Cloud Gaming Revenues to Soar to $12B by 2025

According to gaming experts, 2021 is shaping up to be a big year for cloud gaming.

“We are expecting a big jump in revenue from 2020 to 2021,” observed George Jijiashvili, a senior analyst with Omdia and author of a report on cloud gaming released last week.

“We think consumer use of cloud gaming will reach US$4 billion, which is a growth rate of 188 percent, a massive jump from 2020,” he told TechNewsWorld.

His report also predicted cloud gaming revenues would reach $12 billion by 2025.

A proliferation of cloud gaming services will be launched in 2021, which should brighten the sector’s revenue picture.

“There are currently 25 cloud gaming services currently in beta globally,” noted Piers Harding-Rolls, a games industry analyst with Ampere Analysis.

“Some of those will commercially launch in 2021 and drive awareness, adoption, and monetization,” he told TechNewsWorld.

More significantly,” he continued. “Xbox has added a cloud gaming feature to Xbox Game Pass Ultimate, which will, if included in the market sizing, add value to the opportunity.”

“I also expect Sony’s service PS Now to continue growing in 2021,” he added.

Microsoft Driving Market

Mark N. Vena, a senior analyst with Moor Insights & Strategy, noted that despite some less-than-spectacular performances from Google’s Stadia service, the overall cloud gaming category will continue to rise in 2021 and beyond.

“Microsoft and Sony — to a lesser extent — will grow the market with their forays into the cloud gaming arena with their new console launches that will occur in the holiday season, and Google will widen their library of games,” he told TechNewsWorld.

“The pandemic will also continue to be a tailwind for gaming in general,” he added.

Microsoft will be a big driver of cloud gaming revenue in 2021, according to analysts interviewed by TechNewsWorld.

“There are 15 million Xbox Game Pass subscribers,” Jijiashvili explained. “Not all of them will be Ultimate subscribers, but a big chunk of them will. So next year, there will be several million cloud gaming players just from Xbox alone.”

Kristen Hanich, an analyst with Parks Associates, noted that Microsoft has had some aggressive Game Pass promotions with the goal of bringing more attention and trial users to the offering.

“Once customers understand the value proposition of this model, many will stay and pay full price,” she told TechNewsWorld. “It should be fairly easy to upsell these subscribers to Game Pass Ultimate, the cloud gaming tier.”

Attractive Upsell

Microsoft’s termination of the 12-month Xbox Live Gold Pass could be used as part of that upsell.

Michael Inouye, a principal analyst with ABI Research, explained that a monthly Xbox Live Gold membership is $9.99 a month or $24.99 a quarter, which amounts to $8.33 a month. Ultimate Game Pass is $14.99 a month, which includes access to select PC, console, and cloud titles, cloud gaming, and Xbox Live Gold.

“In effect, you are getting everything beyond Gold for $5 per month, assuming you went with the monthly Gold plan,” Inouye told TechNewsWorld.

One reason growth numbers for the sector may be large is because of their starting point.

“Revenues are pretty much non-existent now,” said David Cole, an analyst with DFC Intelligence.

“You’re really looking at who is positioning themselves to be a leader going into 2021,” he told TechNewsWorld.

“Microsoft’s strategy — to bundle cloud gaming into all their other content — is where cloud gaming is going,” he continued. “It doesn’t exist as its own service, but as part of a larger subscription.”

Content Is King

Attractive pricing, though, won’t deliver on the big revenue potential of cloud gaming without appealing content.

“At the end of the day, gamers are willing to pay for great content,” observed Lewis Ward, a research director for gaming at IDC.

“So the main driver, in my view, will be an increasing number of excellent games in these services,” he told TechNewsWorld.

“If you haven’t got the content that people want to play, there will be no uptake of cloud gaming,” Jijiashvili added.

James Moar, a research analyst with Juniper Research, explained that, as with video streaming, cloud gaming will rely on having appealing content libraries.

“If the latest titles can be played at high quality without the need for new hardware, then cloud gaming will see strong revenue growth in developed markets like North America and Europe,” he told TechNewsWorld.

Convenience will also attract players to cloud gaming, added Parks’ Hanich.

“Gamers want to play their games on multiple devices,” she explained. “That is especially true of gaming enthusiasts who game for many hours per week. They game on their PCs and consoles, but also on their mobile devices when they’re on the go.”

Gravy for Everyone

When markets grow, it can be at the expense of others in the market. That won’t be the case for cloud gaming, at least for the next five years.

“Cloud gaming will contribute to the overall growth of gaming,” Jijiashvili maintained. “Cloud gaming will be a ‘nice to have’ addition to a player’s existing gaming, either on console, PC or mobile.”

Ross Rubin, the principal analyst at Reticle Research, explained that in 2021, cloud gaming will be used by players to extend their reach. “It’s about playing games that you purchased for other platforms,” he told TechNewsWorld.

“It’s a year where more consumers will get exposed to cloud gaming and see how well it works,” he continued. “It may set the stage for shifting more of their gaming to the cloud in the coming years.”

Hanich added that cloud gaming might add to revenues from game sales of game developers.

“Participating in a gaming subscription catalog may actually boost a title’s revenue since it’ll get the game in front of more players who may not have purchased it on their own,” she said.

“Plus,” she continued, “with what we’ve heard from Microsoft, many times people who play a game on Game Pass will also go and buy that game later so they won’t lose access to it if it’s rotated out of the Game Pass catalog.”