The recently-concluded edition of the annual Electronics Entertainment Expo (E3), where the video game industry gets together and showcases the latest and greatest upcoming game titles, had many key announcements. Microsoft’s Xbox Cloud Gaming announcements demonstrated its ambitions to build out its cloud gaming offerings and services. Another console giant, Nintendo, announced two new cloud-based games for the Nintendo Switch. Nvidia’s GeForce Now, Google’s Stadia and Amazon’s Luna announced more additions to their libraries. However, all these announcements were dwarfed by Microsoft’s lofty goals for cloud gaming.

Current cloud gaming efforts

There are already multiple cloud gaming experiences available, each catering to slightly different consumer groups. Nvidia’s GeForce Now enables PC players to stream their PC games on different iOS and Android devices. Then there are exclusive cloud-based platforms such as Google Stadia and Amazon Luna which enable you to play games on your browser, streaming stick, and certain Android and now even iOS devices (for Stadia). Lastly, console makers such as Sony, Nintendo and Xbox have their own cloud-based offerings. PlayStation Now is the most traditional approach, allowing subscribers to stream older PS2, PS3 and PS4 games on demand on their latest consoles and Windows PCs. Nintendo has a cloud streaming service for the Nintendo Switch, called Nintendo Cloud Streaming, which enables players to run full games on their Switch that they are able to purchase from the eShop. It is the most nascent cloud offering, having only four titles so far. Microsoft’s cloud gaming service Xbox Cloud Gaming comes as an added benefit with its monthly Xbox Game Pass Ultimate subscription. Formerly known as Project xCloud, this cloud gaming service enables streaming of over 260 titles to various devices. There are various other cloud gaming providers as well.

Shadow (which just got acquired by Jezby Cloud) offers a cloud computing service that enables subscribers to have access to a high-end computer in the cloud that they can use for gaming or other processor demanding applications. Other players like Blacknut and Boosteroid specialize purely in video games streamed from the cloud. The market itself has slowly been consolidating. Hatch, which specialized in mobile cloud gaming, shuttered its offices in 2020 despite having early promising deals with carriers such as AT&T. Jump on This, another smaller cloud gaming provider specializing in indie-games, also ceased operations in 2020.

Microsoft’s E3 announcements and follow-ups

Microsoft spoke at length about its vision for cloud gaming, and it didn’t stop at selling consoles. Xbox Game Pass Ultimate (which retails for $15 per month and is essentially an all-you-can-eat buffet of games) enables subscribers to stream video games through web browsers now, which gives Microsoft much farther reach as it can be used on iOS devices such as iPhones, iPads and Macs through browser support for Safari and Chrome. Xbox Game Pass Ultimate will also launch in Australia, Brazil, Mexico and Japan later this year.

Microsoft is further expanding its reach to more actual screens, as it plans to integrate directly into internet-connected TVs by working with TV manufacturers. It is also working on its own streaming device to enable cloud gaming on any display. Lastly, Microsoft is upgrading its data server racks to Xbox Series X servers to improve the streaming experience.

The server update went live just a week after the E3 announcements. Now, over 260 games can be played with the new Series X server blades enabling faster loading times, higher refresh rates and more graphics-related options. Not to be outdone, Microsoft has also hired Google Stadia design director Kim Swift to be a part of Xbox Game Studio Publishing to help build partnerships with independent studios for new cloud games.

The Implications

These are by far the biggest announcements Microsoft has made on cloud gaming. With an aim to reach 3 billion players, the company is first integrating cloud gaming more into its core competency, i.e. consoles. Many products such as Google Stadia and Amazon Luna are using cloud gaming as a standalone model as they see this as the future of gaming. However, there are still issues of latency and connectivity that make cloud gaming cumbersome at times.

What Microsoft is doing is building the foundation for a future where cloud gaming will be the center of its strategy. For now, it is utilizing the technology and features of cloud gaming to bolster its console play. For example, it allows consumers to first try out a game via the cloud before purchasing and downloading the full version for the console. Cloud gaming will certainly continue to grow and improve on performance.

2021 may be a breakout year for cloud gaming, especially with current component shortages limiting the supply of consoles and other tech gadgets. 5G can be another driver for cloud gaming despite previous false starts. Stadia has previously partnered with Verizon 5G Home to offer Stadia Premier Edition, including a Stadia controller for free for three months, in 2020. In June 2021, AT&T began offering Stadia Pro for six months to new 5G unlimited wireless subscribers. The hardest part of these subscription offerings is providing a demonstrable value-add for consumers to continue paying for the subscription once the free period ends. 2021 looks to be the most promising time for these cloud efforts to become sticky and show growth.