Cloud gaming could reach a turning point in 2015, analyst says

Streaming of high-end games could become available to nearly 150 million people, a five-fold increase, in 2015 thanks to the growth of so-called cloud-gaming services.

Of course, a lot will depend on pricing and quality, as to whether players will actually use and pay for those services. Still, 2015 could be a big year for cloud-based games, which have wandered in a wilderness as providers improve both the quality and infrastructure behind services.

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Strategy Analytics, a Boston-based market researcher, said in a report today that the addressable audience for cloud-gaming services PlayStation Now from Sony and the Grid Game Streaming Service from Nvidia could grow from nearly 30 million users by the end of 2014 to nearly 150 million by the end of 2015.

The researcher said the growth would come from the growing installed base of cloud-gaming capable devices — such as the PlayStation 4, PC, and tablets — which would help the market increase. Add to that the presence of big brand names like Sony and Nvidia, which could add a lot of marketing muscle to cloud gaming.

That’s a big change from years past. Setbacks such as the 2012 collapse of OnLive led many to believe that cloud gaming would never work as long as broadband service remained relatively slow in places like the U.S.

Streaming-video services like Netflix have taken off. But games are interactive, which presents a much greater technical hurdle for cloud services that host the titles on an Internet-connected data center, or cloud, and send a stream of video to a client device such as a tablet. The computing and graphics processing is done mostly in the data center, allowing for high-end games to run on devices that couldn’t ordinarily run them.

Sony, for instance, can stream a library of older PlayStation 3, PlayStation 2, and PlayStation releases to its PS4, even though the hardware to process those older games isn’t in the company’s latest console. That backward compatibility could theoretically help Sony convince more people to buy PS4s, and Strategy Analytics believes that Microsoft will provide a similar service on the Xbox One.

Nvidia, meanwhile, is offering a series of high-end PC games that can run on its new Shield tablets via its cloud service. That could increase demand for a new type of hardcore-gaming device that lets people play anywhere at anytime. Nvidia could provide the service to other cloud-gaming companies as well.

Eric Smith, analyst of connected home devices at Strategy Analytics, said in an email that both Nvidia and Sony are targeting hardcore players. Nvidia’s Grid service will like spread to new platforms such as gaming PCs next year.

“This puts cloud gaming in the PlayStation Store and the Nvidia Hub platforms, directly in front of some of the most committed gaming consumers as opposed to the average consumer, which are by and large content with mobile-gaming quality and genres, not usually core games on dedicated gaming devices,” Smith wrote.

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In the meantime, OnLive is under new ownership, and it has begun offering its cloud-gaming services in more countries around the world. Its library of high-end titles is growing, and the service is available on a growing number of devices, including smart TVs and tablets.

Some trade-offs in quality and experience will likely exist due to network lag issues, but if game companies price services accordingly, they could still reach large audiences, according to Strategy Analytics. And once that happens, you can expect more firms to enter the market.

Michael Goodman, Strategy Analytics’ director of digital media strategies, said in a statement, “2014 is proving to be a watershed moment with major players putting their credibility and brand names on the line to make cloud gaming work. While broadband speeds and consumer acceptance of subscription models have come a long way, access to content remains an issue for all services.”

He added, “The major video game publishers have so far successfully managed an incremental transition from physical to digital media, but cloud gaming offers publishers a new revenue stream.”

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