The future of video games lives in the cloud
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The future of video games lives in the cloud

The $34.6 billion games console industry is poised to face a powerful new competitor in the very near future: cloud-based gaming. Analysts have touted the emergence of games delivered over the web as a death knell for the console industry for years, but today, it looks like it’s on its way to fruition. This month, Google’s Project Stream started letting U.S. gamers explore the latest version of Assassin’s Creed on a Chrome browser, and Amazon – the leader in the cloud services market, and owner of streaming game platform Twitch – is in a perfect position to disrupt established video game norms.

Despite solid earnings, investors punished Amazon and Alphabet on the market last week

graph 3110 games

Source: Yahoo Finance

The current darling of the console world is Sony, whose PlayStation 4 has sold more than twice as many units as competitor Microsoft’s Xbox One. Masaru Sugiyama, a Goldman Sachs analyst, says the company is in a strong position – but has to be aware of changes in the industry: “until now Microsoft was the only rival, but with Google and Amazon moving in, it’s going to become tougher to stand apart.”

Early users of Google’s Project Stream have talked the platform up, saying that it essentially creates the kind of experience you can get playing on a dedicated gaming PC or console without having to actually own either of those pieces of kit. That’s no threat to game developers, like Activision Blizzard or Take-Two Interactive, but it should leave hardware-makers quaking in their boots. In Sony’s case, some analysts think it’s likely to collaborate with Amazon, and create hardware that can interact with the latter’s platform.

In any case, if it wants to remain competitive, the console industry will have to innovate before the next generation of consoles hits the market. As Sugiyama says: “the battle between local and cloud is beginning. What can the [PlayStation 5] achieve that isn’t possible in the cloud?

Disclosure
Dominion holds both Amazon and Alphabet in its Global Trends Ecommerce Fund, along with other stocks exposed to trends in video gaming, such as Activision Blizzard and Take Two Interactive.


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