Cloud gaming is less than 1% of the game business today, but game analyst firm DFC Intelligence estimates it will grow to over 5% of total revenue, or $13.5 billion, in five years.
The new report from DFC said that one of the new areas of growth is interactive streaming content from the cloud, which is starting to generate new revenues. These include new forms of interactive entertainment such as Massive Interactive Live Events (MILEs), such as Genvid Technologies’ Rival Peak.
Rival Peak was an interactive reality show which starred a dozen AI characters who could be directed by the spectating audience to take different actions in a Survivor-like competition. Now Genvid is creating more MILEs based on other genres such as horror.
Games companies are also using cloud gaming to boost their latest subscription services for games, as they adoption the growing and highly profitable games-as-a-service (GAAS) model.
But DFC said it believes that cloud gaming is not about distribution of traditional high-end games. It believes the the opportunity is more about creating new forms of monetizable games and interactive entertainment that can only exist using cloud delivery.
DFC said major media companies like Facebook, Amazon, Google, Microsoft, and Netflix are looking at interactive cloud content as expansions to their existing social network, entertainment, and streaming services.
The analyst firm also said that new concepts like the metaverse and MILEs expand the definition of gaming and interactive content and are expected to drive the future of interactive cloud streaming. These emerging events are already generating significant revenue opportunities, primarily from virtual item sales.
Cloud gaming and interactive streaming tie in closely with the concept of the metaverse and expand products and services beyond the traditional video game market. New types of products that expand the definition of games and interactivity are the key to growth.
Why the original plans didn’t work out
Cloud distribution is a way to deliver games and other content by streaming it to players from cloud-based datacenters, rather than running the games on players’ own machines. The theory of cloud gaming is that the player does not require expensive hardware because the processing is done in the cloud and only video streams run on the user’s machine.
Such cloud distribution has taken off for video content like on Netflix, but cloud-based services have had
limited impact for delivering games and interactive content. DFC believes that games that are action oriented will never perform as well with cloud delivery due to latency limitations.
Still, the opportunity lies in cloud delivery of games and interactive content, including new forms of products that take advantage of the unique opportunities provided by the cloud. However, it is expected to remain limited as a distribution method for traditional high-end video games.
DFC believes the GAAS business model will drive the market, as will spectating video content of gameplay and user-generated content.
MILEs are a metaverse related concept that is a reality in today’s marketplace. A MILE is a single simulation with many users that participate in the event, frequently impacting the action both individually and collectively, and thus also influencing the outcome. The content is a video or virtual space that is streamed from the cloud.
Individual products like Roblox and Fortnite have started hosting live events that can attract millions of users and generate significant revenue via sponsorships and merchandising opportunities.
And Facebook, which has changed its name to Meta, has done some testing of MILEs as part of its plans to become a major metaverse company.
The major players include Amazon, Epic, Facebook/Meta, Genvid, Google, Microsoft, Netflix, Nvidia, and Roblox. By 2026, the high-end consumers who own consoles and PC hardware will likely generate $9.9 billion of the total $13.5 billion in revenue for cloud games in 2026.