Big Tech's Cloud Gaming Competition Heats Up

Big tech players are becoming increasingly active in the cloud gaming space, with the most recent market entrant Facebook, Inc. (FB) unveiling its free gaming services on Oct. 26.

Also earlier this week, Microsoft Corporation (MSFT) reported its quarterly earnings showing strong demand and growing revenue from its gaming services. And Amazon.com, Inc. (AMZN) has just joined the ranks of existing cloud gaming players like Alphabet Inc.'s (GOOG) Google and NVIDIA Corporation (NVDA), with Amazon opening early access to its cloud gaming platform Luna last week.

The cloud gaming landscape is evolving rapidly in response to consumer demand and the live-from-home environment, but it remains to be seen which big tech firms are best positioned to dominate this growing market. Microsoft estimated the gaming market at 3 billion consumers in its financial results this week. The market is estimated to grow to $7.24 billion by 2027, according to a study by Grand View Research, Inc. 

Gaming offerings are also a test of which big tech platforms are able to establish the most robust business models, develop distribution channels, and play well with each other. While Amazon was able to offer its gaming services on Apple's iOS, Facebook found it more challenging to work around Apple devices. Amazon, meanwhile, is offering games across "PC, Mac, and on web apps for iPhone and iPad," with Android expected to follow.

"Apple treats games differently and continues to exert control over a very precious resource," said Jason Rubin, vice president of Play at Facebook. "Stay tuned as we work out the best way for people to play games when and how they want, regardless of what device they bought."

Facebook, which added cloud games to its existing app this week, is not charging for its games – unlike some of the other cloud gaming providers like Microsoft and more recently Amazon. "We give away a lot of stuff for free, because that is a business for us," Rubin wrote. "Don't undervalue just having people engage with communities on Facebook. That is what we do." Facebook receives 30% from in-app purchases, in addition to ad-based revenue, according to Verge.

Most cloud gaming players note that we're still in the early stages of this market's growth. "Cloud game streaming for the masses still has a way to go, and it's important to embrace both the advantages and the reality of the technology rather than try to oversell where it'll be in the future," Rubin noted.

Microsoft, which expanded its gaming offerings in September, reported a 22% increase in gaming revenue in the last quarter. Its Xbox revenues jumped 30% in the same time period.

Along with Google and NVIDIA, newer players like Facebook and Amazon see growing opportunities in the cloud gaming space, which allows consumers more the convenience of "anywhere, anytime" gaming compared to more traditional console gaming. "We are just getting started and need streamers and players of all kinds – core, casual, and first-time gamers – to provide feedback," said Marc Whitten, vice president at Amazon Entertainment Devices and Services, in a company statement. 

Established players like NVIDIA GeForce Now, Google Stadia, and Microsoft Game Pass Ultimate are not going away. The field is just getting more crowded, with more subscription, platform, and device options for gamers of different stripes.

"What you'll see on day one is just the beginning," said Kareem Choudhry, Microsoft's corporate vice president, cloud gaming, on the day of the launch of 150 games last month. "Over time we'll continue to innovate and add more games that you want."