Newzoo’s Cloud Gaming Trends to Watch in 2022
1. Hardware Supply Issues and 2022’s Packed Release Calendar Will Bolster Cloud Gaming Adoption
From Elden Ring to Starfield, 2022’s release calendar is full of highly anticipated AAA PC and console blockbuster releases. At the same time, semiconductor manufacturers like Intel and Toshiba have stated that the ongoing semiconductor chip shortage will continue well into this year and possibly beyond.
These chips power the latest consoles and PC gaming components, limiting many players’ ability to play the upcoming titles. As cloud gaming promises AAA experiences without the need for hard-to-find hardware, we expect 2022’s new releases to positively impact cloud gaming adoption.
Longer-term, as supply constraints ease, some of these cloud gaming adopters will likely continue to subscribe to cloud gaming services. After all, current user satisfaction with the experience is high, as covered in Newzoo’s Global Cloud Gaming Report.
We already saw an adoption spike happen in 2020. When Cyberpunk 2077 launched, players were keen to experience the game. Sadly, the console and lower-spec PC versions were not fully optimized.
As high-end PC components were hard to find, many gamers tried the cloud gaming version via NVIDIA’s GeForce NOW and Google’s Stadia. They offered high-fidelity versions of the game via the cloud, and both platforms saw user growth during this time.
2. Cloud Gaming Use Cases Will Become Clearer to Gamers Following Innovation in Distribution
The past year has seen some of cloud gaming’s most compelling use cases in action. We’ve already discussed how hardware constraints led to gamers using cloud gaming to play Cyberpunk. However, publishers are also leveraging the cloud to bring high-end content to limited hardware.
Via partnerships with Ubitus, large publishers like IO Interactive and 505 Games have used cloud gaming to bring high-fidelity titles to the aging Switch hardware, including Hitman 3 and Control.
Consumer sentiment has been mixed, as the gaming experience depends heavily on the player’s internet connection. Nevertheless, we expect more third-party publishers and developers to continue leveraging cloud gaming to bring their content to the massive Switch user base.
Publishers are also delivering cloud gaming to gamers via other means. For example, last year Xbox Game Pass Ultimate added cloud gaming to Xbox consoles. This highlighted two important use cases:
- Game Pass offers access to a huge library of games, but players once had to download these games to try them. Now, even gamers who are not ready to take the plunge into cloud gaming can use the service to try games via the cloud (before downloading them).
- Meanwhile, players on Xbox One hardware can play Xbox Series X|S titles via the cloud, giving them access to new-generation gaming on last-generation hardware.
Mobile publishers are also getting involved. They are increasingly using mobile-focused Platform-as-a-Service (PaaS) cloud gaming services to reach gaming audiences beyond the processing and storage limitations of smartphones (more on that in the final trend).
In Fortnite’s case, Epic has leveraged NVIDIA’s cloud gaming service to circumvent Apple and Google’s banning of Fortnite on their app stores. It is worth noting that Android users can still play Fortnite via an APK, but iOS users had no alternative. This marks a big opportunity for NVIDIA and Epic.
We’ve also seen companies using cloud gaming as part of their marketing strategies. For example, Focus Entertainment worked with Gamestream to deliver a cloud-based trial of A Plague Tale: Innocence.
The game’s sequel is out later this year, so this cloud gaming experiment is likely a marketing tool to increase awareness for IP. Focus Entertainment provided the frontend experience, while Gamestream provided the infrastructure and backend tools.
This was part of a wider marketing strategy that included a new-console-generation version of the first game. A Plague Tale: Innocence was the PlayStation Plus PS5 game for June, when it was also added to Xbox Game Pass.
This year, we expect publishers to further experiment with incorporating cloud gaming into their distribution and marketing strategies.
3. Consolidation in Cloud Gaming Is on the Horizon
Echoing the wider games market, the cloud gaming ecosystem has seen several acquisitions and funding deals in the last 12 months. For example:
- In April, Shadow was acquired by Hubic for approximately $30 million, following Shadow’s financial and scalability difficulties
- In May, Mail.ru Group acquired Playkey for an undisclosed amount
- In September, Unity bought Parsec for $320 million
- In November, Intel acquired RemoteMyApp
- Also in November, Antstream Arcade received a $3.5 million investment led by the Atari Group
- In January of this year, Mythical Games bought Polystream.
