Cloud gaming battle heats up as Amazon enters the ring to take on Microsoft and Google

Key Points
  • Amazon unveiled Luna, its own cloud gaming service.
  • The move sees Amazon join a battle with Microsoft and Google to dominate the space.
  • But Amazon is taking a slightly different approach — and it's not guaranteed it'll work out.
Amazon's Luna cloud gaming service.

LONDON — As Microsoft battles it out with Sony in this year's edition of the console wars, it's now got another rival to worry about.

Amazon announced Thursday that it would launch its own cloud gaming service, a kind of "Netflix for games" that forgoes the need for consoles or dedicated hardware to play video games. Called Luna, the platform comes with a library of 100 titles and users can play with a special Luna controller.

The entry of Amazon into the raft of companies developing such game-streaming services has long been rumored. The company's announcement now marks an official challenge to the likes of Microsoft and Google, which have both recently launched their own respective cloud gaming products.

But Amazon is taking a slightly different approach to those companies. Instead of going for an all-access subscription — like Microsoft is with Xbox Game Pass — Amazon is launching so-called "channels" for a range of publishers, for which users have to pay a monthly fee. Only Ubisoft and Amazon itself have been confirmed as companies included in that offering so far, with Amazon's Luna+ channel priced at $6 a month.

And though Luna is similar to Google's Stadia platform in that users can play games from the cloud across PC and mobile devices, it diverges from the company's business model as players won't have to pay extra for individual games.

Amazon also said Luna will be available Apple devices, but only as a web app. This is a step up from Microsoft and Google, which have been unable to add cloud gaming functionality on iPhones due to restrictions within Apple's App Store that require pre-approval for each game. Apple recently loosened its stance slightly, allowing game streaming services that link to games via separate apps. Apple has a competing game subscription service called Apple Arcade.

Can Luna succeed?

Amazon poses a significant threat to Microsoft and Google given its prowess in cloud computing. The firm's Amazon Web Services, or AWS, division is the biggest player in the space, with Microsoft's Azure trailing closely behind. Amazon also has a successful gaming brand in Twitch, the live streaming platform it bought for $970 million in 2014. The decision to integrate Luna with Twitch could drive growth for the cloud gaming offering.

But does that mean it will be successful? Not necessarily. There are numerous hurdles for Amazon to overcome, not least the issue of finding enough content to make its service worth paying for. Google Stadia notably struggled on this front, launching with just 22 titles at launch, but has since gathered momentum as more games have been added.

"Unlike Microsoft and Sony, Amazon lacks the core games business — something that has been a huge hurdle to overcome for Google Stadia," George Jijiashvili, senior games analyst at market research firm Omdia, told CNBC.

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"Amazon has a wealth of experience in cloud infrastructure, but this does not guarantee success. Whilst AWS is clearly a huge advantage, this is only one dimension of the final offering, and the emerging features, content, Twitch integration, and monetisation models will determine the uptake of the service."

While Twitch has been a boon to Amazon — especially in the midst of a viral pandemic that has seen viewership spike — the company has had less success in the development of its own games. Amazon pulled Crucible, its first big-budget game since the creation of Amazon Game Studios in 2012, from public release just a month after it launched. Another title, New World, has been delayed until early next year.

Cloud gaming will no doubt be a key battleground for gaming companies in the coming years. According to Omdia, such streaming services are expected to generate $4 billion in revenues next year and a massive $12 billion by 2025. That's no insignificant chunk of an industry estimated to be worth more than $150 billion.