Cloud Gaming

In September, Google announced it will be shutting down its game platform Stadia on January 18. Google will be making a full refund to anybody who bought Stadia hardware or bought gaming content. The announcement is reported to be a shock to the online gaming industry because it calls into question the business model of selling gaming through monthly subscriptions.

Gaming is a huge business. In 2021, gaming generated $214 billion in revenues worldwide. That represents over 6% of all spending on entertainment. Gaming market experts are predicting that this will grow to over 10% during this decade.

The pandemic triggered a growth spurt in gaming, with revenues almost tripling since 2019. During that time, there was also a big change in the dynamics of the industry, where many games are offered for free. Many game makers  are willing to forego the upfront fees for purchasing a game, which is a barrier to entry for consumers, and instead are hoping to get tens of millions of users by giving free access to games. Free games get monetized by microtransactions within the games to buy in-game goods and services. The biggest example is Fortnite, which is free to play and yet generates several billion dollars per year in revenue from players. Currently, almost all mobile games and six of the ten top PC games are free. The console game companies have stuck with the traditional paid model.

Before the pandemic, some large tech companies like Apple, Google, Microsoft, NVIDIA, and Tencent created online gaming platforms where customers could get access to libraries of games with a monthly subscription. The online platforms were chasing several groups of gamers. First, online games freed players from an expensive PC or console, and gamers could play with a handheld device anywhere they could find fast broadband. Second, the online platform libraries were meant to attract casual gamers who aren’t focused on playing only a few games. The vast majority of gaming revenue comes from casual players.

But online game platforms like Google got mixed reviews. The biggest complaint was that gaming through handhelds could be sluggish – a death sentence for gaming. This speaks more about the quality of broadband connections than it does the gaming platforms. Serious gamers using PCS or consoles invest in buying the fastest broadband available. But people willing to game on handheld devices from anywhere were subject to the big variability in broadband connections away from home. I recently talked to a librarian whose library had banned online gaming because it killed the broadband connections of other library patrons.

Google obviously didn’t achieve the goals it had set for the gaming platform and didn’t get the number of subscriptions it was hoping for. Online reviews of the Google platform are mixed, with some users loving the service while others pan it. Some users said the online libraries of games aren’t dynamic, with the companies going for a large library instead of a great library.

Google’s demise might spell a change in the idea of subscription gaming – it might not be what enough people want. But even if these online services die or aren’t very popular, there is still going to be a huge demand on broadband networks to carry gaming content. Both PC and console platforms invite gamers to play online with friends by setting up VPNs. Many of the popular free games allow for multiple players, in some cases millions at a time.

Gaming has spread to all age groups in the US. 24% of all gamers in 2022 are under 28, while 26% are between 18 and 34. But the other 40% of gamers are over 34, with 6% of gamers over 65.

Ten years ago, we didn’t even mention gaming when talking about uses of broadband. But for many households, gaming has become the predominant driver of bandwidth demand. Interestingly, people don’t just play games, and millions watch others play games on Twitch and YouTube. While the Google gaming platform didn’t make it, I think we can expect gaming to be a significant driver of broadband usage.

Gaming Migrates to the Cloud

We are about to see a new surge in demand for broadband as major players in the game industry have decided to move gaming to the cloud. At the recent Game Developer’s Conference in San Francisco both Google and Microsoft announce major new cloud-based gaming initiatives.

Google announced Stadia, a platform that they tout as being able to play games from anywhere with a broadband connection on any device. During the announcement they showed transferring a live streaming game from desktop to laptop to cellphone. Microsoft announced the new xCloud platform that let’s Xbox gamers play a game from any connected device. Sony Playstation has been promoting online play between gamers from many years and now also offers some cloud gaming on the Playstation Now platform.

OnLive tried this in 2011, offering a platform that was played in the cloud using OnLive controllers, but without needing a computer. The company failed due to the quality of broadband connections in 2011, but also due to limitations at the gaming data centers. Both Google and Microsoft now operate regional data centers around the country that house state-of-the-art whitebox routers and switches that are capable of handling large volumes of simultaneous gaming sessions. As those companies have moved large commercial users to the cloud they created the capability to also handle gaming.

The gaming world was ripe for this innovation. Current gaming ties gamers to gaming consoles or expensive gaming computers. Cloud gaming brings mobility to gamers, but also eliminates need to buy expensive gaming consoles. This move to the cloud probably signals the beginning of the end for the Xbox, Playstation, and Nintendo consoles.

Google says it will support some games at the equivalent of an HD video stream, at 1080p and 60 frames per second. That equates to about 3GB of downloaded per hour. But most of the Google platform is going to operate at 4K video speeds, requiring download speeds of at least 25 Mbps per gaming stream and using 7.2 GB of data per hour. Nvidia has been telling gamers that they need 50 Mbps per 4K gaming connection.

This shift has huge implications for broadband networks. First, streaming causes the most stress on local broadband networks since the usage is continuous over long periods of times. A lot of ISP networks are going to start showing data bottlenecks when significant numbers of additional users stream 4K connections for hours on end. Until ISPs react to this shift, we might return to those times when broadband networks bogged down in prime time.

This is also going to increase the need for download and upload speeds. Households won’t be happy with a connection that can’t stream 4K, so they aren’t going to be satisfied with a 25 Mbps connection that the FCC says is broadband. I have a friend with two teenage sons that both run two simultaneous game streams while watching a steaming gaming TV site. It’s good that he is able to buy a gigabit connection on Verizon FiOS, because his sons alone are using a continuous broadband connection of at least 110 Mbps, and probably more

We are also going to see more people looking at the latency on networks. The conventional wisdom is that a gamer with the fastest connection has an edge. Gamers value fiber over cable modems and value cable modems over DSL.

This also is going to bring new discussion to the topic of data caps. Gaming industry statistics say that the average serious gamer averages 16 hours per week of gaming. Obviously, many play longer than the average. My friend with the two teenagers is probably looking at least at 30 GB per hour of broadband download usage plus a decent chunk of upload usage. Luckily for my friend, Verizon FiOS has no data cap. Many other big ISPs like Comcast start charging for data usage over one terabyte per month – a number that won’t be hard to reach for a household with gamers.

I think this also opens up the possibility for ISPs to sell gamer-only connections. These connections could be routed straight to peering arrangements with the Google or Microsoft to guarantee the fastest connection through their network and wouldn’t mix gaming streams with other household broadband streams. Many gamers will pay extra to have a speed edge.

This is just another example of how the world find ways to use broadband when it’s available. We’ve obviously reached a time when online gaming can be supported. When OnLive tried is there were not enough households with fast enough connections, there weren’t fast enough regional data centers, and there wasn’t a peering network in place where ISPs connect directly to big data companies like Google and bypass the open Internet.

The gaming industry is going to keep demanding faster broadband and I doubt they’ll be satisfied until we have a holodeck in every gamer’s home. But numerous other industries are finding ways to use our increasing household broadband capcity and the overall demand keeps growing at a torrid pace.