Home consoles face extinction as cloud and AI boom, BI research says

Bloomberg Intelligence forecasts that streamed games will become a $38B market by 2035 and that the dedicated console will stop being a mass-market product. The case depends on surplus GPU capacity pushing compute prices down late this decade, which has not happened yet.

Streamed games will be a $38B market by 2035, and the console may stop being a mass-market product. That is new research from Bloomberg Intelligence.

The report is led by BI analyst Nathan Naidu and was reported by Bloomberg on Tuesday. AI does double duty, cutting costs and supplying the data centres streaming runs on.

Consoles become a niche. Naidu compares them to record players, kept on by enthusiasts and collectors, and calls their role relatively uneconomic.

The economics rest on a glut that has not arrived. Naidu concedes AI demand is pushing compute prices up now, and expects the build-out to leave surplus GPU capacity late this decade.

Prices are moving the other way. AWS raised GPU prices about 20% in July for reserved capacity, its second rise in six months. The cause is a memory shortage analysts do not expect to ease before 2028.

The company calls are specific. Microsoft holds roughly 40% of streaming with Xbox Cloud Gaming, which BI estimates at 220 million hours last quarter. Nvidia has the edge with GeForce Now, and Tencent leads in China.

The operators sound less certain. Microsoft began testing ad-supported streaming in July and Amazon folded Luna into Prime Video, moves our own reporting read as an admission that cloud gaming has not worked yet.

Naidu puts Nintendo in the worst position, because it has treated streaming as peripheral. Sony fares better on PlayStation Plus and the PlayStation Portal.

Microsoft is building a console anyway. Xbox chief Asha Sharma announced a next-generation machine for 2027 in July, while cutting 3,200 roles and shedding five studios, two of them European.

The pressure there is margin, not streaming. Xbox’s profit margin fell to 3% this financial year, and Microsoft has not ruled out a spinoff or an outright sale.

Europe has a legal stake. Brussels made cloud streaming a condition of the Activision deal, and Microsoft’s published commitments give EEA players and streaming providers free licences for those games.

The clock matters. They run ten years from October 2023, lapsing two years before BI’s $38B date, though licences taken inside the window last indefinitely.

Game-making is moving faster than game-playing. Bloomberg reports that Epic chief Tim Sweeney said the company is retooling for maximum AI acceleration, having already built Claude and Gemini into Unreal Engine 6. A survey of more than 2,300 developers found 52% think generative AI is harming the industry.