. A high resolution and frame rate must be paired with low latency for a smooth gaming experience that lives up to gamers' expectations. Today’s cloud gaming services are held back by the speed of current internet technology and struggle to live up to gamers’ expectations because of it [78]. This is not an easy problem to solve, but there are two emerging technologies that may be able to advance cloud gaming’s capabilities.

Connectivity Requirements

Internet speed required for traditional online gaming and cloud gaming[79][80]

The minimum download speed required for traditional online gaming is 3 megabits per second (Mbps) download, with speeds of 15 Mbps recommended for more competitive games [79]. The minimum upload speed for a single device is 1 Mbps, and these minimums provide a ping rate less than 150 milliseconds [79]. Such ping rate is standard for online games to run fairly smoothly. For comparison, Google Stadia requires 10 Mbps minimum and 20 Mbps for 1080p for a single user [80]. Because cloud games are not processed locally, this requirement applies to both online and single player games. Overall, cloud gaming needs approximately 3.33 times faster internet to provide similar performance to traditional games. This estimation is based on one cloud gaming user per household, excluding other internet services. While a faster internet connection may be able to solve latency issues, multiple streams of data lead to other problems. With multiple users sending streams of data through the same internet connection, factors such as capacity and stability have to be taken into consideration. Thus, in addition to speed, the ways that the gaming data are processed, analyzed and stored are also critical to achieving stable performance.

5G Networks

Compared to existing infrastructure such as 4G LTE, 5G can provide up to 6 times faster internet speed and 3 times less latency [81]. 5G connections will also have increased capacity, allowing for multiple streams of data without compromising the stability of the network [81]. For example, if one household has three cloud gamers playing games with 4K service at the same time, that household will need an internet connection with 105 Mbps download, that is 35 Mbps times 3 devices, to allow the games to run. Most households in North America do not have access to that speed [82], and even those that do may experience high latency because of the instability of multiple devices competing for bandwidth [81]. With 5G providing over one gibabit per second(Gbps) peak data speeds [83], the need for high internet speed can be met, while the increased capacity of 5G enabled devices will allow for more stable connections.

Model for potential partnership between CSPs and cloud gaming providers[84]

Given that the future of cloud gaming is tied closely to the development of 5G infrastructure, there is the potential for communication service providers (CSPs) to partner with cloud gaming services [84]. This would benefit the CSPs by giving them an additional way to monetize their 5G networks. It would also benefit cloud gaming companies by broadening the market of consumers who can run their platform effectively. An alternative to this arrangement could be cloud gaming providers building their own 5G network or equivalent to achieve competitive advantage. Out of the present players, Google is best equipped to take this route. While their parent company Alphabet paused expansion of its Google Fiber program in 2016 [85], the infrastructure they currently maintain and experience they have gained could give them an edge in establishing vertical integration between internet services and cloud gaming programs.

Limitations of 5G

Stable Communication Infrastructure

Because of the interactive nature of cloud gaming, upload speed can be as important as download speed. 5G can help boost upload speeds, but to achieve the ultra-low latency needed for cloud gaming, edge computing is a more relevant technology, as it brings the processing physically closer to the individual users [86]. What this means is that a great deal of physical network infrastructure will likely need to be built to realize the full benefits of 5G for gaming [86].

Encryption of Individual Traffic

Factors besides internet speed also greatly affect cloud gaming latency. Cloud gaming services like Stadia encrypt their data in unique ways [87]. Such traffic requires identification and classification protocols to accurately slice network traffic based on factors like geographical distance between the server and user. While 5G does have identification protocols embedded, additional cloud gaming-specific protocols will likely need to be used to achieve top performance [87]

Internet Usage

The enormous internet usage of cloud gaming services is a barrier even with a 5G connection. When using a 4K cloud gaming service, 15.75 GB of data are used per hour, meaning that a single user can only game 65 hours per month with a 1TB internet connection [86] [88]. Data usage will increase with the number of users in the household and other internet services being used. Currently, Bell classifies 300GB of internet consumption per month as a high-usage household [89], which is far from enough to support cloud-gaming. With cloud gaming services entering the mass market, internet plans may need to evolve to accommodate higher usage rates.

