Video gaming and esports analytics provider Newzoo estimates that the cloud gaming market generated $1.57 billion in revenue in 2021, more than double the previous year's revenue of $669 million.
The market's terrific growth last year was driven by 23.7 million paying subscribers. Nvidia (NVDA -2.40%), as it turns out, was the biggest player in this space -- the tech giant pointed out last month that its GeForce NOW cloud gaming service had crossed 15 million subscribers.
This indicates that the graphics specialist is already commanding over 63% share of this nascent but lucrative market that's growing rapidly. Cloud gaming allows gamers to stream and play high-end games even on underpowered devices thanks to remote servers that are equipped with powerful hardware. All that they need is a fast network and a subscription to a cloud gaming service such as GeForce NOW.
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Nvidia's early dominance in the cloud gaming market is great news for investors as this space has a lot of room for growth. Not surprisingly, the company has been taking steps to bolster its cloud gaming presence. Let's see why that could be a big deal for Nvidia in the long run.
Nvidia is expanding its cloud gaming reach
Nvidia revealed at CES 2022 that the GeForce NOW cloud gaming service offers more than 1,100 games. For comparison, GeForce NOW had a library of 1,000 games in July last year, indicating that Nvidia has been consistently expanding its offerings to lure more consumers. The strategy has worked as the service is witnessing a nice spike in the number of subscribers.
In September last year, Nvidia said that it had 12 million subscribers for its cloud gaming service, which means that the company has increased its base by 25% in the space of just three months. It is also worth noting that the pace of GeForce NOW subscription growth has increased. The service was nearing 10 million subscribers in March 2021, which means that it had taken Nvidia six months to increase its subscriber base by 20% from March 2021 to September 2021.
The latest update indicates that Nvidia has added more subscribers in the space of just three months. This isn't surprising as the company has been taking smart steps to increase the value proposition of the service. For instance, Nvidia's addition of an RTX 3080 membership tier to the GeForce NOW platform in October 2021 brought high-end gaming to consumers without the need to invest in expensive hardware or gaming titles.
Additionally, Nvidia recently announced that it is working with major television manufacturers to bring cloud gaming to more users across the globe. The company is working with Samsung and LG to integrate GeForce NOW with smart TVs. The cloud gaming service will be available on Samsung smart TVs from the second quarter of 2022, while more LG TVs are expected to support GeForce NOW this year.
Partnering with smart TV manufacturers could give GeForce NOW a big boost in the long run. Mordor Intelligence estimates that the global smart TV market could clock an annual growth rate of 16.5% through 2026. More importantly, Samsung and LG accounted for almost half of the global TV sales in the third quarter of 2021, according to market research firm Omdia. This could pave the way for stronger growth of the GeForce NOW service.
Nvidia has also partnered with AT&T to offer GeForce NOW to consumers using the telecom carrier's 5G network. Users with a 5G device on AT&T's 5G unlimited plan or another qualifying plan are eligible for a six-month GeForce NOW priority membership at no cost, which is another smart way of Nvidia trying to woo new users.
The big picture
By now it is evident that Nvidia is leaving no stone unturned in its efforts to dominate the cloud gaming market. This is the right thing to do as this space is going to take off in the coming years. Newzoo estimates that cloud gaming revenue could jump to $6.5 billion in 2024, which points toward more than fourfold growth over the next three years.
By 2030, the cloud gaming market is expected to generate $22 billion in revenue, according to Allied Market Research. If Nvidia continues to enjoy a 50%-plus share of this market in the long run, cloud gaming could give its top line a nice boost by becoming a multibillion-dollar business.
In all, there's a solid incentive for Nvidia to maintain a tight hold over this market as cloud gaming could complement the growth of its gaming hardware business and help it remain a top video gaming stock for a long time to come.
