It’s been eight months since we released our first cloud gaming report, and already much has changed in the industry. With the announcement of Google Stadia, Microsoft xCloud, and most surprisingly, Microsoft’s collaboration with Sony on cloud and AI, cloud-based solutions have arrived as predicted. But as console-makers, publishers, and tech companies each fight for a piece of the gaming pie, they also face competition from a less obvious stakeholder: your local telco/Communications Service Provider (CoSP)
Why Are Telcos/CoSPs Interested in Offering Cloud Gaming Solutions?
Two big changes in consumer behavior have recently challenged the telco/CoSP business model of selling voice/SMS, data, and pay-TV bundling. First, voice calling and standard texts/SMS have struggled to maintain relevance in a world increasingly communicating via apps such as Skype, WhatsApp, and FaceTime. Secondly, millennial cord-cutters (and cord-nevers) are simply not as interested in pay-TV in a world full of Netflix, Twitch, and Fortnite. With traditional TV bundles under threat, telcos/CoSPs must confront the question of how to diversify services and find the right content mix for their customers. This is where gaming comes in: Cloud gaming, with its strict latency requirements, is one of the most compelling consumer use-cases for 5G right now and ties in neatly with telco’s/CoSP’s core business model—selling larger data packages. Furthermore, telcos/CoSPs can take a cut of in-app purchases made via carrier billing.
One primary value a telco/CoSP can offer consumers (compared to other games subscriptions such as Xbox Game Pass or the new uPlay+ from Ubisoft) is ultimately the convenience factor. Consumers already have an internet subscription, and adding a gaming service to that is a simple process for a consumer already used to the concept of bundling—no extra hardware (except a gamepad), no extra account setup, no game purchases or updates. Groups such as families and lapsed gamers may expand the gaming market by adding a gaming subscription here where they previously did not have one. Meanwhile, ultimate gamers are likely to try cloud services that deliver entirely new types of gaming and content experiences and enable them to game on the go.
As far as content goes, the exclusivity pendulum continues to swing back and forth, and publishers can be motivated to license their games to cloud gaming services as it would remove hardware barriers for players thereby expanding the potential reach of their game. In emerging markets where high-cost consoles or PCs are uncommon, cloud gaming enables these willing consumers to engage with games they could not access otherwise. With the recent content announcements from E3, platform agnosticism is seen as a growing trend as third-party publishers release more titles across a variety of platforms. At the same time, Stadia, Microsoft, Sony, and Nintendo all have their own efforts to beef up their exclusive first-party offerings. Without their own service to promote, however, external publishers can choose between finding as many distribution platforms as possible, or pursuing an exclusivity deal with a first-party.
While Verizon reportedly tested a cloud gaming service back in January, other carrier offerings are already underway. PlayGiga and Intel® have entered into a collaboration to bring a cloud gaming solution to telcos/CoSPs and media companies. (Read the case study and watch the two-minute video in the Cloud Gaming section). Essentially, telcos/CoSPs can immediately provide consumers with a bundled subscription game streaming service by using PlayGiga’s white-label offering – games included. Including games access without an additional fee is a consumer benefit in contrast to other business models such as Stadia where users will need to pay extra to access some games on top of the baseline service.
This Isn’t the First Time Telcos/CoSPs Have Tried to Enter the Game-Streaming Space; What’s Different this Time?
As those within the industry know, the concept of cloud gaming has actually been around for several years—and a few telcos/CoSPs have tried their hand at services already.
However, previous attempts were disadvantaged in multiple ways: high quality network connectivity wasn’t as widespread, and cloud gaming tech was not as advanced, or able to offer low latency’s reliably. With each millisecond presenting a critical difference in user experience, optimizing for low latency is a priority for graphics companies, and Intel’s visual cloud architecture powered by Core™ i7 and Radeon* RX Vega M is designed to achieve just that. Furthermore, the general concept of streaming and subscriptions is now more firmly established in consumers’ minds.
But finding the right content is crucial to attract consumers to any games service, and it will be especially important here as consumers will compare and contrast services by competitors. Thus, to have the best chance at success against services from Google or Microsoft, telcos/CoSPs will need to elevate their content and pricing strategy for their key demographics and ensure they serve the motivations of different gamer segments.
Today, telcos/CoSPs are looking to quickly monetize their current network investments in fiber and 5G, and cloud gaming technologies are an attractive option to recoup some of these costs. Owning the consumer data also enables telcos/CoSPs to understand consumption behavior and further optimize their content strategy for customers. The infrastructure costs may be minimized by managing several subscribers in the same GPU as opposed to technologies that dedicate one single GPU per subscriber, as demonstrated by PlayGiga’s graphics virtualization technologies. Using the Intel chipset, Playgiga’s OpEx may be reduced by as much as 50 percent1 through better power management and space requirements, creating a profitable business case for telcos/CoSPs.
Will Cloud Gaming Replace PCs and Consoles?
With other advances towards cloud including EA’s cloud-native development platform Project Atlas, Hatch’s 5G cloud gaming service on mobile, and rumors of Amazon also making moves, it seems that the games industry is collectively marching towards a cloud-filled future.
Nonetheless, we are a far cry from seeing the apex of cloud gaming, and in the near term expect cloud services to exist alongside traditional gaming — serving a different audience with different needs. We believe that local gaming will still have a place, as long as consumers perceive value in it, such as for the eSports pros optimizing for fast reaction times or those on military deployment without access to a stable internet service. Meanwhile, even the staunchest hardware enthusiast may be persuaded to try cloud gaming for the mobility benefits and never-before-possible experiences enabled by a cloud-native platform. Just as consumers can appreciate the different use cases of movie theaters vs. home theaters vs. streaming movies on mobile devices, gamers will also discover how cloud gaming fits into their lifestyle.