The gaming industry has been gradually making the shift to digital over the last decade and cloud gaming is the next step in the process. This study examines the challenges facing the industry-wide and commercial deployment of cloud gaming in terms of technology and services. It also identifies the major industrial challenges across the value chain and the growth engines that will encourage development of this new market segment.

• What role will cloud gaming play in the restructuring of the gaming industry?
• How will the various players in the new value chain fit together? Will this be a turning point for device manufacturers?
• What will be the new challenges facing consolemanufacturers? What position will accessories have
in these new game forms?
• Is connected TV the preferred device for cloud gaming?
• Network infrastructure, bandwidth, lag time… what
technological challenges need to be resolved for cloud gaming to really take off?
• What services will be available and what business and pricing models will be used?
• Does cloud gaming herald the end of the console?

Table Of Contents


Contents

1. Executive Summary 6
1.1. Eight major advantages cloud gaming provides across the value chain . 7
1.2. Four major technological challenges7
1.3. Six challenges for services in drawing in gamers8
1.4. Ten market challenges across the value chain 8
1.4.1. Cloud gaming service providers: quickly become a key market player 9
1.4.2. Casual game developers and publishers: more than one growth driver9
1.4.3. An additional distribution channel for publishers, a long-term risk for console
manufacturers 10
1.4.4. Consumer electronics manufacturers: paving the way for cloud gaming. 10
1.4.5. Cloud gaming: a loss leader for the Web titans and a factor for market
concentration. 10
1.4.6. Retailers: is cloud gaming a secondary objective? 10
1.4.7. An opportunity for online distributors to break free of the PC 11
1.4.8. Service and traffic for ISPs and telcos . 11
1.4.9. Capturing audience for TV industry players . 11
1.4.10. Cloud gaming, like the rest of the industry, is moving toward ubiquity and
standardization 12
2. Methodology 14
3. Cloud Gaming’s Central Role in Video Game Digitization 16
4. Market Structure and Key Factors . 22
4.1. Introduction to cloud computing . 22
4.2. Annexed list of cloud computing companies29
4.3. Technological structure of cloud gaming 29
4.3.1. Architecture and operation of cloud gaming30
4.3.2. Pros and cons of cloud gaming technologies 34
4.3.3. Technological issues . 37
4.4. Structure of the cloud gaming industry . 40
4.4.1. The cloud gaming value chain . 40
4.4.2. Segmentation of the cloud gaming industry . 42
4.4.3. Cloud gaming offering overview43
4.5. Factors for market development and platform deployment44
4.5.1. Technological limitations . 44
4.5.2. Drawing in gamers with content . 45
4.5.3. Drawing in gamers with services . 47
4.5.4. Is the market ready? 49Cloud Gaming - How Will It Change the Game?
5. Overview of the Cloud Gaming Market50
5.1. Industry analysis . 50
5.1.1. Services offered to gamer customers 50
5.1.2. Business and billing models51
5.1.3. Publishing and catalog strategies: AAA vs. casual and social games. 54
5.1.4. Targeting as a central issue . 59
5.1.5. User experience61
5.2. Case studies . 64
6. Player Profiles. 66
6.1. Gaikai . 66
6.2. GameStop / Spawn Labs . 70
6.3. G-cluster . 72
6.4. iSwifter 77
6.5. OnLive 80
6.6. OTOY . 85
6.7. Playcast Media. 88
6.9. Spoon cloud gaming . 92
6.10. T5 Labs . 94
6.11. Ubitus . 96
7. Challenges, Market Strategies and Forecasts . 99
7.1. Challenges across the value chain 99
7.1.1. Cloud gaming service provider: quickly become a key market player. 99
7.1.2. Casual game developers and publishers: more than one growth driver 102
7.1.3. An additional distribution channel for publishers, a long-term risk for console
manufacturers103
7.1.4. Consumer electronics manufacturers: paving the way for cloud gaming . 104
7.1.5. Cloud gaming: a loss leader for the Web titans and a factor for market
concentration . 104
7.1.6. Retailers: is cloud gaming a secondary objective?104
7.1.7. An opportunity for online distributors to break free of the PC 105
7.1.8. Service and traffic for ISPs and telcos . 105
7.1.9. Capturing audience for TV industry players. 105
7.1.10. Cloud gaming, like the rest of the industry, is moving toward ubiquity and
standardization106Cloud Gaming - How Will It Change the Game?

Tables

Table 1: World video game market: physical vs. digital game sales, 2011-2015 16
Table 2: Revenue from digitization by platform . 16
Table 3: Number of super fast broadband subscribers by country and super fast broadband's
share of connected households, year-end 2010. 18
Table 4: FTTx coverage and penetration by country, year-end 2010 . 18
Table 5: Summary table of pricing strategies in use . 53
Table 6: Connected TV sales forecasts, 2012-1016 . 54

Figures

Figure 1: Share of data center activity processed in the cloud. 22
Figure 2: Change in cloud computing spending by IT companies worldwide, 2008-2013 23
Figure 3: Players in the cloud computing value chain23
Figure 4: Structure of cloud computing services 24
Figure 5: Applications of IaaS 26
Figure 6: Applications of PaaS. 27
Figure 7: Applications of SaaS. 28
Figure 8: Applications of cloud computing . 28
Figure 9: Current roles of cloud gaming players 30
Figure 10: Changing roles of cloud gaming players. 30
Figure 11: Technological architecture of cloud gaming 31
Figure 12: Operation cycles for a video game played on a local system and a cloud gaming system33
Figure 13: Structure of cloud gaming services by cloud computing technology. 40
Figure 14: Cloud gaming value chain . 41
Figure 15: Where cloud gaming fits in the traditional video game value chain . 43
Figure 16: Positioning of the main CGSPs . 43
Figure 17: Potential development scenario of a content strategy based on casual games 56
Figure 18: Potential development of game catalog content . 56
Figure 19: Worldwide online gamers 59
Figure 20: G-cluster’s business model . 75
Figure 21: Onlive business model84
Figure 22: Playcast Media’s business model. 90
Figure 23: Ubitus cloud computing technology97
Figure 24: UbiLive servers . 97
Figure 25: How GameCloud works

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