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    With Google Stadia Launch, China’s Investors See Future in Cloud Gaming

    Analysts predict that cloud-based gaming, powered by 5G technology, will dramatically reshape the mobile entertainment industry.
    Nov 22, 2019#gaming#technology

    China’s commercial rollout of 5G mobile networks at the end of October has opened the door to previously unimagined opportunities for a wide range of industries. Cloud gaming could be one of the first to harness the high-speed technology and reap financial rewards.

    On Tuesday, Google launched its new cloud gaming platform, Stadia. Already available in 14 markets including the U.S., Canada, and a dozen European countries, Stadia allows users to stream over 20 games including NBA 2K20, Final Fantasy XV, and Assassin’s Creed Odyssey directly in the Google Chrome web browser, without the need to download apps or programs, similar to existing video-streaming services.

    The day after Stadia’s launch, over 20 companies from China’s gaming sector saw their share prices rise by 10%, the daily limit on domestic exchanges, according to Sina Finance.

    “The launch of Stadia is definitely a tipping point,” Zhang Yi, a senior analyst at online consulting firm iiMedia Research Group, told Sixth Tone, referring to the Chinese gaming companies’ strong performances this week. In its latest report published last week, iiMedia said cloud gaming supported by 5G networks presents a huge opportunity that could reshape China’s entire gaming industry.

    Currently, most mobile video games must be downloaded as apps or programs to internet-connected devices such as smartphones, tablets, or desktop computers. Developers have to make different versions of their games that are optimized for these different devices, as well as their distinct operating systems. They also have to share a portion of their revenues with game publishers and distribution channels, which can amount to 50% or more of their earnings, Zhang said.

    “If game developers don’t rely on these distributors or publishers, such as app stores or Tencent, they can’t reach their users,” Zhang explained. Cloud gaming would likely allow game developers to bypass distributors, while 5G speeds would provide network stability and low latency that are crucial for cloud gaming — and that can be difficult to maintain on the current 4G network. In the future, gamers will only need a 5G-ready device and access to a 5G network to ensure a seamless, uninterrupted cloud gaming experience.

    “It’s like playing web browser games that can be found and played anywhere, without the need to download, save, or update,” Zhang said. “It’s definitely a big encouragement to the game developers.”

    Some companies are already taking steps to seize the imminent opportunity. Tencent, for example, started testing three cloud gaming platforms earlier this year. At the ChinaJoy digital entertainment expo in August, the company launched what it called a “cloud gaming solution,” along with a handful of games playable on a trial basis.

    Phone makers and cell carriers are trying to get in on the cloud gaming action, too. In June, Huawei X Labs announced that it would join forces with rival game developer NetEase to build a “joint innovation lab” for 5G cloud gaming. And in September, Alibaba Cloud partnered with software company Ubitus to launch its own cloud gaming solution based on the concept of a public cloud. Meanwhile, China’s “big three” telecom operators — China Mobile, China Telecom, and China Unicom — are all busy developing their own cloud gaming platforms.

    Along with the U.S., China is one of the world’s two largest mobile gaming markets. Its annual revenue is expected to reach $25.5 billion by the end of 2023, according to Niko Partners, a market intelligence group focusing on Asia’s gaming sector. But China’s gaming industry is still recovering from a nine-month suspension of new game approvals and faces an ongoing crackdown on minors’ screentime. According to Zhang, China’s cloud gaming industry is still in its infancy, with just 63 million users nationwide and a market value of 630 million yuan ($90 million) at the end of last year. But with 5G, the domestic market could be worth 100 billion yuan and boast 600 million users by 2023, he said.

    Even the Chinese government — which seems to have gaming permanently in its crosshairs — has recognized the potential of a 5G-backed cloud gaming market. During this year’s ChinaJoy conference, Guo Yiqiang, head of publishing at the Publicity Department of the Communist Party, endorsed cloud gaming, calling the sector an important application of 5G technology.

    Zhang of iiMedia also sees cloud gaming as a potential driving force for an initial wave of 5G consumption. Since 5G’s commercial rollout, telecom providers and phone makers have largely struggled to convince consumers that they need 5G services and devices. “Users still think 5G isn’t relevant to them,” Zhang said. “Telecom providers are actively promoting 5G, but it’s more for autonomous driving and the industrial internet, which users cannot feel. So cloud gaming is something these users can experience and feel the difference.”

    Some experts are still on the fence about whether cloud gaming is being overhyped as a potential game-changer, however, and early reviewers have been largely unimpressed by Google Stadia, with one Forbes contributor calling it “a technical, conceptual disaster.”

    “Is the problem with cloud gaming or with Google?” Pei Pei, a well-known online commentator and an analyst at Sinolink Securities, wrote in a recent blog post. Pei went on to list a series of questions that he believes have yet to be answered, addressing the business model, content, and target audience. “Cloud gaming has potential — just not Google’s,” he concluded.

    Editor: David Paulk.

    (Header image: A controller for Google’s cloud-based gaming service, Stadia, is exhibited at the Google I/O developers’ conference in Mountain View, California, May 7, 2019)