For Amazon's Next Trick -- A Cloud Gaming Service

Amazon.com (NASDAQ:AMZN) is well known as the leading online retailer, as well as being the undisputed champ in cloud computing. The company also is pursuing growth in digital advertising, streaming video, business-to-business (B2B) commerce, video game streaming, and a growing host of electronic devices.

Now, the digital sales leader wants to combine the best aspects of two of its businesses -- cloud computing and video game streaming -- to attack one of the last untapped opportunities in gaming. Amazon plans to launch a cloud gaming service, according to a report in The Information (paywall). However, it is entering a crowded field, as several of tech's biggest companies have similar aspirations.

Mounting evidence

Amazon is working to develop a service that would deliver video games via online streaming, according to the report. The company is said to be in discussions with video game publishers about making their games available via the upcoming service, which wouldn't debut until sometime next year.

Other sources point to Amazon's current job postings as corroboration, with opportunities for two engineers to work on "cloud games" and another posting that states, "This is a rare opportunity to take a technical leadership role to shape the foundation of an unannounced AAA games business." The company also is working on "a never before seen kind of game," according to reports in The Verge.

One of the biggest advantages of developing such a service is the potential to draw new gamers into the fold, particularly those who have resisted the call because they're unwilling to pay for a game that they aren't sure they'll like. Additionally, the high cost of gaming hardware with the processing power necessary to play today's cutting-edge games can be a deterrent. Since the games would be installed on massive data-center computers, they could be accessed by much more meager platforms, like smartphones and tablets.

Until recently, such a service would not have been possible, but the rapid adoption of cloud computing, better algorithms, and faster processors are putting the once-unattainable goal within reach.

Inexorably linked

Amazon already has numerous ties to gaming. It's the proud owner of Twitch, the video game streaming platform it purchased in 2014 for an estimated $1 billion. The unit is reportedly generating more than $500 million in annual ad revenue, with plans to double that to more than $1 billion annually.

It also has a division dedicated to gaming -- Amazon Game Studios -- that works exclusively in the area of game development. It offers Amazon Lumberyard, a free, AAA game-development engine that's deeply integrated with both Amazon Web Services (AWS) and Twitch and provides a framework and tools that help developers create video games.

A crowded field

Competitors Microsoft (NASDAQ:MSFT) and Google, a division of Alphabet(NASDAQ:GOOGL) (NASDAQ:GOOG), are among those also looking to create cloud-based gaming services. Late last year, Microsoft announced Project xCloud with the intention of making gaming "available on demand and accessible from any screen."

Google is working on Project Stream, which it says is "a technical test to solve some of the biggest challenges of streaming." A beta test of the service has been running since October in partnership with Ubisoft, to stream the latter's Assassin's Creed Odyssey.

Sony launched its PlayStation Now platform in 2015, but hardcore gamers complain that latency -- the delay that occurs between when a gamer executes an action and when it shows up on the screen -- remains a problem when playing high-end games. The only current solution to this issue is above-average internet speeds that may not be available to everyone.

If anyone can do it

The experience gained through AWS cloud-computing operations and Amazon's years of live streaming at Twitch -- which allows viewers to watch games that are in progress -- may put the company in the best position to solve the problems that have kept cloud gaming from going mainstream. So far, none of the leading tech companies have been able to crack the code for storing video games on data centers for gamers to play in real time -- at least not in any meaningful way.

With all the tools at its disposal, Amazon might just be the first.

This article originally appeared in the Motley Fool.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Alphabet (A shares) and Amazon. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool owns shares of Microsoft. The Motley Fool has a disclosure policy.