Drastic increase in online services to bolster cloud gaming revenues

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The need for physical distancing and sheltering in home during the Covid-19 pandemic could accelerate the adoption of cloud gaming services among new gamers who are looking for additional sources of entertainment, according to tech market advisory firm ABI Research.

This development will give a bump to the market which has recently seen some lackluster launches and issues with content, reaffirming the original forecast of nearly $4.5 billion in revenue by 2024 – so long as cloud gaming services can support a higher load of concurrent users and provide a good first impression.

“The impact of the Covid-19 has and will continue to take a toll on the global economy until it is contained. But not all markets are equally impacted, and the cloud services and content markets are a prime example,” said Michael Inouye, principal analyst at ABI Research.

Public events and gatherings, as in other markets, have been negatively impacted, with closures, delays, and reduced attendance.

“As more of the public spends more time at home and indoors, the other component of the media and entertainment market in some areas is receiving a boost. School closures, for example, are giving a bump to video gaming and Over-the-Top (OTT) streaming. More broadly speaking, the more time people spend at home, the greater the importance of OTT streaming, video games, and social media in media and entertainment and maintaining social connections,” Inouye explained.

“For non-gaming households starved for new content and entertainment, subscribing to a cloud gaming service is a good option to add a gaming platform without making significant investments into new gaming hardware.”

In the short term, while there are certainly manufacturing shortages and challenges, some aspects of the consumer electronics space, such as game consoles, have not experienced a significant impact to date and more importantly, the future launches of next-generation consoles are still planned for the end of 2020.

“Problems with this launch, however, would certainly reduce the revenue expectations for retail and the console gaming market at large, but could offer a window for nascent cloud gaming services to generate additional exposure. Similarly, a protracted struggle to contain the virus will make it increasingly difficult for studios and content producers to produce and adhere to release schedules, disrupting the flow of content and potentially causing issues with services,” Inouye pointed out.

The longer-term will certainly yield more significant problems for all companies throughout the media and entertainment landscape, according to ABI Research.

“Proactive protections, such as altering release windows and adapting pricing and business models have already started to happen. Services and operators should continue with these experiments, work on refining the business and pricing models, and once things return to a semblance of normalcy, evaluate the prospects of continuing to employ some of these initiatives – this applies to all services, but pay-TV in particular,” Inouye said.

“Companies in the video industry are working to position pay-TV operators as cross-platform services, but operators need to better support customers who are accustomed to adding and dropping OTT services freely and extend this flexibility across the board in order to reduce churn and better serve as the future aggregation point for media and entertainment services.”

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