Games has grown over the past few decades to become a hugely valuable market that generates very high customer engagement. According to the latest study by analyst firm Newzoo, the global games market will generate $152.1 billion in 2019, almost ten per cent growth from 2018.
That’s 57 per cent more than the $97 billion generated by the global theatrical and home-movie market last year, and eight times the $19.1 billion generated by the global recorded music market and games is growing in every region of the world. And, unlike those other formats where the shift to digital has been slow, more than 90 per cent of revenues will come from digitally delivered games.
After a few years without too much happening, over the past year or so there has been a significant movement towards game streaming with companies like Google, Amazon, Electronic Arts or Microsoft announcing their cloud gaming projects. Cloud gaming is estimated to be worth $2,5 billion by 2023, so the fact that these giants have made their move now suggests the scale of the opportunity. There’s no longer any discussion on whether streaming will happen, but rather on the right way to compete.
Why is this happening?
Mobile gaming, with 45 per cent of the global games market, remains the largest segment. This is due to the ubiquity of mobile phones, low entry barrier for game developers, and the lower expectations around how a mobile game should look and play.
On the other side there is PC and console gaming, where gamers buy-in to a never-ending upgrade cycle, with new hardware costing several hundred pounds each time.
Cloud gaming bridges the gap between HD gamers and these billions of people playing in low spec devices. It lowers significantly the entry barriers to AAA games, multiplying the market reach for games companies. It also provides a more convenient user experience, as downloads are no longer needed, and many other benefits like real cross-platform gaming and the ability to play with friends and family around the world.
Even gamers who already own a gaming PC may struggle to enjoy a decent performance of the latest AAA games, as according to Steam’s hardware & software survey, between 50 per cent and 80 per cent of them don’t have the recommended GPU or processor requirements. This is one of the main reasons why cloud gaming is set to shift the industry from a hardware-based to a software-based industry, ready to emulate Netflix and Spotify’s approach to content distribution.
Historically, Telcos have only played the part of providers of connectivity for PC and gaming consoles. But with cloud gaming, telcos have a real opportunity to move much higher up the value chain.
Importantly, while many of the existing players are targeting hardcore gamers, cloud gaming is likely to be much more appealing for the mass market/family segment. This is because cloud gaming solves pain points which are relevant for this segment (tech literacy, cost of hardware, cost of games, parental control, content, discovery, so on), but not for the hardcore gamer.
Plus, telcos already target families and mass-market consumers. This means that their whole marketing machinery is already geared at promoting new, value-add subscription services. They already have all the tools they need to launch and promote cloud gaming services, actually giving them an advantage over the big games companies who are getting all the attention at this point in the hype cycle.
There are other reasons too why cloud gaming is a sensible way for a telco to expand its entertainment portfolio:
Games as a customer acquisition tool: streaming games represents the first big opportunity in some time to offer a completely new category of digital services to their subscribers, making a differential offering if they are first movers.
As an up-selling tool: the possibility to enjoy high-end games on a TV or PC represents a good reason for customers to upgrade to premium connections (5G).
As a retention tool: Cloud gaming can promote customer loyalty and reduce churn when bundled into top-tier tariffs together with connectivity and Pay TV subscriptions.
Increasing ARPU: telcos have a fixed cost for each new subscriber that they connect and supply with a set-top box. The more services they sign up for, the more profitable that customer becomes.
The 5G opportunity: a radically new use case
Telcos have struggled for a long time to find new sources of growth and market expansion. Now, 5G is on the horizon, but it represents a fresh new supply of costs along with huge uncertainties regarding its monetisation.
When it comes to getting consumers to adopt new network technology, you need an appealing use case to underpin your sales pitch. 3G was all about access to the mobile internet, and 4G was launched with the promise of streaming music, TV and video. When it comes to 5G, cloud gaming happens to be the most compelling, brand new service that telcos can base their roll-out around.
The biggest impact 5G will have on residential customers is faster speeds and reduced latency. Those also happen to be the key barriers to launching a commercial cloud gaming service.
With 5G, any smartphone or connected tablet will have 10–100 times more data per second, compared to 4G, which is essential for sending high-definition streams. This means there are two different service propositions telcos can offer:
In 5G-connected homes catalogue-based subscription services can be offered. Families will be able to play the latest games on almost any TV or PC, even in remote locations not reached by high-speed fixed broadband.
Gaming on the move changes the perception of mobile gaming. As mentioned previously, mobile gaming has been limited so far to casual games that can be processed locally by a smartphone or tablet. With 5G, millions of mobile devices will be ‘AAA gaming-ready’, as the processor and battery intensive work can be done elsewhere, converting tablets or smartphones into real next-gen consoles. Multi-device gaming will assume its full meaning, as you can start a game on your PC and pick it up on your smartphone with no difference in the quality of the gaming experience.
