Cloud gaming gets a lift from COVID-19 and 5G

Cloud gaming has boomed during the coronavirus pandemic. And with the anticipated spread of superfast 5G mobile networks, it’s expected to grow even more.

Spending on nascent cloud gaming services, in which people stream high-quality video games directly to devices like smartphones instead of video game consoles, is expected to generate $584.7 million this year, more than three times as much as the $170 million spent in 2019, analytics firm Newzoo said on Thursday.

By 2023, the cloud gaming market is expected to balloon to $4.8 billion, Newzoo noted. That’s a nearly 50% increase from the firm’s prior projection, that cloud gaming revenue would be $3.2 billion that year.

Newzoo analyst Guilherme Fernandes said that COVID-19 and ensuing shelter-in-place rules are responsible for the huge growth. People with more time on their hands because of the coronavirus pandemic are more willing to try a cloud gaming service.

Cloud computing giants like Microsoft, Google, and Amazon are betting billions of dollars on cloud gaming. Their rivals include Nvidia, Blade, and Parsec.

Fernandes said he expects cloud gaming to gain even more momentum as more telecommunication companies build 5G networks. The increased Internet speed is expected to make the technology more appealing to users.

China will likely be among the biggest markets, Fernandes said. In addition to new 5G networks, Chinese tech giant Tencent is investing heavily in its own cloud gaming service.

In the U.S., after nearly a year of testing, Microsoft plans to debut its xCloud service in mid-September. The service will be bundled into the premium tier of the company’s Game Pass video game subscription service.

Fernandes said that Microsoft is “the strongest player right now,” partly because of the company’s history of selling popular video games via its Xbox gaming console.

Amazon is reportedly developing a cloud gaming service, but problems in the company’s video game unit could delay those plans, Fernandes said. Earlier this summer, Amazon released its much anticipated online shooter Crucible, but then quickly moved the game to a “closed beta version” after a poor reception.

While Google and its Stadia cloud gaming service have benefited from COVID-19, a lack of exclusive video games have muted its success, Fernandes said.

“I think Google’s launch of Stadia was a little bit underwhelming because they have not delivered enough content to really get people on board,” he said.