South East Asia’s Cloud Gaming Landscape
🔑 Key Takeaways
Cloud computing providers are competiting feverishly to build necessary data centres in a high-growth, data hungry region like South East Asia.
The marginal cost of running this infrastructure, especially for low-ARPU markets like the Philippines or Vietnam is difficult to stomach in the short run but ideally this pays off as their economies grow over the next few decades.
Telecom’s are the ultimate enabler in the cloud gaming ecosystem as all traffic from server to client devices go through their pipes. That being said - many countries are still held back by poor infrastructure.
Each telecom is determining how best to marry gaming into their existing strategy - read our post on Telecom Gaming Models to learn more!
Cloud gaming has been touted as the next major leap in bringing gaming to more audiences over the past few years. All across the value chain, from console manufacturers like Xbox’s cloud gaming to telco’s around the world like Jio, SK Telecom, and China Unicom, cloud gaming is being shown as a demonstration of what high throughput data speeds can accomplish when everything comes together in just the right way.
Despite this optimism, I have my reservations about what use cases this technology truly unlocks. In the west at least, Google Stadia flopped due to a clunky business model and not having any games that benefited from the technology. Amazon’s equivalent, titled Luna, seems afraid to go loud and proud in fear of suffering a similar fate. Xbox’s cloud gaming offering has been well received, but it also lives snuggly within the broader Xbox Game Pass, a service whose value proposition is truly unparalleled right now. Cloud gaming doesn’t make Xbox Game Pass great, it’s more like a neat addition to an otherwise impressive service.
In an effort to see how the Asian cloud gaming landscape operates - we’ll take a tour through a phenomenal graphic from Niko Partners and examine two stakeholders from it - Cloud computing providers, and telecommunications providers.
⛓️The Cloud Gaming Value Chain
☁️ Cloud Computing
As cloud computing expanded dramatically in the past decade, firms have sharpened their cloud product marketing, tailoring it to finer and finer verticals - even if the underlying technology is broadly versatile. Amazon for example, competes fiercely with its AWS GameTech against Microsoft’s GameFab platform. But unique to Asian markets are Alibaba Cloud and Tencent Cloud, which offer services that lend themselves well to the south east asian market.
Below is a clipping from Alibaba’s product page:
While all cloud platforms would boast high-concurrency architecture, South east asian markets really benefit from it to 2 reasons:
Populations in SEA are of a much larger magnitude than NA and EMEA markets, with markets like Indonesia (40 million gamers) or the Philippines (43 million gamers).
These markets are all on very similar timezones, with nearly 3 billion people on 4 timezones, meaning that after work gaming sessions are going to hit cloud gaming more concurrently than any other region in the world
This also means that the server-side computing demands placed on these stacks are steep. The GPU in the server racks of thes themselves are quite expensive, with notorious heat/electricity/cooling requirements. Estimates suggest at least $0.35-40 per user hour. This means that just the direct marginal server costs of 20 hours of gaming is $7+.
The unit economics of these cloud providers can be hard to justify for certain markets where middle class income still needs some growth. We explored this in our look at India’s gaming industry, where there is clear, unrelenting, demand for games in the region but companies are finding it hard to cover their operating costs because monetization models haven’t really settled and the culture is pre-disposed to not pay for things without a lot of assurances.
That being said, this isn’t stopping big tech from establishing data centres all across South East Asia to service demand.
High engagement and low revenue is a hard story for cloud providers to reconcile when building data centres in places like Vietnam or Cambodia for example - but it is a bet on the future of those countries ARPU (avg revenue per user) growth long term.
Regardless, cloud providers’ footprints will continue to expand into this region, not solely for gaming for the countless other use cases of cloud computing. For example: Microsoft provides cloud services to south east asian ride hailing company Grab, and a similar arrangement has seen Google provide cloud services for rival Gojek.
🛜 Telco/ ISP
Unsurprisingly, the quality of a cloud gaming experience is only as good as the country’s ISP. The faster the packets of game data can fly, either through a wired connection on copper or fibre optic cabling or over wireless 4G/5G stack, the more seamless the game experience and ultimately higher adoption of cloud services.
South East Asian telco’s introduce 2 big puzzles of cloud gaming.
More Robust Infrastructure = Less Cloud Gaming
Take a country like Singapore. A mature south east asian gaming market growing at ~7% annually. 1.2M paying gamers out of 5.6M citizens and an average per capita gaming spend of said gamers being US$258. Clearly this is a shining example of south east asian gaming in terms of market size, average revenue per user (ARPU), and growth.
That being said, the more sophisticated a countries telecommunications network, the more likely the citizens have access to either a) high powered handsets or b) home game consoles, which remove the market need to stream games from the cloud in the first place. Additionally, if internet speeds are fast enough, plenty of gamers are happy to simply download the title to their machine locally and wait the 10-15 minutes as opposed to playing with a laggier, cloud streamed option. Cloud gaming in these markets may play an important role in game discoverability, being able to try a game out without rationing hard drive space or waiting those 10-15 minutes to download but as a means of playing through full titles not many gamers would prefer it.
Painting Countries with a Brush
Similar to our examination of the African games industry, South East Asia is categorized as a monolith, plagued by an unwillingness from those to see it as a collection of unique countries and cultures. The reality couldn’t be further, especially when it comes to comparing telecommunications infrastructure. There are three variables we care about when evaluating cloud gaming in these geo’s
Fixed broadband penetration
This reveals how much of the country is covered by a wireline footprint. Countries (or parts of countries) that are lacking in this can’t depend on wired/wi-fi connections for gaming and need to use a mobility stack to stream games, which will be at lower speeds.
Fixed broadband wiring types (Fibre Optic vs Copper/DSL)
Fibre Optic wiring offers symmetrical upload and download speed. Unlike streaming video that only demands downloading video content from servers, the upload speeds dictate how quickly a user can send game data from their cloud gaming to game servers for other players to download. Put simply, if Player 1 fires a bullet, that data needs to be communicated as quickly as possible to game servers and down to Player 2’s game for them to react. Fibre optic lends itself to gaming because of this data speed symmetry which often a common marketing message pushed by telco’s to communicate the benefits of this opaque nuance.
Average download/upload speeds
The faster a game can be streamed from cloud gaming servers the smoother experience a player will have. Additionally, faster upload speeds means player inputs are delivered to gaming servers more quickly for them to process and relay to other players.
