• Michalis Papachristodoulou

Video gaming ascends to the Cloud

The video gaming industry has long been in the ascendancy. With Microsoft, Sony, and Apple all heavily invested in this market, technological advancements have been rapid. This year saw the launch of both Sony’s and Microsoft’s new flagship consoles, the PlayStation 5, and the X-Box X, yet both may become outdated much earlier than hoped by their purchasers. Cloud gaming is already here, and it threatens to upend the video gaming industry.

Video-game industry

Prior to the pandemic, the global video gaming industry was expected to earn an already staggering $160bn in 2020, far surpassing the $101bn revenue of the film industry and the $62bn revenue of the music industry. The pandemic may have hurt the net income of many, but the gaming industry has been one of the biggest winners of the year. With almost half of the world’s population spending time under lockdown at one point or another, demand for video games soared, and the video gaming industry is forecasted to surpass $175bn in revenue by the end of the year.

Video games are divided into various platforms. Originally, the main platforms were arcades, but their significance has waned. Nowadays, video gaming occurs through consoles, personal computers, handheld devices, and mobile games. Virtual reality is the newest platform in the video game industry, carving out a place for itself and increasing its market share consistently, though still lacking behind the traditional platforms. For all these platforms, there is a need for specialised hardware, as a game’s file must be downloaded and stored in the relevant device.

Cloud gaming

Whilst virtual reality is still in the process of establishing itself as a household platform, a new movement in the video game industry is already under development which will remove the need for hardware. This new movement is cloud gaming, a type of online gaming which uses remote servers to run games in a different location and then streams the game to a player’s device.

Cloud gaming has the potential to revolutionise the video-gaming industry. Anyone with a device that connects to the internet will be able to play high-quality games without the need for expensive hardware, making gaming as easy as watching Netflix in one’s smartphone or computer. There will be no need to purchase a console or a handheld device. Even high-powered gaming computers may be made obsolete by this development, as a screen and an internet connection will be all that is needed to play any game offered in the cloud, making such games accessible to all 3.5 billion smartphone users worldwide.

This service will likely be provided as a subscription, moving away from the prevalent business model in the video-gaming industry, in which users bought individual games for use on a single platform. The first steps away from this model have already been made. Google’s Stadia, Sony’s PS Plus and Microsoft’s Xbox Game Pass Ultimate are all examples of subscription gaming services, which offer a selection of games to users without the need to download those games.

These subscriptions do not yet offer the full cloud experience, as they rely on a customer owning and using a console to stream their games. Importantly, subscription gaming services rarely include the newest and most popular games, and gamers still have to purchase such games individually. The end-result of needing a console and having to purchase certain games individually, is that gamers have not yet experienced the benefits of a complete cloud gaming service.

Legal and practical issues

A complete cloud gaming service still has various issues to overcome before it can become a dominant feature in the video gaming industry.

Firstly, it requires strong infrastructure, both in terms of the server farms for running the games at the developer’s end, and a strong internet connection at the end-user’s side. The sheer amount of processing power required to run the games remotely means only a few companies can currently enter this market; the same companies that are already dominating the technological market. Microsoft, Apple, Amazon, Google, and Facebook are all involved in the development of cloud gaming, with Sony facing an uphill battle to retain its market share in the video gaming industry, due to its lack of cloud server capabilities.

A strong internet connection is a pre-requisite for a user to be able to use cloud gaming. Latency, the amount of delay between the user’s input and the input’s effect within the game, is a major concern for all online games, especially for fast-paced ones. Latency will be a much bigger concern for cloud gaming due to the need to transfer vast quantities of data between the end-user and the data servers that run the games.

A potential way to negate latency is to use predictive inputs, where algorithms will collect a user’s data and predict the user’s next moves. This collection of data will need to be managed very carefully to comply with GDPR and other privacy protection regulations. The gaming patterns of an individual are not considered personal information, but many experts warn that advanced algorithms can decrypt this data to reveal a user’s personal characteristics, subsequently leading to privacy concerns. This is exacerbated by the low level of compliance with privacy regulations exhibited by the companies most likely to dominate cloud gaming.

With the move to cloud gaming, the focus on hardware capabilities will be diminished. Instead, the focus will move to the content that each cloud gaming service provider can offer. This means that game developers stand to gain from cloud gaming, as a battle to agree exclusivity deals with them will ensue. Exclusivity agreements for games are already a mainstay of the market, and their influence cannot be understated. A gamer’s choice of platform or console may be heavily influenced by the availability of a single game in a certain platform/console.

Platform exclusivity is the one area that gives Sony hope in its battle against the 5 tech giants threatening to upend the video gaming industry. Sony has invested heavily in its relations with game developers and will hope to retain a significant portion of them to preserve its status as a market leader. Yet, the 5 tech giants have the financial resources to not only secure favourable exclusivity agreements but even to purchase game developers themselves and add them to their services. Such acquisitions are already underway (See Microsoft’s $7.5bn purchase of Bethesda and Google’s acquisition of 5 separate game studios).

Looking Forward

The future of the video gaming industry is going to be shaped by the development of cloud gaming. Google, Microsoft, Apple, Facebook, and Amazon have all recognised the market’s potential, and are bound to make their mark in what is going to turn into a war for the fastest cloud servers and the most popular content. It would be no exaggeration to describe cloud gaming as a "game-changer".

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