Written by Feliks Olko

10 min read

Cloud Gaming Newsletter: February 2020

  • Gaming

Major Industry Developments

The Key Stories from this Month

The Game Industry in Numbers

  • The Global Game Market 2019 was worth $148.8 billion (7.2% year-on-year growth = $3 billion less than forecast) with 2.2 billion worldwide gamers and 4.4% of all gamers download a new game every single day.
  • By 2022, the market is expected to grow even further to $189.6 billion, with mobile and console game accounting for a combined 80% of revenues.
  • In 2020, the global in-game spending is expected to reach $32 billion, up from 2015's $22 billion.
  • The total free-to-play game market in 2018 was worth $87.7 billion – 80% of digital games revenue with 54% of gamers play MMO games.

Online Games Net Revenue & Gross Margin

Notable M&A and Investments

Key Technology Predictions for 2020

Prediction 1: The Smartphone Multiplier Means An Incredible Market

Deloitte has predicted that that the 'smartphone multiplier effect' will drive more than $459 billion of revenue in 2020 alone – with over $118 billion coming from connected mobile games.

This represents a 15% ($58 billion) increase over the prior year, already greater than the $26.6 billion (6%) year-over-year growth that smartphones may see in 2020.

With smartphone sales in 2020 expected to reach $484 billion, the entire smartphone ecosystem – smartphones plus smartphone multipliers – will be worth over $900 billion.

Prediction 2: The Insurgence & Challenge of Video Game Streaming

Deloitte also predicted that even as networks expand to accommodate growth in over-the-top (OTT) video, much richer and more dynamic content may soon be vying for their infrastructure.

Some of the world’s largest cloud providers have announced plans to stream multiplayer video games. Doing that, however, is quite a different challenge from streaming video.

Considerable computational power and network messaging goes into instantaneously synchronizing actions between the game and its players, particularly if synchronization is required across the globe.

The most popular multiplayer games today host more than a million players simultaneously, but they only manage this by partitioning users into smaller groups in separate instances of the game (for example, by creating 10,000 different “worlds” that host 100 players each).

The newer streaming video game providers claim that their services will allow a single game instance to potentially support thousands of players, placing greater demands on CDNs to manage the necessary synchronization.

Prediction 3: Artificial Intelligence Permanently Alters Enterprise Computing

Oracle predicts that Artificial Intelligence (AI) technology is fundamentally altering enterprise computing by changing how organizations receive, manage, and secure business data.

Enterprises are quickly embracing AI as they perceive its ability to improve efficiency, boost productivity, and reduce costs.

By 2025, 100% of enterprise applications will include some form of embedded AI.

These technology advancements will impact all parts of the business, accelerating time to insight by helping managers and executives obtain a better understanding of operations, employees, markets, and customers. 

Forward-looking customers are drawn to these next-generation clouds for three primary reasons:

  • To accelerate agility: 70 percent of IT decision-makers believe cloud computing makes them more agile.
  • To scale more easily: Companies that adopt cloud services experience a 20.6% average improvement in time to market.
  • To get online fast: 49% of enterprises see faster time to deployment as a key reason for migrating to a modern cloud.

“One ongoing challenge is the contrasting tones of the source material and the MMORPG space. Historically, Star Trek has been less focused on action and more on exploration, moral dilemmas, solving mysteries and character-driven stories -- there is many an episode where a phaser is never even fired.

Whereas, video games (and particularly MMOs) tend to be undeniably driven by combat! To combine both worlds in industry needs tech that can support this visionary scale of a never ending space exploration!" 

– Al Rivera, Principal Lead Designer | Cryptic Studios

Six common mistakes when moving to live-service games and free-to-play

Industry consultant Ben Cousins outlined the most common pitfalls for developers tackling a new structure and business model in a recent article for GamesIndustry.biz.

  1. A lack of customer focus and service thinking
    Free-to-play and live-service games are fundamentally different from traditional games in that they operate as ongoing services rather than one-shot products
  2. Incorrect budget allocation
    In a meeting at the end of last year, someone asked: "What is the biggest change game teams must make when they move from products into services?" My answer: "They need to get used to the idea that half their budget will be spent on UI."
  3. Production values are too high (Time to Market, Expensive Prototyping) 
    In an interview with Gears of War's Rod Fergusson, he revealed that he has almost cancelled Fortnite while it was in development because it didn't hit his quality bar. This failure for a AAA studio to understand the need to drop some of the production values and move to live prototyping as soon as possible is key!

    Feliks note: Moving towards cloud-native development will give studios more time to flesh out their pipeline through feedback coming from live testing, which will make the post-launch practice much smoother.  
  4. Ignoring the importance of pipelines and practices for post-launch
    When developers launch traditional product-based games, to a degree they are 'throwing something over the wall'. The game is complete, the tools may never be used again, and the codebase might never again be touched. If there is post-launch work on patches or a little DLC, it might be completed by a different team, and the vast majority of the actual work is already done pre-launch.
  5. Cosmetic-only monetization in free-to-play games
    The argument here is that the games that make billions from cosmetic-only economies typically only succeed because of the sheer numbers of players. On a per-user basis they actually have very poor monetization, relative to games that use more aggressive methods. This is because for a multiplayer game that is built from the ground-up to be about dominating other players, the proportion of the audience who are interested in self-expression via cosmetics is rather small.

    Feliks note: Personally, I believe any monetization tool in place that is not cosmetic-only in nature will, in the long run, lead to players migrating to another game regardless of how good the actual gameplay is. On top of this short-term damage, the longer-term impact on a company's brand (see Electronic Arts (EA) and the loot box controversy), it's far better to be safe than try to gain a short-term, small financial uptick.
  6. Post-launch panic (Time to Monetization) 
    When we compare traditional game products with live-service games and free-to-play we see huge differences, but there's one that usually causes the most hand-wringing and consternation among first-time developers, publishers and money people – the immediate post-launch performance of a game.

Successful product-based game

Successful live-service games

Other Stories From The Month