Amazon may be going after cloud gaming, but Microsoft has a big head start

Key Points
  • Competition is brewing among Amazon, Google and Microsoft in a different corner of the cloud market: gaming.
  • Amazon is planning a gaming service, but it probably won't become available before 2020, according to a new report.
  • Google is testing a new service.
  • Microsoft launched the Xbox almost two decades ago and bought a cloud gaming company last year.
Satya Nadella, CEO of Microsoft, smiles at a meeting of the Economic Club of Washington in Washington, D.C., on Oct. 4, 2017.
Zach Gibson | Bloomberg | Getty Images

Amazon, Microsoft and Google are in the midst of an intense battle to win business from companies moving their workloads to the cloud. Now, there's brewing competition among them in a very different corner of the cloud market: gaming.

Microsoft has long been a gaming powerhouse, having introduced the Xbox console in 2000. In expanding how and where people can play games, Microsoft said in October that it will start testing a cloud gaming offering this year. Its Project xCloud will work on mobile devices. That announcement followed the acquisition last January of PlayFab, a start-up that provides game developers with cloud-based tools.

Amazon has kept quiet about its ambitions in the market. But The Information reported on Thursday that the company has held conversations with publishers about releasing games on a new service as early as 2020. That project would build on previous efforts to support game developers. Amazon declined to comment on the report.

Google, meanwhile, has started testing a cloud gaming service — under the name Project Stream — with a limited number of users.

It's the latest example of the three massive U.S. infrastructure companies putting their technology to work in a way that lets customers offload their computing and storage needs so they can do more without relying on expensive hardware.

But these companies aren't all equal. And when it comes to gaming, Microsoft has a home-field advantage.

"Amazon is not a gaming company. Google isn't. Sony is a gaming company, but they don't have a cloud presence," said Steve Perlman, former CEO of cloud gaming company OnLive. "Then you have Microsoft — Microsoft has both of those things."

Perlman knows the challenges this market presents. He founded OnLive in 2007, and ultimately sold assets to Sony in 2015, a year after Sony announced a game streaming service, PlayStation Now. Earlier in his career, Perlman sold WebTV to Microsoft, and some members of that team worked on Microsoft's Xbox 360 console.

Different world

When Perlman jumped into game streaming over a decade ago, it was possible to play games by connecting to remote servers, but it never reached a mass market. Apple and Google hadn't yet become dominant mobile players with app stores, and publishers weren't focusing on developing games for the cloud.

Still, the technology did attract some users. Even though there could be a lag in some high-performance competitive gaming scenarios, OnLive ran tests and found that people generally couldn't tell the difference between games running remotely and games running locally, according to Perlman.

At that time, he said, Microsoft was more interested in console sales.

"We had some conversations with them" about cloud gaming, Perlman said. "It just wasn't a place they wanted to go."

Today's world is very different. Microsoft is now "mostly a cloud business," Perlman said. In addition to its established relationships with gaming companies like Activision Blizzard, Electronic Arts and Take Two Interactive, the company has a deep investment in cloud infrastructure.

"At least in theory, I think they could do it," Perlman said.

Microsoft said in a statement that it's best-positioned to develop and deliver this technology.

"There are only a few companies in the world with the resources to make a game streaming service real at a global scale," the statement said. "Out of those companies, only Microsoft has years of first-hand experience in the key areas that are vital to making this a great experience for gamers: cloud (to support and scale a quality experience), content (whether first-party or not, designing technology with developers to make gaming libraries accessible from anywhere) and community (having built the first-of-its-kind Xbox Live and evolved it over the last 15+ years)."

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