US cloud gaming market forecast
Source: STL Partners
Video gaming is a huge business, generating more revenues than movies earn at the box office and in the home combined. Now the video games market is poised to expand again with the arrival of mass-market cloud gaming services, which enable consumers to play video games using any device with a screen and an Internet connection (often using a browser) – the software and hardware required to play the game are all hosted in remote data centres. We have modelled the U.S. cloud gaming market and the share that could be captured by U.S. telcos in the chart above.
Cloud gaming adoption should grow quickly from 2022, once Google and the other Internet giants have ironed out the initial kinks in their services. For casual players, the convenience of cloud gaming will more than compensate for some lag and latency. STL Partners believes the U.S. market will climb to be worth about US$6 billion in 2023, as some console gamers begin to make the switch. However, most hardcore gamers are likely to buy one of the next generation consoles, such as the PlayStation 5, that will be launched in the next couple of years, meaning they will likely switch to cloud gaming around 2025, when the market could expand rapidly to be worth more than US$18 billion.
Telcos could earn incremental revenues in this market from a mixture of upstream and downstream propositions. They could, for example, earn commission from leading providers of cloud gaming by selling bundles of broadband and a gaming subscription. They could also earn revenues from consumers by selling a “gaming add-on” that would fine-tune their broadband connection for cloud gaming.