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Microsoft has a bleak outlook on cloud gaming’s future

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Microsoft has addressed the future of cloud gaming in its lengthy response to the UK Competition and Market Authority’s (CMA) decision to launch an in-depth “Phase 2” investigation into the company’s purchase of Activision Blizzard. It turns out that, away from the marketing for Microsoft’s xCloud game streaming service, the company’s outlook on cloud gaming is pretty bleak, at least for the short term.

Cloud gaming is a “new and immature technology which the CMA has recognized faces significant challenges,” writes Microsoft, adding that consumer adoption of the technology “is not expected to be rapid as it requires a significant change in consumer behaviour”. Rather than an imminent cloud revolution, Microsoft expects “that gamers on PC and console will continue to download the vast majority of the games they play” instead of adopting streaming alternatives.

It’s a marked difference from the company’s bullish public stance on its own xCloud streaming service. At an E3 event three years ago, Xbox boss Phil Spencer stood on stage and touted the service with characteristic enthusiasm, but it seems that Microsoft privately has far more muted expectations both for xCloud and game streaming as a whole.

Microsoft is talking down (or honestly describing) the near-term future of cloud gaming in order to counter the CMA’s argument that it might use its purchase of Activision Blizzard to freeze out competitors in the game streaming market. Instead, Microsoft argues that, because adoption of the tech has been so sparse, “Harming or degrading rival services would significantly set-back adoption of this technology,” which would only benefit “market-leading incumbents” like Sony on console, Google and Apple on mobile, and Steam on PC.

Rather than tightening its grip on cloud gaming, Microsoft argues that it would benefit much more from encouraging “the widespread adoption of cloud gaming technologies by as many providers as possible”. That, says Microsoft, would help spark the “major shift in consumer behaviour required for cloud gaming to succeed”.

So, in essence, Microsoft is arguing that it has no interest in monopolising cloud gaming because there’s barely anything to monopolise. The technology is still so embryonic, and its adoption so minimal, that the main challenge in the foreseeable future is convincing players that the tech is worth their time at all, no matter who provides it. Considering the upcoming death of Google Stadia, it’s hard to find fault with Microsoft’s argument. 

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