Current Development of 5G

5G has already been deployed in more than 35 countries, though the full economic effect of it is not projected to be realized until 2035 [83]. South Korea and China have a large 5G user base with more than 5 and 36 million subscribers respectively, giving the Asia-Pacific region high growth potential for cloud gaming[90] [91]. In the United States, mobile carrier T-mobile has launched the first nationwide 5G network [92] [93], and in Canada providers like Bell have launched pilot programs in select cities [81]. As 5G proliferates to more people, cloud gaming’s market potential will also increase, but it will likely take years for 5G to become the standard. Most countries with 5G are still in the early stages, and the need for new 5G compatible devices means even once the networks are fully in place people will not have immediate access [83].

Cloud gaming using edge computing [94]

Edge Computing

Processing and storage taking place in a central public cloud puts enormous strain on networks to deliver a performance level similar to gaming consoles or PCs [94]. To get around this issue and minimize latency, some companies have proposed using adaptive networks based on edge computing. Edge computing brings processing and storage closer to the user through a network of small devices or "edge nodes" [95], which can localize data streams to achieve minimal latency. While gamers are playing, the console and software will be stored in the edge node that is nearest to each gamer instead of the public cloud server, reducing the time it takes for them to get a video response to their commands[94]. Network slicing enabled by edge computing distributes data by geographical areas so gamers can be closer to the server handling their storage and processing [96]. This method can also match online gamers by area to further reduce distant network communications and maintain optimal network traffic during peak time [97]. In this model, the central public cloud servers are used as a data centre to store aggregated data that has already been processed and analyzed in the edge cloud [94]. This aspect helps overcome privacy problems by keeping processed data localized in neighbourhood data centres, or on the device itself, rather than sending sensitive data over the network back to the central public cloud [97]. Operating in this way reduces the difficulty of complying with legal standards regarding data privacy, and limits the company's overall risk.

Takeaway

Cloud gaming has the potential to revolutionize the technology and business of gaming. We could one day see a world where the need for personal gaming hardware is minimal, lowering the barrier to entry for the latest games and making them available anywhere. That being said, there are significant roadblocks to overcome. Latency has been an issue since the very first cloud demo, and will likely continue to be for some time. 5G and edge computing could resolve this, but whether cloud gaming will still be in the public consciousness by the time they are widespread is unclear. On the business side, cloud gaming lacks a dominant, proven model. Many services require subscriptions and full price purchases, making their value proposition less clear than the title “Netflix for Games” might suggest. This value proposition has been weakened further as games have been pulled from platforms like GeForce Now, and users with iOS devices have found themselves unable to bring their games on the go as promised.

If cloud gaming overcomes these obstacles and becomes the norm, there could be serious implications for consumers. Film and television have been irrevocably altered by the rise of streaming. At first, consumers reaped huge savings by switching from cable and DVDs to low monthly streaming rates. Today, the streaming landscape has fractured into dozens of companies, each with a service for their own intellectual property, and consumers are left paying as much as ever despite owning nothing [98]. The same thing could happen with game streaming, as major publishers have already taken steps to keep third parties from streaming their games, potentially signalling their intent to launch their own services in the future. Whether cloud gaming is the future of games, and if that is a good thing for consumers, remain unclear. Consumers will have to decide if making the switch to streaming benefits them enough to make the costs worthwhile, and their choice will determine whether cloud gaming finally takes over the industry as predicted.

Authors

Vivian Jiang Harjot Kahlon Jessica Kwok Alex MacLeod Jenny Ren
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada
Beedie School of Business
Simon Fraser University
Burnaby, BC, Canada

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