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Game On

The gaming industry anticipates the next big thing will be cloud technology as big tech eyes a foothold in what it hopes will be a lucrative market. Are their lofty ambitions realistic?

By NewsChina Updated Nov.1

Cloud gaming, while still in its early stages, has started to attract attention from China’s big tech players, all hoping to take the lead in an emerging sector. At the recent China Digital Entertainment Expo and Conference (China Joy 2019) held in early August in 
Beijing, 5G and cloud gaming technologies were big draws, with companies like Tencent and Huawei already having launched cloud gaming systems. Yet some industry insiders caution that it may take years to deliver a fully workable system that will attract gamers away from their consoles.  

Cloud gaming means the game resides on a server, not on a game player’s personal device such as a computer, console or mobile. The gamer only needs to install a client program to enter the game, which means it does not require a lot of processing power. Cloud gaming companies, like online video service providers, normally profit through charging subscription fees.  

“When you open your browser, you enter the game directly with a high-quality image. The main character can run, jump, make actions smoothly – the experience is exactly the same as a game stored and run on a local device,” said Yang Yu, cloud gaming project manager for tech giant Tencent Holdings during China Joy 2019. He estimated that as 5G technology develops, transmission speed from cloud to device will increase drastically, meaning there will be more applications for cloud gaming and the games will get even smarter.  

Traditional gaming normally requires a client to spend an hour or so to download the setup package for a game, which also takes up lots of space on the hard drive. For additional high-quality image effects it requires hardware with a high-performance graphics processing unit (GPU) or central processing unit (CPU). But cloud gaming is no longer device-centric, which means, Yang said, that gamers can switch from playing on a PC to a mobile device and resume a paused game at any time. “Cloud gaming is the next generation of gaming. Gamers can play anywhere,” Yang said. 

Emerging Market
Cloud gaming is not new. During the 3G era a decade ago, OnLive, the California-based provider of cloud virtualization technologies, started promoting a cloud gaming service, followed by companies including Sony, NVIDA and Electronic Arts. However, limited by bandwidth and immature cloud service technology, cloud gaming did not make a splash.  

This year, Google joined the game industry. During the annual Game Developers Conference held in March in San Francisco, Google revealed its cloud-based gaming platform Stadia which allows users to access games through its Chrome browser on any device, including a mobile or a PC.  

Prior to that, leading cloud service company Microsoft announced a try-out of its new service, Project xCloud, later this year. According to Microsoft, the project will allow players to enjoy games instantly, whether they are playing on a console, PC or mobile phone. 

It is the new global push for 5G that has allowed cloud gaming to regain momentum as a promising industry. According to a research report by investment bank China International Capital Corporation Limited (CICC), cloud gaming will combine with new generation hardware appliances including augmented reality (AR) and virtual reality (VR) to become the first of its applications on the consumer market for the 5G era. 

“The final goal of cloud gaming is a reflection of video and audio transmission technology,” Huang Shifei, vice general manager of Tencent Cloud told NewsChina. “The industry favors an in-cloud gaming system like Google which has already made attempts in this area.”  

According to Huang, the prerequisite to achieve low-latency for cloud gaming is sufficiently fast internet speed and more importantly, the reduction of costs resulting from a large cloud service. Along with the construction of large data centers and accelerating internet speeds, cloud computing has become the backbone of IT infrastructure, leading to a complete revolution in IT resource construction, ways of working and business models. Indeed, including the gaming industry, all sectors are seeking opportunities in the new technology revolution to increase their market and upgrade their products.  

“From a long-term perspective, cloud services are the basis for building up all sorts of platforms for scientific research or social governance,” Liu Song, Vice President of Alibaba Group told NewsChina. “The two key elements for digital transformation are the double helix: network collaboration and data intelligence.” 

The potential emerging market has attracted the attention of industrial players, including traditional game producers, hardware service providers, cloud service platform technology support providers, internet operators and mobile suppliers.  

However, since 5G cloud technology is still in its test phase, the existing problems of time delay, content and commercialization patterns are still obstacles for the cloud gaming industry.

No Console 
Google Vice President Phil Harrison remarked this March that the future game device is not a console or set-top box, but the platform provided by the gaming service itself. During an earlier media interview with The Verge, he said that for the last 40 years games were device-centric. “They were packaged on a disc, or a cartridge, or a tape, or a download, or they were written specifically to take advantage of or up to the limitations of a particular device,” Harrison said: “We just broke through that glass ceiling today by giving the entire data center to the game developer and being completely device agnostic. So, no, we don’t need a console and that’s the whole point.” 

Google’s participation reshuffled the existing market distribution among three competitors, including Sony, Microsoft and Nintendo. In May, Sony became a client of Microsoft’s cloud service Azure, which shocked the gaming world. Sony and Microsoft have even decided to explore cloud gaming, streaming media, artificial intelligence and semi-conductor development.  
Compared to the heated competition in the overseas market for cloud gaming, the domestic gaming industry seems to be more moderate. Most domestic industry insiders NewsChina interviewed said there was not much to report. “There hasn’t been much progress to acclaim yet,” one said. An employee from a leading domestic cloud gaming service provider told the reporter that cloud gaming in China is at the technology and resource preparation stage, so it is far from ready for wide market promotion.  

