The Growing Pains – and Winners – of Cloud Gaming

The UK Competition and Markets Authority’s (CMA) recent report on the Microsoft's pending acquisition of Activision Blizzard didn't just contain the blockbuster suggestion that Microsoft break up the latter. Reading between the lines and redactions, the CMA report offers considerable insights into some of cloud gaming's challenges, as well as the best positioned competitors.

Growing Pains
The report includes several interesting revelations from cloud gaming providers. The most eye-catching figure is that xCloud’s share of monthly active users at least doubled from 20%-30% in 2021 to 60%-70% in 2022. Looking ahead, the report confirms that at least one major company is considering an expansion into cloud gaming.

The CMA also provided additional information from current cloud gaming competitors, albeit with redacted identities. We can, however, make educated guesses on which companies admitted what.

  • Shooters Are Selling: Multiplayer and “fast-twitch games” are among the most popular games for one service. (Page 185)
    • This unnamed service, which upgraded its GPUs and highlighted better-than-console latency, sounds like Nvidia's GeForce Now. The company has often talked up GFN's latency and upgraded its servers in 2021 and 2023 to RTX 3080 and RTX 4080 equivalent GPUs.
  • xCloud Revenue: A March 2022 third party report estimated xCloud’s 2021 revenue at under $50 million. (Page 197)
    • If accurate, xCloud was less than 4% of Xbox’s Content and Services revenue in 2021.
  • License Fees: One cloud gaming service is paying $10 million per licensed AAA game. (Page 251)
    • The surrounding context suggests this competitor is Amazon Luna.
If there’s a major gripe when it comes to cloud gaming, it's dealing with startup costs like Microsoft Windows fees or cloud infrastructure.
  • Best in Class: The report suggests that Nvidia has the lowest server operating costs due to its use of its own GPUs. (Page 212 & 222)
  • Windows Isn't Cheap: One competitor saw its streaming costs per hour double when it prototyped its service with Windows. (Page 201)
Game Subscriptions Reduce Game Purchases
Microsoft also surprisingly admits that Game Pass cannibalizes traditional game sales, suggesting that gamers are increasingly gravitating toward the subscription model. For early adopters of cloud gaming– like manufacturers who bundled game subscriptions with their desktops and laptops – this is a sign that their bets may be paying off
  • This also seems to directly contradict Xbox head Phil Spencer’s prior claims that Game Pass boosts overall game sales.
Crossplay Doesn’t Boost Matchmaking Speed
One of the most universally popular gaming innovations in recent years has been crossplay between different platforms. For example, PC players on Call of Duty are no longer isolated from the majority of COD’s player base on console. While the CMA’s report confirms crossplay is becoming more popular on Xbox, it concludes that crossplay does not significantly improve matchmaking times. 
Featured image courtesy of Microsoft