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The Inflection Point for Cloud Gaming

The next wave of consoles in 2028 is likely a tipping point for cloud gaming adoption

Cloud Gaming: Is 2028 The Tipping Point?

The collapse of Google Stadia remains a major blemish for the cloud gaming industry, representing all the failed promises of the value that cloud gaming theoretically should provide gamers. While there are many things that contributed to its collapse, the largest factors are widely considered to be infrastructure shortcomings, a lack of compelling content, and Alphabet’s mismanagement and ultimate unwillingness to continue funding the project.

Despite Stadia only shutting down a little over a year ago (January 18, 2023), the cloud gaming industry continues to power forward:

  • The Activision Blizzard acquisition by Microsoft highlighted the seriousness with which regulators and industry experts were taking the prospect of cloud gaming (one of the core drivers for the CMA’s initial blocking)
  • NVIDIA via GeForce NOW has barreled into the space with new hardware
  • Netflix has joined the race with significant investments in their gaming division

The cloud gaming industry is still nascent in terms of utilization, but we wanted to take a look at what today's largest players are doing to address the factors (technology and content) that lead to the collapse of Stadia and to hone in and deliver on their proposed value propositions of cloud gaming:

  • Accessibility: The ability to play any game from any device
  • Limited Friction: Negligible load times and no downloads

The Behemoths Of Cloud Gaming

Cloud gaming is currently dominated by a few major players: Xbox, GeForce NOW, and PlayStation.

Xbox Cloud Gaming

  • Tech & Content: Xbox Cloud Gaming bundles their service with their subscription pass which offers over 400 games (GamesRadar), ensuring a strong content offering. However, Xbox seems to fall behind GeForce NOW from a technology perspective exhibited by the video compression that some users experience (PC Gamers).
  • The Value Proposition: Cloud gaming has clearly been a major focus for Microsoft as demonstrated by one of the slides leaked during the Microsoft / Activision acquisition process that highlighted their focus on “The Path to Leadership In Gaming” (Windowscentral). This likely appeals to a broader audience than GeForce NOW; players that are looking to try new games and avoid paying large amounts of money can look to their Game Pass subscription as a cheap alternative.

GeForce Now

  • Tech & Content: GeForce NOW has made substantial progress towards alleviating the latency concerns of players while also maintaining substantial graphical fidelity. To achieve this, NVIDIA partners with telecommunications companies (telcos) to integrate their servers at locations closer to end users and utilize their own high quality graphics cards. In addition to adjustments on the technology side, GeForce NOW allows users to sign into existing game libraries like Steam and Epic Games Store to play games they already own. This approach ensures they have access to incredible content, but introduces additional friction by not providing it themselves and requiring sign ins and purchases to third party providers.
  • The Value Proposition: We think that this service appeals most to the needs of the hardcore gamers who know and own the games that they want to play yet do not own high end gaming equipment and graphics cards. We think the catalyst for GeForce NOW’s adoption is when a wide audience of gamers choose to not buy their own high-end hardware but instead subscribe to this cloud gaming solution.

Both of these approaches seem to be garnering significant demand with GeForce NOW claiming over 20 million registered users in 2022 up from 1 million in 2020 (PC Mag) and Microsoft claiming that the number of people having used their cloud streaming service doubled to 20 million in 2022 (The Verge). While these are currently the leaders in the space, it is unclear which strategy will win out or if there are multiple winners in the long term.

Content Is Still King

While it is easy to point and compare cloud gaming to the video streaming wars which largely center around content, technology and performance are equally important for gamers. Today, 82% of gamers say they would skip purchasing new gaming hardware in favor of the cloud if connectivity guarantees performance (EY). However, it is unclear how differentiated this technology is between service providers and whether or not this will remain a core differentiating factor in these services going forward.

Network latency can be improved by utilizing servers closer to end users (similar to how our portfolio company, Edgegap, deploys multiplayer game servers close to end users). GeForce NOW works with telcos providers to best position their servers (NVIDIA), while Microsoft utilizes their own data centers across the world. As internet access (fiber optic cables), hardware (GPUs), and software (network optimization) continue to improve, it would not be surprising to see the largest cloud gaming providers converge on a latency that is considered “good enough” for cloud gaming, turning what is today a technical advantage into a commodity.

If technology no longer serves as a differentiator among the major providers, content is poised to take center stage once more as the core differentiator in cloud gaming. Although GeForce Now currently attracts gamers with its Bring Your Own Game (BYOG) model, the appeal of this approach may diminish as new games become increasingly available through subscription services.

In this evolving landscape, the subscription model that offers the most compelling content will likely prevail. This shift suggests that the value proposition for cloud gaming is set to undergo significant changes in the foreseeable future.

What Catalyzes The Shift

As this continues, we ask the question, “What will drive players to cloud services in the near-term and long-term?”:


  • Multi-platform Accessibility: This remains a potential near-term driver that players may utilize over time, however this value proposition is directly competitive with the new wave of handheld devices like the Nintendo Switch and Steam Deck which have recently exploded in popularity.
  • Access (Better Compute and Graphics): The ability to access more powerful computers and play games that would otherwise be unplayable on gamers existing hardware is a possible use case, but given the relatively high adoption rate of Console and PC in the U.S., 42% and 38% respectively (Statista), it remains unclear whether this will be a primary driver. However, this may be a larger near-to-mid-term driver in regions with these technical barriers (India, South East Asia, Latin America, Africa). Interestingly enough, regions that would benefit most from a lower barrier to entry still may not be able to utilize cloud gaming due to the cost structure. F2P will likely never be feasible using cloud because of this.


  • Access (Better Compute and Graphics): As stated above, we believe most gamers in the West currently have access to the infrastructure that allows them to play the games they want to play. We believe that a large unlock could take place for cloud in 2028, when next generation consoles are expected to release. This could create a situation where instead of spending an estimated $500 on a new console, users will decide that a subscription service for $10 per month may be a better option, especially when considering that the estimated $500 is equivalent to over 4 years of gameplay ($500 / $10 / 12 months).

Takeaway: The cloud gaming landscape is rapidly evolving, shaped by the lessons learned from Google Stadia's demise and other historical failures (see our history of cloud gaming newsletter), as well as the innovative strides taken by industry leaders like NVIDIA and Microsoft. Assuming costs can be controlled and profitable business models for cloud gaming are deployed, the technology advances and content offering expansions set up the industry for significant growth.

NVIDIA's GeForce Now has effectively minimized latency issues, enhancing player experience, particularly for the hardcore gamer demographic. Simultaneously, Xbox Cloud Gaming has leveraged its extensive game library to successfully address content availability concerns. These improvements reflect a robust response to past challenges and signal a promising future for cloud gaming—a future where it could become a mainstream gaming platform, offering convenience and accessibility.

The Inflection Point for Cloud Gaming

The next wave of consoles in 2028 is likely a tipping point for cloud gaming adoption

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