Plenty of cloud gaming companies have entered the market since 2019. While these early movers continue to vie for their spot in the highly competitive market, we expect to see more consolidation and M&A activity this year as the market continues to mature.
“As is often the case in the games market, larger companies will acquire smaller ones to quickly increase their footprint in the growing cloud ecosystem,” says Newzoo Market Analyst Tiago Reis. “The smaller services benefit from more brand recognition and get access to more content — a key driver for user acquisition and retention.”
4. Cloud Gaming Will Spread to More Devices and Ecosystems
Most cloud gaming services were limited to PC and Android in 2019, somewhat undermining the use case of high-quality games on any hardware. Services are now available on more platforms, but there have been challenges.
Owing to strict rules around its closed ecosystem, Apple does not easily allow dedicated cloud gaming apps on its App Store. To jump this hurdle, cloud gaming services have used progressive web apps via Apple’s Safari browser to bring their services to iOS. This is how Fortnite recently returned to iOS devices following the game’s removal off the App Store.
Several big cloud gaming services are bringing — or have already brought — their cloud gaming services to TVs:
- Tencent launched its START service on several smart TVs in 2020 and continues to work with Chinese TV manufacturer TCL to optimize the cloud gaming experience on large screens
- Last year, select LG TV models began supporting NVIDIA’s GeForce NOW and Google’s Stadia.
- Already in 2022, Samsung revealed it was bringing GeForce NOW, Stadia, and Utomik to its latest smart TV models.
However, smaller cloud gaming services have also been keen to add their services to smart TVs to maximize their reach:
- Bluestacks X, a free mobile-focused cloud gaming platform launched in September 2021, has been available on TVs since the beginning.
- Blacknut and Gamestream have also strived for high accessibility since their start
- Sunrise, a Swiss CSP, partnered with Gamestream, and has plans to bring its cloud gaming service to Samsung smart TVs in February.
This trend will continue in 2022. And we expect to see more services and TV manufacturers announcing collaborations. Xbox boss Phil Spencer confirmed in November that Microsoft was working with manufacturers to bring Game Pass to Smart TVs, so Xbox Cloud Gaming looks to be next in line.
5. Cloud Gaming PaaS services Will Grow (Especially Outside China)
Platform-as-a-Service (PaaS) companies allow clients to host, manage, and execute software via the cloud. As we have touched on in this article, game companies are already collaborating with PaaS cloud gaming solution providers to:
- Circumvent app store fees
- Lower user acquisition costs
- Grow their reach, discoverability, and — ultimately — their user base.
China is a trailblazer in B2B PaaS cloud gaming. Chinese companies like Tencent, Haima Cloud, Alibaba, and others are already active and innovating in the space.
The PaaS cloud gaming model is well suited to the Chinese market’s free-to-play nature. Game publishers pay the PaaS service provider to host their titles. In turn, players can then access the publishers’ mobile F2P games free of charge.
These services also boast cloud gaming’s many other benefits, such as removing barriers related to storage or processing power on mobile devices.
However, they also carry cloud gaming’s disadvantages, including the need for a robust and reliable internet connection and having to queue for access to servers when demand is high.
Although China’s fast rollout of 5G has boosted the country’s mobile-internet quality, some users may still run into issues, especially as many popular mobile games are competitive and online.
Nevertheless, we expect that B2B PaaS cloud gaming solution providers will continue to flourish in China’s mobile segment. We also foresee B2B PaaS growth beyond China. Some non-Chinese companies that have already taken the first steps in this area are now.gg, CareGame, Facebook Gaming, and Ubitus.
Hardware will always be a part of many gamers’ lives. But in the long term, gaming will almost undoubtedly follow other mediums like music and video, finding a home in the cloud. Many publishers expect this and are hedging their bets for the future.