Thursday, 22 November 2012

Chinese Cloud Gaming Service Cloud Union

Beijing, China based cloud gaming service Cloud Union was founded by Danny Deng (Deng Di) who serves as CEO of the company. The company team began R&D on cloud gaming technology in 2008 and officially formed a company in 2009 when angel investor Wang Hai helped out with money. Wang Hai currently serves as chairman of the company. Before that he was digital media investment officer at Netural GmbH., vice president at P2P video streaming outfit PPLive and chief operating officer at Viacom's MTV China. His story as a chairman of Cloud Union is somewhat similar to a chairman from another cloud gaming company, namely Gary Lauder who became chairman of OnLive after he saved them from bankruptcy and kept the company afloat.

After their official formation, Cloud Union had to wait another whole year without any serious investment before they've got their first infusion of venture capital in 2010 with a $2 million investment from Softbank China Venture Capital (SBCVC). Later the company became more successful with investments as in January of this year even Intel Capital invested into Cloud Union.

As mentioned before, Cloud Union has their headquarters in Beijing, where they also have an R&D center. They also have branches in Hunan and Hangzhou that are set up as regional operation centers. Besides, it also has an R&D center in Chengdu.

PC gaming is remarkably popular in China. But because of the high barrier of entry, many Chinese gamers are limited to gaming in smoke-filled net cafes, and often even those computers aren’t capable of running the latest and greatest games. “Does it run Crysis?” has been a refrain in the Western PC gaming community for years, and systems that can run Crysis are indeed powerful — but they’re also expensive. So Chinese gamers have mostly stuck with older games like Counter-Strike and World of Warcraft, or played Chinese games with more modest hardware requirements.

This is where Danny Deng and his company Cloud Union comes in. Cloud Union focuses on the design, development and operation of cloud gaming platforms and is a leading live cloud and streaming service provider for high quality (3D graphics and rich audio) gaming in China. Through centralizing all computing power and graphics rendering in the server end, and streaming video of the gameplay to the client end, Cloud Union allows people to play high quality games across a multitude of devices like low-powered and cheap PCs, Macs, TVs through IPTV providers and mobiles. Cloud Union is currently employing around 100 people, most of whom work in R&D.

“Most of the electronic devices, as long as they can connect to a network and decode a video stream, will be able to enjoy cloud game services. In theory, any game can be streamed to any device using CU’s technology, such as a notebook, TV, normal set-top box, etc. We even connected the PS3 with our cloud, so if Sony agrees, you can play PS3 games on any smartphone and Smart TV in China,” said Danny Deng, the CEO of Cloud Union.

When Cloud Union released their first PC client in March of 2011, they opted not to promote the product for fear of overloading its servers. To support the operation of their cloud game platform, the company has set up eight service centers in some major cities in China. At present, they have more than 2,000 servers that are able to serve more than 300,000 cloud gamers in China. Since China is a huge country and especially the western regions and the countryside are underdeveloped and lack the internet infrastructure, Cloud Union can currently only serve about 30% of Chinese internet users which limits their market potential. Like with other cloud gaming services, responsiveness and video quality are two key problems for Cloud Union, though the company has now managed to reduce average lag time to around 30 ms. They are working hard on attracting more users to join, improve their technology, buy more servers and bandwidth, and deploy a network that will cover the entire country.

It's not yet known what computer hardware Cloud Union uses in their data centers, though NVIDIA's cloud gaming boss Phil Eisler mentioned them in an interview back in September. Since Cloud Union streams the latest high-end PC games from the cloud to gamers, and NVIDIA has a very strong presence among cloud gaming services in the far east with the only serious computer hardware currently catered especially towards cloud gaming services, it might very well be that Cloud Union uses NVIDIA's GeForce GRID cloud gaming technology in their data centers.

Since China’s government is calling for a new round of broadband bandwidth upgrading and cost reduction, China’s network operators need to find new killer applications to attract users to upgrade bandwidth and pay more money on their service. And cloud gaming definitely is a killer application for network operators.

