Video game software manufacturers are increasingly looking to cloud computing in hopes of offsetting slowing console sales.
Cloud gaming technology streams games directly to Internet-connected devices, with the processing occurring on remote servers rather than gaming consoles. As a result, gamers can play fast-action, sophisticated titles through a Web browser on their laptops, tablets, smartphones, and even some TVs without installing software or purchasing specialized hardware.
Sony’s recent $380 million acquisition of game-streamer Gaikai underscores the potential of cloud gaming, although challenges remain. In particular, firms are challenged by running data centers that require power, cooling, quick Internet connections, and advanced graphics chips. In addition, cloud gaming has yet to prove real profitability.
“Despite attractions such as avoiding paying at least $99 for a game console, cloud gaming services have had a modest impact so far,” writes The Wall Street Journal‘s Ian Sherr. “Industry researcher IDC estimated that OnLive had about two million customers during the first quarter of this year, based on a survey of 1,500 U.S. gamers—not much of a foothold compared to console sales by Sony and Microsoft Corp., which have each exceeded 60 million units sold.”
Like other software segments, gaming firms are hedging their bets that while cloud computing requires some initial upfront investment, it will eventually rain profits.