Gaming in the Cloud: The Next Frontier Beyond Consoles

Cloud gaming is poised to transform the video gaming sector in the forthcoming years, enabling a much wider audience to stream high-quality games (featuring advanced graphics and intricate game dynamics) on any device without requiring costly gaming consoles or PC components. The cloud gaming market is projected to grow at a 44% CAGR until 2030, propelled by swiftly advancing high-speed internet infrastructure, evolving commercial strategies, and enhanced user experiences. Beyond the gaming engagement, cloud gaming will also revolutionize every level of the video game value chain.

We anticipate that in 2025, sales of gaming consoles and PC hardware will decline, as consumers prioritize spending on displays and streaming devices. The year 2025 will be pivotal for developing cloud gaming capabilities across the value chain, compelling stakeholders to carefully evaluate their investment choices.

How does cloud gaming function?

Cloud gaming involves a range of technologies that utilize the cloud to present all or part of the gaming experience. The most significant aspect of this is cloud streaming. Cloud streaming comprises two elements: executing CPU and GPU-intensive video games on powerful remote servers and transmitting the gameplay to users’ devices. By offloading the substantial computational power needed for gaming to the cloud, cloud streaming enables high-quality games to be played on any device equipped with a display and an internet connection.

 

Why is cloud gaming the future?

Cloud gaming provides significantly enhanced accessibility and integration across platforms. It lowers customer barriers to entry by removing the necessity for costly hardware such as consoles or PCs, making high-caliber games more attainable and available to a broader audience—although ongoing subscription fees are expected to rise as cloud hosting and delivery costs are factored in. This transition brings an opportunity for traditional PC and console game developers to diversify their offerings on platforms like smartphones, which constitute ~50% of the global gaming market. Furthermore, cloud gaming aligns with contemporary trends favoring seamless cross-platform experiences, enabling players to smoothly shift between devices while preserving their progress.

 

What hurdles does cloud gaming encounter?

Despite its optimistic prospects, cloud gaming still confronts both technical and commercial obstacles. On the technological side, required internet speeds, low latency, and virtualization software are not yet broadly accessible for widespread adoption. Nonetheless, advancements in 5G availability and fiber-optic systems are progressing swiftly, and AI along with machine learning are continually enhancing video compression and minimizing buffering durations, further refining the overall user experience. Consequently, we believe that the technological limitations will be addressed soon.

The transition to suitable cloud-compatible commercial models, however, will be more complex. Specifically, four entities dominate the majority of games consumed on consoles and PCs (Microsoft, PlayStation, and Nintendo for consoles, along with Steam on PC). While they are gaining traction by bundling cloud gaming features with premium content subscription services, these firms have not yet reached a critical mass. Mass adoption of cloud gaming will only occur when these platforms incentivize it more effectively.

Xbox and PlayStation have provided cloud gaming for several years, yet their emphasis has been on enhancing cross-platform accessibility rather than lowering customer expenses by eliminating console hardware. On Xbox Live, users must subscribe to the highest-priced “premium” plan to access cloud gaming. Steam, which derives most of its revenue from a percentage of one-time purchases instead of a subscription model, provides cloud gaming only through peer-to-peer means, where one player serves as the server and others connect to them. For a more significant shift, Steam would need to modify its revenue structure.

What may ultimately encourage game distributors to prioritize cloud gaming is the evidence that the average revenue per user (ARPU) for cloud games appears to be on the rise and is set to exceed all other gaming formats, aside from mobile, by 2027. Once the commercial model issue is resolved, we foresee a swift transition from traditional to cloud gaming, with an adoption curve parallel to that of video streaming—where over a decade, Netflix completely dismantled Blockbuster’s advantage, leading to Blockbuster’s downfall.

 

Our forecast for the cloud gaming sector in 2025

The cloud gaming market could achieve a valuation of $64 billion by 2030 (and $140 billion by 2032, according to Market.us), and continue to grow from there. We predict a significant alteration in consumer expenditure in 2025, as gamers abandon conventional hardware in favor of investing in streaming devices and displays.

Game developers, publishers, and distributors must concentrate on preparing themselves for success in both the short and long term to gear up for the cloud gaming revolution. Technological barriers will soon be rectified, paving the way for those who tackle the commercial model challenge to gain a competitive advantage in this profitable, emerging industry.