According to Huang, the reason for limited promotion of cloud gaming domestically is due to the high cost of bandwidth. In contrast to game producers and the cloud service provider’s “low key” style, telecommunication operators and mobile phone producers appear to be active in promoting cloud gaming. China Telecom, China Mobile and China Unicom all presented 5G cloud gaming solutions at China Joy. Smartphone makers including OPPO and OnePlus exhibited their cloud gaming service at the 2019 Mobile World Congress in Barcelona, Spain, in February. Liu Zuohu, co-founder and CEO of OnePlus lauded the possibilities of playing games on his company’s phone. “Under 5G internet, speed, time delay and internet capacity have all been improved significantly, and it allows the realization of cloud gaming. All you need is a OnePlus mobile phone and you can play any game, anywhere,” Liu said.  

The new round of competition for cloud gaming has resulted in a challenging situation for the gaming industry. There is a lack of innovation which can sustain the enthusiasm of its consumers. Meanwhile, cloud service providers and telecommunication operators joining the new market are expecting to make extra profits. “Companies like Sony, Google and Microsoft have their own huge cloud service platforms. Take Google for example, its cloud service cannot beat Amazon and Microsoft, so it expects to boost its cloud service by joining the gaming industry,” Huang Leping, managing director of CICC, told NewsChina. 

According to telecom industry analysts Synergy Research Group, of those in the cloud infrastructure services market, Amazon, Microsoft, Google and Alibaba all achieved “substantial” market share gains over the course of 2018, fueled by enterprise demand for public cloud services. The research also indicated that Amazon leads the market with a 34 percent share, followed by Microsoft (15 percent), Google (7 percent), IBM (7 percent) and Alibaba (5 percent).  
Domestic cloud service providers like Tencent and Kingsoft have joined cloud computing through cloud gaming to provide cloud service and streaming media technology support for gaming or livestreaming platforms. When the number of domestic games boomed in 2014, the mobile game market grew vigorously.  

“That was a period when there was high demand for cloud services for the gaming industry. Once a game becomes popular, the need for more computing power and guaranteeing low costs can be fulfilled by cloud computing,” said Guo Lan, a partner in Kingsoft Cloud. “That’s why the early market for cloud computing is mainly promoted by internet companies focusing on game or video streaming services.”  

Li Yutao, manager of Tencent’s video service department, told NewsChina that during the 2018 FIFA World Cup webcast, cloud computing played a key role. “It was an urgent assignment to fulfill the temporary transmission of a few terabytes or even a dozen terabytes of computer storage capacity for the webcast during peak web viewing time. It would have needed six months to a year’s preparation if you used traditional physical computer storage deployment methods, but with support from cloud services, the problem was solved smoothly.”  

For some leading gaming companies, the more important aspect is to provide technological and industry solutions that can lead the way. According to Yang Yu, Tencent is planning more applications for cloud gaming. For example, during a gaming webcast, viewers can enter the game for real-time interaction with the host gamer or users can directly try playing a game by clicking an ad for it.  

A man plays a game at a Tencent Cloud booth during China Joy 2019, August 2, 2019

Cost and Profit 
Whether cloud gaming can replace device-based gaming remains a question in the view of industry insiders. During an earlier interview with website GameSpot, Microsoft Xbox head Phil Spencer said that cloud gaming offered another option for consumers along with traditional game playing through physical devices. “I think this is years away from being a mainstream way people play. And I mean years, like years and years,” Spencer said. 

The biggest challenge to overcome is bandwidth, said Huang Leping. “However, with the 5G era coming, time lags and wider bandwidth can allow real breakthroughs for both cloud gaming and the AR/VR industry.” 

Actually turning a profit is another issue. The industry expects to attract more capital investment. A person working in cloud gaming told NewsChina that the problem is the shortage of supply chain capacity, which results in the limited scale of the industry. “Many game players have to wait for their turn to play, and the server is always fully occupied, thus the user’s experience is less than satisfactory for sure,” said the source.  

For cloud gaming service providers, either building their own server or buying one means a huge capital outlay. Zhao Liang from Shunwang Technology Co. said that his company has been planning to purchase enough computing power from cloud service providers. “But neither Alibaba Cloud nor Tencent Cloud have the amount of resources and prices are high,” Zhao said.  
The industry has yet to agree on the best way to charge users. The present widely adopted model for cloud gaming is by subscription. Yet similar to music and film sites which offer free services as well as a subscription model that offers better access, cloud gaming has to face the same situation where potentially few people actually pay for the upgraded package.  

“The number of players who tried cloud gaming are in the millions, however the number of players who want to pay to continue the service is only in the tens of thousands,” an anonymous industry insider said.