INSIGHTS | Cloud Gaming Lite

China jumped on the cloud gaming dream in a big way in 2019, with major companies such as Tencent, Huawei, and NetEase each announcing plans for cloud gaming services or solutions.

However, the current leader Google Stadia has struggled to provide satisfactory service. China also has a smaller market for the graphics-intensive games that are best suited to cloud.

Bottom line: Cloud gaming will not make AAA games big in China any time soon—as neither the network speeds nor the market exists yet. But major companies still believe they can make money selling incremental improvements in the less-demanding games already popular in China.

Major cloud projects:

• February 2019: Tencent unveiled its cloud gaming service Tencent Instant Play, a product of its partnership with Intel.
• March 2019: Tencent started recruiting users to help with the closed beta of its other cloud gaming service Start, to be made available in Guangdong province and Shanghai.
• June 2019: Huawei launched its cloud gaming management platform featuring 5G integration.
• June 2019: NetEase’s Thunder Fire Studio partnered with Huawei to establish a cloud gaming innovation lab using 5G networks.
• December 2019: NetEase starts beta testing its cloud gaming service, which is currently limited to mobile titles and runs on 4G networks.
• Neither Netease nor Tencent have progressed beyond testing.

Virtual big rigs: The dream of cloud gaming services is to eliminate the need for high-end hardware.

• Cloud users don’t have to download and install games and updates.
• By rendering games in the cloud and allowing access from all types of devices, cloud gaming blurs the boundary of PC, console, and mobile games, putting all game developers on a level playing field.
• Cloud gaming enables users to play more graphically intense titles in more fragmented time, which could boost the active player base—and potentially the life span of games—with social elements.
• Stadia’s business model is essentially virtual hardware rental—much like having access to a gaming device, users pay to use the computing power of the service, and then buy games separately.

No market for AAA: Hardware aside, China doesn’t have a market for AAA games, those that come with the highest development and promotional budgets.

• China’s console market has been kept small by a 14-year ban on foreign consoles, during which time PC gaming and later mobile gaming became dominant. Even after the ban was lifted in 2015, game selection has been heavily censored to include only uncontroversial titles.
• China’s PC-mobile video game ecosystem consists primarily of free-to-play titles, so cloud gaming services could have a hard time charging users high subscriptions just to access these games on the go.
• China’s most popular games—such as League of Legends, Honour of Kings, and Peacekeeper Elite—have relatively low hardware requirements and can run smoothly on inexpensive hardware.
• Stringent game approval processes in China create an additional barrier for AAA titles. These tend to contain regulator-unfriendly elements like violence or gore.
• Chinese operators hoping to sell AAA titles must compete with Steam, which sells to Chinese users from outside the country, avoiding licensing issues.

How do they charge? While big players in China’s cloud gaming landscape have yet to make public their pricing approach, some small service providers have been operating with time, or subscription-based models for as long as five years.

• Dalongyun, a Shanghai-based cloud gaming company, charges users based on the time they spend on games and the configuration they choose. Except for the shooter title “Overwatch,” all available games on the platform are free to play.
• Another Chinese platform, Gloud Games, uses a subscription model, charging users monthly, weekly, or daily membership fees per game. Users can also choose to buy permanent access to games.
• But Gloud’s model could run into legal trouble: Most AAA titles offered on Gloud Games have not received approval to be distributed in China.

Selling incremental improvements: Major players such as Tencent and NetEase clearly believe they see a market for cloud gaming. Their strategies probably do not depend on a sudden AAA takeoff, but rather incremental improvements in experience for already-popular games.

• Tencent’s popular and upcoming titles, such as League of Legends, PUBG, and Fortnite, are often played on small computers and mobile devices at low settings, compromising experience for mobility. Cloud could offer incremental improvements rather than access to whole new games.
• Huawei, which does not have its own gaming portfolio, would probably offer services to help game publishers offer titles through the cloud or roll out its own cloud gaming services.

Is it good enough? Reports from multiple news outlets and early users of Google’s Stadia, launched in November, suggest the service just isn’t very good. Although service providers in China are not guaranteed to run into similar issues, they very well could.

• The Washington Post reported “horrendous latency” (the time lapse between pressing a button on a controller and the game reacting to it) as well as “buggy, quick cuts” when using Stadia, making both singleplayer and multiplayer games unplayable.
• Forbes also reported “periodic stuttering issues with massive resolution and frame drops” that disrupted gameplay, despite testing Stadia using a solid internet connection.
• Many Twitter users who used Stadia also complained about serious lag during cutscenes, which require no input from players.
• Some of the world’s most widely played games, such as “League of Legends,” “CS: GO,” and “PlayerUnknown’s Battlegrounds,” happen to be very latency- and frame rate-sensitive due to their emphasis on the reaction speed of players.

Is 5G the answer? Cloud gaming needs high bandwidth and low latency to function properly, and 5G networks can theoretically provide just that.

• China has been investing heavily in 5G, with the three state-owned carriers—China Mobile, China Unicom, and China Telecom—launching 5G plans in November.
• However, for 5G to truly provide the lower latency that shooter titles need, they have to be built as wholly new standalone networks, while the 5G networks being rolled out today are non-standalone ones that rely heavily on leverage existing 4G infrastructure, according to a Forbes report.

Despite so, Yang Yu, the technical lead at Tencent Cloud Gaming Solutions, told TechNode in November that 4G is already good enough for solid cloud gaming experiences as long as you don’t move between base stations. Tencent is focusing on delivering quality 4G-based cloud gaming experience for casual gamers and some pro gamers, Yang said.