$38 Billion Cloud Gaming Market to Displace Mass Consoles by 2035
Game streaming is projected to expand into a $38 billion market by 2035 and displace the traditional video game console as a mass-market product, according to an investor-focused report by Bloomberg Intelligence analyst Nathan Naidu and his team, heise online reported. The transition is expected to be driven by artificial intelligence, as the buildout of data centers to support AI workloads increases cloud-gaming capacity and reduces operational costs.
Cloud Infrastructure Supports Complex AI Gaming
As games grow increasingly complex due to artificial intelligence, the rising hardware demands can be met more efficiently from centralized data centers rather than developing new console generations every few years. Bloomberg Intelligence noted that Microsoft, Nvidia, and Tencent stand to benefit most from these shifts because of their heavy investments in cloud infrastructure.
Microsoft’s Xbox Cloud Gaming currently maintains a market share of approximately 40 percent. However, the company has recently scaled back its cloud offerings. Effective November, Microsoft is limiting cloud gaming within the Xbox Game Pass to a monthly hour quota. The Ultimate subscription tier, priced at 21 euros per month, receives 15 hours; the Premium subscription at 13 euros gets 10 hours; and the Essential plan at 9 euros includes 5 hours. Subscribers who exceed these limits must purchase additional hours through the Xbox Store, a move Microsoft attributes to rising costs tied to user numbers and play time.
Substantial cost reductions for cloud-gaming providers remain distant. Naidu wrote that current demand for AI data centers is driving up the price of computing power. Excess GPU capacity—which is expected to lower computing costs and render cloud gaming more economical—is not anticipated until late in the decade as data center expansion continues.
Console Prices Rise Across Major Hardware Brands
Standalone gaming hardware has also grown significantly more expensive over recent years. Driven by a memory crisis, Microsoft increased Xbox console prices by 33 to 50 percent on August 1. The Xbox Series X with a disk drive now costs 800 euros instead of 600 euros, while the 512-gigabyte Series S rose from 350 to 500 euros. Sony priced the PlayStation 5 at 650 euros beginning in April, and Nintendo raised the price of the Switch 2 from 470 to 500 euros on September 1.
Despite the projected growth of cloud streaming, consoles are not expected to vanish entirely. The Bloomberg Intelligence report indicates they will remain relevant for dedicated players seeking peak performance and potentially for collectors, comparable to the persistence of vinyl records in the music industry. Microsoft noted in its cloud limit announcements that streaming may prove particularly useful in markets where physical consoles are scarce or cost-prohibitive.