Cloud Union has partnered with China Telecom and China Unicom, potentially pushing cloud gaming services to 400 million broadband users in China. Moreover, Chinese IPTV providers BesTV and Wasu chose Cloud Union as the only partner in the cloud gaming area with over 20 million IPTV users potentially able to enjoy Cloud Union's cloud gaming services in China. The Cloud Union cloud gaming service is offered as an IPTV subscription plan option with subscription revenues split between Cloud Union and the IPTV providers.

“We have made great progress with WASU Digital, which is one of the biggest IPTV operators in China, to enable every user to play cloud games in WASU’s network,” said Danny Deng.

Cloud Union picks the games they offer at present mostly based on the demands of gamers, especially focusing on games that have high hardware requirements and more realistic graphics. Mature gamers tend to prefer these kinds of games. But more and more women and adults are also using their cloud game platform because it’s so convenient, so they are also expanding the variety of games they offer. They have a very experienced copyright team with more than ten years of experience in game distribution in China. They have relationships with lots of games publishers and developers from China and abroad, like for example with renowned international games publisher Ubisoft. Their cloud gaming model has been very well received by developers and publishers because their cloud gaming platform resolves several huge problems for the games industry in China, like piracy, high hardware requirements, and how to best collect fees. Currently their business model is to buy the domestic rights for games outright, and they currently offer more than 200 games, all legally copyrighted. They are considering allowing publishers and developers to set their own prices for games in the future, of which they will take a small percentage.

Coming back to the question “Does it run Crysis?”, well no, at least Crysis isn't in the Cloud Union games lineup. But there are other heavy hitters like The Elder Scrolls V: Skyrim including the latest DLCs like Hearthfire and even fairly recent blockbusters like Dishonored and Borderlands 2. Here's a more comprehensive list of the more prominent games in Cloud Union's games catalog, since Cloud Union buys the rights for the games for China some of the games are temporarily not available because they've run out of their alloted number of licenses and have to buy more:
It's fairly easy to say that this is the most impressive games lineup of any cloud gaming service to date, yes even better than OnLive's games catalog. Upcoming games for Cloud Union are Assassin's Creed III, Tom Clancy's Ghost Recon: Future Soldier and Medal of Honor: Warfighter.

That Cloud Union has such a great support by games publishers in China that are even willing to tolerate the business model of outright selling the rights to their games isn't surprising when one considers that the console market in China is not very strong, there is virtually no games retail at least no legal retail because of the rampant piracy and that Cloud Union is partnered with China Telecom and China Unicom. Since to date large games publishers couldn't monetize their high-end PC and console games in China, they must feel pretty happy that China is embracing cloud gaming which makes game pirating virtually impossible. No wonder that game publishers like Activision, EA, Ubisoft, Take-Two Interactive, Bethesda SoftworksWarner Bros. Interactive Entertainment, Disney Interactive Studios, LucasArtsSquare Enix, AtariCapcom, KonamiNamco Bandai, Tecmo KoeiSEGA, Codemasters, CD Projekt RedDeep Silver and THQ are willing to feature their high-end games on the Cloud Union cloud gaming service regardless of the possibility that they won't look and control that good through cloud streaming. Even more remarkable is that Microsoft, one of the big three console manufacturers, is on board, though only older titles in the form of Age Of Empires III and expansions and Ion Assault are in the Cloud Union games catalogOnLive for instance doesn't have such luck in the western markets where games retail and consoles are established players and it's harder to gain game publisher support.

“Compared to the US, China is very different when it comes to the internet as well as TV industry. We are already standing at a competitive position in the Chinese market, which the potential competitors, such as OnLive and Gaikai, may not rival easily,” said Danny Deng, the CEO of Cloud Union.

Cloud Union is not having the Chinese cloud gaming market for itself as Taipei, Taiwan based cloud gaming provider Ubitus is helping China Telecom building a cloud gaming service. Other cloud gaming competitors are sure to follow into the burgeoning Chinese cloud gaming market.