Cloud gaming can expand the addressable gaming audience and allow for any game to be played on any device. We have heard about this in the media for a few years, but most experts say cloud gaming will not take off in earnest until 5G is prevalent everywhere, and that a primary benefit will be to play high end console and PC games over a 5G connection on smartphones. While we agree that this is one use case for cloud gaming, we believe that the vast majority of mobile games can benefit from cloud gaming solutions today.
Mobile is key to the growth of cloud gaming. Mobile gaming is the fastest growth segment overall, and China is no exception, as Niko Partners has shown in our market model. 5G technology will be a key enabler of cloud gaming in the future, but that does not mean that cloud gaming can’t provide solutions over 4G. In fact, roughly 75% of mobile games can already benefit from cloud gaming on existing mobile infrastructure.
Many gaming trends have emerged (or at least gained momentum) from China and other parts of Asia, including online gaming, free to play gaming, esports, and others. In Western markets, Google Stadia, Microsoft’s Project xCloud, Amazon’s Luna, and Sony’s PlayStation Now are notable self-contained B2C cloud gaming services that operate with a subscription or premium business model. Self-contained services are restrictive though, and developers are keen to attract users from all over.
What we observe in China is that Chinese developers are taking advantage of both B2C and B2B, Platform as a Service (Paas) cloud gaming solutions, while the rest of the world is looking primarily at B2C solutions such as Stadia. We think that mobile-first B2B publishing solutions will advance in the rest of the world too, providing developers with a service that they can utilize to offer gamers a new way to discover and play mobile games, and possibly cloud native games in the future.
The B2B cloud publishing solutions that Niko Partners has observed in China help to streamline user acquisition, game discovery, sharing, and payments for mobile games in the cloud. This article covers some of the market advances coming from China for B2B mobile cloud game publishing and signals the potential in the rest of the world for B2B PaaS models.
The Growth of Cloud Gaming in China
China began its 5G rollout in October of 2019, providing the network foundation to support cloud gaming on mobile devices, instead of only Wi-Fi connected devices. China has installed 792,000 5G base stations across the country, with 260 million 5G compatible devices connected as of February 2021. In March, 76% of all phones shipped in China were 5G compatible, and this number is expected to reach over 80% by year-end. According to the GSMA, the number of 5G smartphone users is set to reach 822 million by 2025.
China’s three leading telecoms providers, China Unicom, China Mobile, and China Telecom all offer B2C cloud gaming services that its subscribers can access on their phone or TV. Tencent, the largest games company in the world, offers its Xianyou mobile cloud gaming service with over 100 mobile games that can be played across multiple devices. Huya, a top live streaming platform in China, offers its Yowa cloud gaming service that integrates with its live streaming platform and allows streamers and viewers to play together instantly. While business models are still being experimented with, most services are currently testing a time-based fee model (pay per hour) or a subscription model (Pay per month / year).
The saturation of the B2C cloud gaming market leads to market fragmentation, with title licenses distributed among various services. However, we expect to see the market consolidate as dominant services emerge. B2B services aim, in part, to help smooth the friction in the B2C market and let the developers go direct to their own consumers.
The B2B Solution – China Starts a Trend
In China, mobile game developers are already using B2B solutions that offer a PaaS model whereby game developers can directly publish mobile games to the cloud, to be accessible to gamers everywhere. As of May 2021, China has the most developed PaaS cloud gaming ecosystem in the world. The space is driven by Haima Cloud, Huawei, Alibaba, Tencent, Kingsoft Cloud, WeLink and a few more. Notable mobile game companies including Tencent, Lilith Games and miHoYo have invested in these B2B cloud gaming solution providers. This broad ecosystem has attracted our attention and we expect similar developments to take hold outside China soon.
Outside of China, we have found only a couple of notable companies in the B2B cloud gaming PaaS space. These are Ubitus, which primarily focuses on console and PC game solutions, and Now.gg, which focuses on mobile game solutions. According to an article published on VentureBeat, Now.gg has more than 10 mobile game companies publishing on its platform. Validating that the Chinese recognize the benefits of PaaS, at least two of those companies are Chinese game developers. Facebook Cloud Gaming offers a B2B solution that allows mobile game developers to bring their titles to the cloud; however, these games are only accessible on the Facebook platform.
This type of publishing to the cloud is limited by technology infrastructure so we think it will be difficult for Chinese vendors to extend to international markets. This leaves a wide-open playing field for the rest of the world.
[Leading Chinese vs Global B2B Cloud Companies]
Understanding the Future of Cloud Gaming Through China
While this analysis is focused on the B2B aspect of the Chinese market, it is important to also note that China is leading the world in implementation of both B2B and B2C cloud gaming offerings thanks to a combination of support from government, major telecoms, leading publishers, and independent platforms. There are currently more than 30 B2C cloud gaming platforms operating in China, although the saturation of the market has already forced some of these, such as that of Yoozoo, to close. The Chinese games market has a much stronger focus on mobile gaming as the future of the games industry, and this contributes to its diversity. China is the only global market to have developed and widely implemented B2B cloud gaming services, and the impacts are already apparent in gamer behavior and mobile market strategy. B2B models also dramatically reshape game marketing, shareability, discoverability, and even payment pipelines.
[Cloud gaming exposure in China] (Source Niko Partners, 2021 China Gamer Survey, n. 2400)
How does B2B Mobile Cloud PaaS work in China now?
Developers publish their games to the cloud via a progressive web app that can run on any device that supports a browser, including social media and messaging apps. This is done without a third-party service or subscription that the user must sign up for. This frictionless approach makes it much easier for someone to start playing mobile games anywhere, at any time, on any device. It also allows the game developer to bypass the take rate they would pay Apple or Android stores on each in-app purchase, with the developer only needing to pay the B2B provider to host the game in the cloud and process payments. This means that the developers can use a PaaS to instantly reach a much larger, previously untapped audience – all of the reasons why the B2C cloud solutions are in development today.
PaaS cloud gaming solutions increase opportunities for integration and sharing – titles can be embedded in websites, chat platforms, and integrated into streaming media, meaning curious players can try a game out at the touch of a button. We are already seeing ByteDance experiment with this in China through Douyin (TikTok) where cloud game ads run in the app and users can instantly start playing after clicking through.
Case Study: Genshin Impact
One case study in the use value of PaaS cloud gaming by Chinese games in international markets is miHoYo’s Genshin Impact, a F2P MMO for consoles and mobile devices. miHoYo recently worked with cloud solutions provider WeLink to release a cloud game version of Genshin Impact, allowing players on older hardware to experience the title. This extends the game’s reach while attracting more players who can then spend on premium content. By eliminating the need to run the game locally, download files, or have the hardware to support a high-demand game, miHoYo can increase adoption with the opportunity to convert these adopters to paying players. This also allows miHoYo to circumvent payments made through console or mobile app stores, eliminating the percentage they would pay to these platforms. Already established players can quickly share the game with their friends, building grass-roots support for audience growth.
For more information
Our upcoming report, Cloud Gaming in Asia, is scheduled for release in July 2021 and will examine more broadly the current state of cloud gaming ecosystems and usage in the 11 Asia markets that we cover in our analysis.
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