Cloud (M&E), a Benefactor of the COVID-19 Pandemic

Amazon announced its cloud gaming service, Luna, in September, and it entered early access (in the United States) on October 20th. A few days later, Facebook announced the availability of cloud games on its Facebook Gaming platform, stemming from its acquisition of PlayGiga in late 2019. While these services were planned well in advance of the COVID-19 pandemic, the need for social distancing, cancellation of public events, and remote schooling has been a boon to the gaming industry. While the pandemic will not necessarily drive existing gamers to the cloud, it has helped to accelerate the outreach to new gamers by making gaming more accessible—Facebook’s use of cloud gaming, for example, is focusing on free-to-play engagements.

Similarly, video solutions providers consistently point out the acceleration and acceptance of cloud solutions and services as a direct result of the global pandemic. Broadcasters and operators faced the same challenges as their workforce went remote, and this positioned the cloud as an optimal solution. Broadcasters that adhered to the “tried and true” infrastructure and on-prem hardware were forced to embrace cloud solutions, and the vast majority now view the cloud in a new light. This doesn’t mean that 2020 resulted in a complete transition; there are still a great deal of legacy deployments operating today, and many will go through a hybridization process that bridges the divide between legacy and the cloud. Solutions providers like Synamedia and Harmonic, for example, are specifically targeting these hybrid opportunities. The gaming and video streaming markets today are relatively separate with distinct market leaders, but the cloud will alter these landscapes and engender far more opportunities for overlap and crossover.

Across the media and entertainment industry, we are starting to see a convergence of content and services. Companies are already talking about the value and significance of collaboration between business units, and in some cases, these silos are already coming together and merging. For example, a company might have a group that specializes in social media and another in streaming video, but increasingly content is flowing freely to both. In linear video, a similar story is starting to play out as companies and groups (e.g., On Addressability and Project OAR) are hoping to make linear look more like digital in terms of ad inventory and management. This month, Nielsen, for example, announced it is adding addressable measurement to its National TV currency, by integrating data across 55 million devices, which include smart TVs and STBs from AT&T DirecTV, DISH, and VIZIO (which is working with Project OAR).

Cloud gaming is not currently part of these industry efforts, but in time it could be, especially when you consider that the likely market leaders have significant roles throughout the M&E market: Amazon/AWS, Google, Microsoft, Apple, Facebook, Tencent, Alibaba, Sony, etc. With the heightened rules and concerns around privacy, it may sound like an impossible vision as it becomes increasingly difficult to rely on broad tracking devices (like third-party cookies) or easy access to deterministic data (i.e., data via Apple’s IDFA), but consumers will be far more willing to opt-in to tracking if it is handled by a known and trusted entity and it provides a better overall experience (not too far removed from consumers’ relationships with Google and Apple via their smartphones). Cloud gaming as just another application on a smart TV platform or smartphone could leverage the same pool of information to offer in-game advertising, something that was hyped years ago but was not a commercial success, in part because the ad inventory was too small and there was too little data on the player base. Cross-channel tracking and audience measurements could change this dynamic.   

As alluded to earlier, the pathway to this unified future is still years away, but the pandemic has accelerated many of these trends. The video market is in the lead and will serve as the foundation for other industries (i.e., social) to build upon and integrate. Cloud gaming has certainly grown faster (in terms of users) than our 2019 forecasts had projected (even for 2020), but the strong demand for next-generation consoles and GPUs from NVIDIA and AMD are clear signs that the industry is far from transitioning wholesale to the cloud—there are at least 5 healthy years ahead for the PC and console market. This does not mean there won’t be crossovers happening at a smaller scale, however, as is the case with video today (Microsoft’s Xbox Game Pass Ultimate tier is a prime example where gamers will have access to both cloud and console/PC).

Gaming is also important as video becomes more interactive—many of the same principles and incentives that fuel gamers will help video services add value through interactivity and gamification. Ultimately, companies will need to view content, workflows, and the very structure of their services through a new lens and a more expansive customer journey. Marketing and advertising, BSS/OSS solutions, and data pools will need to adapt to support a more unified ecosystem that sees ad inventories and customer/service management solutions extend to multiple platforms and channels.

Focus must remain on creating value for the end user to ensure the necessary business models remain viable in the years to come. This includes better user experiences, direct value (e.g., ads with promotions), and will likely include hybrid business or pricing models (e.g., free to play/view + ads and premium subscription or pay to play), but ultimately transparency and security will remain critical ingredients to ensure services maintain healthy relationships with their customers. The relationships that services build with their customers will become more important than ever, especially as these networks extend to different segments of the market and encompass more areas of their end users’ lives.