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Contestable Markets: The Battle for Dominance in Cloud Gaming

Geoff Riley

6th February 2020

Who said this today? "When you talk about Nintendo and Sony, we have a tonne of respect for them, but we see Amazon and Google as the main competitors going forward"

The answer is Phil Spencer, Microsoft's head of gaming quoted in this article on the BBC website. Having just come off yet another session on my favourite cycling gaming and fitness app Zwift, I was intrigued to read that Microsoft fear the enormous scale, capacity and capability of Amazon and Google (Stadia) as the cloud gaming industry expands and evolves in the months and years to come.

The cloud gaming market is forecast to grow from one billion U.S. dollars in 2018 to eight billion by 2025 but given the surge in investment flowing into this industry, this may prove to be a substantial underestimate.

Cloud gaming uses huge servers to run a gaming service instead of high-powered PCs. The player stream a game from the cloud, allowing them to access their game from anywhere and any device, from a phone or tablet or PC.

There is a big shift in consumer preferences taking place. The annual number of video game consoles sold worldwide has dropped from around 90 million devices sold in 2008 to only about 45 million in 2018 as shown in the chart below.

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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