Gaming and game development generate billions of dollars in revenue. Microsoft recently acquired PlayFab to shore up Azure's game development infrastructure.
According to a recent report from Digi-Capital, revenue generated by video game software and hardware combined could reach $170 billion by the end of the year. By 2022, just four years from now, that revenue number is expected to exceed $235 billion, which some would consider a conservative estimate. Whether it is PC, console, or mobile devices, video games, and video game development, is big business.
With this backdrop in mind, Microsoft announced its acquisition of PlayFab in January 2018, for an undisclosed amount. PlayFab's intellectual property includes a complete backend cloud-based game development and distribution platform. Microsoft believes PlayFab's platform, when fulling incorporated into its intelligent cloud services, will add to the appeal of Azure for game development.
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With the widespread adoption of cloud services and mobile devices, the nature of how video games are played has evolved in the past few years. Games are no longer solitary activities, instead they are often multi-player social interactions that must be supported by cloud-based, dynamically enabled infrastructure.
Games were rapidly shifting from packaged goods, sold in boxes, to "always on" digital services, requiring sophisticated server-based infrastructure to host and operate. Built well, these backend systems enabled games to engage, retain, and monetize players like never before, with longevity in the top grossing charts measured in years. Built poorly, they crashed and burned on launch day.
PlayFab is an established platform for game development, currently powering more than 1,200 live games, and serving over 700 million players. The PlayFab platform processes more than 1.5 billion transactions a day. This proven infrastructure platform instantly raises Microsoft Azure's own status as a game development platform.
Game development in such an environment is marked by periods where there is little demand for computational power followed by periods where demand can overwhelm in-house server farms to the breaking point. From Microsoft's perspective, the most obvious solution to this dilemma is to deploy the dynamic computational power of the intelligent cloud and Azure.
With the addition of the PlayFab platform to Azure's roster of services, game developers of any size can access and pay for the computational power they need for compiling code or rendering art assets, when they need it. Azure services will reduce development costs, which can stifle the growth of small, independent development houses. More developers create a larger addressable market, which, in turn, equals more customers for Microsoft and Azure.
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The video game industry, including game development, is growing at an incredible rate that is expected to reach almost $300 billion in annual revenue within the next few years. The market is too large and too lucrative for Microsoft, or any other cloud-services company, to ignore.
Game development, particularly in a mobile and multi-player universe, requires a platform that can dynamically adjust to the ebb and flow of computational demand and support the distribution infrastructure of an always-on digital environment. With the acquisition of PlayFab, Microsoft is adding another established and successful platform to its array of Azure services in an effort to capture more of this fast-growing market.
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