Newzoo projects more than $1 billion in worth for the global cloud gaming market in 2021 and expects it to soar past $5 billion by 2023, a sign the video games industry may soon see its Netflix moment.
But cloud gaming is still in an early stage. Amazon, an obvious player for the cloud games space, only has its Luna service out in early access; it remains to be seen if Amazon will give other cloud players a run for their money when Luna eventually gets a full launch.
As such, Xbox currently has the best shot at becoming cloud gaming’s leader — here’s why:
Xbox’s cloud efforts are part of a larger, already successful subscription push.
A feature of Xbox Game Pass’ Ultimate tier, Xbox Cloud Gaming (formerly xCloud) launched in September 2020 and allows for the entirety of the subscription service’s catalog to be played in the cloud.
This sets Xbox apart from Amazon, Google and Nvidia, whose cloud services are standalone and marketed as gaming alternatives that skirt download times and save space on hard drives.
The cloud-only approach was also the case for Sony’s PlayStation Now service until 2018, when it began allowing downloads for select titles per complaints from players experiencing slower Internet speeds.
With Xbox Game Pass, all titles can be downloaded, and the Ultimate tier also grants access to EA games via the EA Play service. If players subscribe to Game Pass specifically for cloud gaming, they can still access whatever games they like in the event of an ISP outage.
Amazon and Google are clearly aware of the advantage Xbox gained by bundling, as both companies struck deals with Ubisoft to have the publisher’s Ubisoft+ subscription as an add-on channel for Luna and Stadia, respectively, albeit at an additional expense for users.
The in-house cost to stream games is more than what these services charge.
Exclusive data estimates provided to Variety Intelligence Platform by Parsec, a streaming-software provider that often partners with publishers and event organizers to demo games (the 2021 Tribeca Festival one recent example), demonstrate that the estimated expenses of streaming AAA games cost companies operating cloud gaming services a pretty penny.
Utilizing public specifications info for Amazon Web Services as the backdrop for its internal calculations, Parsec’s estimates posit many AAA games are currently streamed at a loss, with many AAA titles costing more to stream than what the prevailing cloud and subscription services are charging.
At $14.99 a month, Xbox Game Pass Ultimate comes closest to matching the estimated $15.04 cost to stream “Call of Duty: Warzone.” But as is the case with these services, Xbox licenses many Game Pass titles from publishers, and those fees further retract from what can be made back via each monthly subscription.
Likewise, the reason Facebook charges players nothing for games streamed via Facebook Gaming is that those games are already free and ad-supported, unlike most AAA games.
Microsoft is making Xbox a robust home for first-party titles.
Following a studio acquisitions spree to match Sony Interactive Entertainment’s suite of first-party developers, Microsoft shocked the games industry by acquiring the parent of prominent publisher Bethesda Softworks last fall, a move meant to bolster Xbox Game Pass as much as promise more exclusives for the new Xbox Series consoles released in November.
This puts Xbox Cloud Gaming at a tremendous advantage, unlike its Big Tech competitors.
Less than two years after launching Stadia and without having released any planned first-party games, Google announced the closure of its internal game studios while assuring Stadia is here to stay and will keep releasing third-party exclusives. Amazon is still developing games, but has yet to find a hit amid reports of internal strife.
Given the increasing probability that new games from Bethesda’s biggest franchises like “The Elder Scrolls” and “Fallout,” plus new property “Starfield,” will be exclusive to Xbox and Windows, Xbox Cloud Gaming will have substantially more AAA games to offer players without requiring them to pay extra to add channels to their subscription.
PlayStation 5 may be outselling Xbox Series to the same degree PlayStation 4 did last gen against Xbox One, but if it Xbox continues to build its cloud component on the success of Game Pass, it could very well see itself as the predominant force in cloud gaming.
UPDATED, June 4, 12:40 p.m. PT: A passage stating Google had shut down its first-party game studios without any Stadia exclusive having released has been amended to clarify no first-party games from the studios had released, rather than Stadia exclusives altogether. A chart has also been updated to acknowledge iOS support for Stadia.