Last week, the United Kingdom's antitrust regulator blocked Microsoft's $69 billion acquisition of "Call of Duty" maker Activision Blizzard over concerns that it could kill competition in the still developing "cloud gaming" sector. So, what is cloud gaming?
Technology firms have long dreamt of shifting gamers away from cumbersome consoles and physical purchases to subscriptions and virtual access – essentially a Netflix for video games. So is cloud gaming the promised land?
For decades, the console has been king. Sony's PlayStation, Microsoft's Xbox, and various Nintendo units have dominated.
Millions have also enjoyed gaming on their PCs.
But the arrival of superfast broadband has allowed companies to experiment with new ways of delivering and monetizing games.
Rather than buying games and storing information on their personal consoles and PCs, gamers would pay monthly fees, access a suite of games, and have their data stored on servers far away.
Doing away with manufacturing and delivering hardware costs would allow healthier profit margins and capture new audiences.
At least, that's the theory.
Some 32 million people were paying for cloud gaming services last year out of a gaming population of over 3 billion, according to Newzoo, a data analysis firm.
This translated to revenues of about $2.4 billion, according to Newzoo, with the broader industry worth more than $300 billion globally.
But analysts are mainly united in predicting massive growth for the sector, fuelled by rising numbers of potential players.
"It's set to become an industry worth at least $40 billion by 2030, growing by around 40% annually according to industry estimates," said analyst Susannah Streeter from Hargreaves Lansdown.
In its 400-page decision to block the Microsoft-Activision deal, the U.K.'s CMA antitrust regulator said the number of regular cloud gamers had more than tripled in the U.K. between 2021 and 2022.
And it cited the potentially "transformative" impact cloud gaming could have in the coming years.
But it is still a relatively small piece of the pie.
Microsoft is already the dominant player in the sector. For example, its Game Pass service has a claimed subscriber base of 25 million.
Its nearest competitor, NVIDIA's GeForce Now, also claims 25 million registered users – though it has a free tier, the figures are not comparable.
Sony and Nintendo have made moves in the arena, and telecoms firms worldwide are looking at the sector to boost profits from 5G networks.
But these firms are yet to make major inroads and may be concerned by what they have seen recently.
Google launched its Stadia offering in 2019, trying to build a gaming empire mainly from scratch with in-house studios. Instead, it shut down less than three years later.
Industry watchers are now expressing doubts about Amazon's foray into the scene – it launched its Luna service in 2020 but is reportedly in difficulties.
"Amazon Luna and Google Stadia have the same problem – there simply aren't enough games to guarantee success," wrote Tessa Kaur on The Gamer website.
Microsoft was fuming at the watchdog's decision.
The firm's usually mild-mannered president Brad Smith told the BBC it was "probably the darkest day" in four decades of Microsoft's involvement in the U.K.
He said the firm's confidence in Britain was shaken and hinted at a broader impact on jobs in the country.
But experts were not expecting a massive fallout for the cloud gaming sector.
The apparent immediate effect is that Activision's games, which include some of the most popular titles worldwide, will not immediately be available for download.
Tom Wijman of Newzoo was confident, pointing out that nothing stopped Activision from making its games available.
But Joost Rietveld from University College London highlighted the promises Microsoft had made to license Activision games to other suppliers and suggested such a move would have benefitted the entire sector.
"Cloud gaming is still only a fraction of the larger games industry," he told Agence France-Presse (AFP).
"I believe this acquisition could give the space a much-needed jolt."
