Microsoft released its fiscal 2022 third-quarter financial report, and it performed admirably, with revenue up 18% and net income up 8% year over year. And in the conference call following the financial results, Microsoft CEO Satya Nadella revealed that more than 10 million users played cloud games via Xbox Cloud Gaming.
Not long ago, Microsoft and Epic Games jointly announced that anyone with a device running Android, iOS or iPadOS can use Xbox Cloud Gaming to experience Fortnite for free without having to buy an additional XGPU.
Even the most discussed game on Twitter in 2022 Genshin Impact, although already available on multiple platforms including PS4 and PC, has a cloud gaming service that allows players to play the game with the best settings even if their device is not powerful enough.
Considering that Xbox Cloud Gaming is an integral part of XGP, this means that 40% of the current 25 million XGP subscribers have experienced Cloud Gaming. At the same time, since Xbox Cloud Gaming is currently only available in 22 countries and regions, which does not cover all the regions where XGP offers services, it means that the potential of the cloud gaming business is quite large.
The concept of cloud gaming was proposed by Microsoft back in 2009. At that time, Microsoft envisioned running the Windows system on a server in the data center. All local storage, data processing, and applications would be moved to the data center, the desktop would be virtualized, and the image rendered on the server side would be transmitted to the user’s end device in the form of real-time video streaming over the network.
Cloud gaming is expected to solve the problem of gamers having to use powerful PCs, smartphones, and home consoles designed specifically for gaming to minimize the threshold at which users can experience game content.
The first time cloud gaming technology reached gamers was Google’s Project Stream, unveiled in October 2018. At that time, gamers were able to play the Assassin’s Creed: Odyssey game on the web through the Chrome browser, which was undoubtedly a new experience.
Then, at the Game Developers Conference 2019, Google officially unveiled Stadia Cloud Game Service, the target product of the Project Stream project. And after that, Amazon Luna, Microsoft Xbox Cloud Games, Facebook Gaming, and even a number of cloud gaming startup platforms joined the competition.
Gamers who have already experienced cloud gaming know that the faster the network speed and the lower the fluctuations, the more similar the cloud gaming experience is to the traditional model. The problem, however, is that only gamers geographically closer to the data center or backbone network nodes can have a good experience unless cloud gaming platforms build data centers everywhere.
Cloud gaming itself is a very expensive service. Currently, online games and standalone games that offer online features use players’ hardware devices as distributed computing nodes to share the pressure on servers, meaning players pay to share the costs of providers, while cloud gaming centralizes data processing. Normally, all computations and rendering are done on the server side. Also, unlike video/audio streaming media with unified content sources, only a certain number of CDNs are required to achieve global distribution. Cloud games are essentially designed so that each user sees their own real-time live screen, which also contributes to the cost.
It may be impossible to overcome these issues in a short period of time. However, Microsoft has tens of millions of users with its Xbox cloud gaming service, which proves that the cloud gaming market has some potential. The number of users in the industry VR has exceeded 10 million, which was also the case with Meta’s Quest 2 last year. In fact, ten million users is a very important milestone for Internet products and also one of the evaluation benchmarks to determine whether the product is promising.
In its early days, when Facebook was open to anyone, the company quickly became a central member of the Internet world when it reached ten million users. Zuckerberg’s verdict on the industry VR is also that around 10 million people need to use the VR platform and buy content so that developers can continue to develop and make a profit.
If the number of users reaches 100 million, it means that one tenth of netizens have become users of the platform. So the ten million users of Microsoft Xbox Cloud Games also means that they continue to support cloud games with unstable networks and lower specifications, which shows that there is indeed a significant number of players. With the development of cloud gaming services, we can hope that gamers can free themselves from the shackles of hardware in the near future.