5G makes VR gaming more viable
The speed of 5G also brings VR content into play. Processing and streaming of VR can be extremely demanding but there are already ongoing projects to provide cloud gaming in affordable VR headsets in order to create a more enriched and convenient gaming experience at greatly reduced user costs.
All of this is likely to happen sooner than you might think. Already, several telcos across the world have already started to commercialise cloud gaming subscriptions on 5G networks. Telecom Italia was the first in Europe, and several others are in various stages of trialling their own offering.
With all telcos looking for ways to monetise their 5G networks and increase their revenues, streaming games services represent an unmissable opportunity to turn their networks, finally, into the most significant gaming channel.
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.
PlayGiga´s cloud gaming service will be showcased at the Rakuten Mobile Edge Computing stand
High definition service demo on 4G and5G networks for side-by-side performance comparison
Madrid, 25.07.2019 – PlayGiga, a leading cloud gaming pioneer with deployments in 5 countries and Research and Development collaboration projects with AT&T, Ericsson and Intel, will demonstrate their cloud gaming solution at Rakuten Optimism 2019 in Tokyo from July 31 to Aug 3.
Rakuten Optimism is an event series designed to inspire visions of a shared brighter future, as well as deepen the understanding of the services and ideals underpinning the Rakuten Group ecosystem. In line with the theme of “Welcome to the 5G era” Rakuten Optimism 2019 will feature top-tier speakers from around the globe and showcase Rakuten’s more than 70 services, including it 5G ready mobile network launching in October.
“Asia, specifically Japan, is currently at the vanguard of 5G,” said Javier Polo, CEO of PlayGiga. “We are delighted to collaborate with Rakuten in this event that shows how 5G and cloud gaming will totally reshape the way we play and consume games”.
PlayGiga´s ground-breaking cloud gaming platform will be showcased alongside other Mobile Edge Computing innovations built for 5G networks with the aim of demonstrating a superior user experience. Visitors to the booth will be able to play DEAD OR ALIVE 6 in high definition on both 4G and 5G networks in order to compare performance side-by-side.
According to analysts, Asia is set to become the world’s largest 5G region by 2025. Mobile operators across the region will invest almost US$200 billion over the next few years in upgrading their 4G networks and launching new 5G networks. On the other hand, the global cloud gaming market will be worth $2.5 billion by 2023 with Japan at the forefront aided by the availability of high-speed fixed and mobile broadband services in the market.
The aim is to compare game experiences using LTE technology versus an EDGE Computing infrastructure
After successful lab-based tests with AT&T and Vodafone exploring how to deliver new gaming experiences over 5G and Edge Computing, PlayGiga has now teamed up with T-Mobile Poland to test cloud gaming using its Edge Computing architecture. The aim of the test is to compare the end-user experience for gamers using LTE technology versus EDGE Computing infrastructure.
About 40 gamers from Krakow have been taking part in the research, which started on May 24th and is set to run until the end of August. The testers received a mobile router and access to the PlayGiga streaming service, which consists of 20 top titles including Rise of the Tomb Raider™, Ryse: Son of Rome and Batman: Arkham City.
Some gamers are accessing PlayGiga via T-Mobile’s public LTE network, and others via a specially built, private LTE network, which is not accessible to users outside of the test group (the so-called campus network). The objective of the test is to conduct a technical analysis as well as collecting qualitative feedback from the gamers themselves.
Edge Computing is a new concept of cloud computing architecture. Servers are no longer placed in remote, centralized Data Centers, but “on the edge” of the cellular network, close to the end user and data generation site. Such a change significantly reduces delays in communication with the server (Low Latency Networks) and lightens Internet connections. This improves the quality of services sensitive to interference, in particular network games and video transmission. EDGE Computing and dedicated resources in LTE networks also allow to build solutions that meet exceptionally high security standards and enable the management of Quality of Service (QoS) parameters.
The current test project builds on the infrastructure and experience gained in the Low Latency Prototyping and 5G Prototyping programs run by Hubraum, the tech incubator of Deutsche Telekom based in Krakow.
According to Javier Polo, PlayGiga´s CEO, “we are really excited to team up with T-Mobile and showcase the potential of PlayGiga´s groundbreaking cloud gaming technology when combined with 5G. This will usher in new and exciting gaming experiences -such as mobile cloud gaming, one of the most demanding use cases for 5G- and PlayGiga is delighted to be at the forefront of it”.
Jakub Probola, Innovation & Development Director adds “At T-Mobile, we believe that thanks to the joint activity with PlayGiga, we were able to validate new paradigms and collect real market feedback. We got very positive feedback from test customers, that proves EDGE and applications running on-top can make a substantial difference. It’s very exciting to be part of such a revolutionary project”.
Edge Computing, in conjunction with 5G networks, is expected to boost industries such as digital entertainment and virtual reality as well as other non-gaming related fields such as robotics, autonomous vehicles and drones. According to a recent report by US-based Allied Market Research, the global edge computing market generated $1.73 billion in 2017 and is expected to reach $16.55 billion by 2025.