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Telecom operators need to act quickly to cash in on cloud-gaming value chain

(Image credit: Samsung)

Streaming entertainment is a booming business for telecom operators but cloud gaming (game streaming) promises to be the next disrupting force in the digital-gaming market as it lowers the barriers for accessing the gaming experience for consumers and offers publishers the opportunity to address new market segments, industry experts said.

Most games are downloaded and played locally on smartphones, gaming consoles and PCs today but with cloud gaming, it eliminates the need for specialised consoles and high-end gaming PCs and allows gaming aficionados to play any game from any device from anywhere.

Giulio Sinibaldi, senior research analyst at Analysys Mason, said that telcos have huge growth opportunities in the cloud-gaming value chain but they need to lower the remaining barriers.

“Operators are key enablers of cloud gaming but they must consider how best to position themselves in the market to secure the most value and they should work with partners to launch cloud-gaming services in order to address different consumer segments. Operators that plan to offer edge cloud services for cloud gaming should move quickly to build the necessary capacity,” he said.

Moreover, he said that operators are well-positioned to directly address three out of five barriers, such as broadband access technology, server infrastructure coverage and consumer education while the remaining barriers are the cost of service delivery and high-end content availability.

In 2019, cloud-gaming services belonged to the fixed-line category. Playstation Now and GeForce Now, Vortex and Google Stadia are the most adapted services.

Cloud gaming servers are available in a limited number of countries worldwide, especially in North America, Europe and the Asia Pacific.

In 2019, Sinibaldi said that there were less than 200,000 mobile cloud gaming users worldwide as there was only a handful of active mobile cloud gaming services of which Hatch is the most adopted.

Hatch is available in more than 20 countries.

The research firm said that the cloud gaming market is expected to grow from $265m in 2019 to $14.5b of total digital consumer spending in 2024.

Microsoft xCloud is expected to be launched in certain countries in the second half of this year while NVIDIA GeForce Now became a full-fledged commercial service with 1m users in the first quarter of this year.

(Image credit: Analysys Mason)

5G is necessary

“The traditional channels such as consoles, online platforms (Steam or Origin) and app-stores (Apple Store and Google Play), will remain the fast-growing segments as gaming labels will not switch to cloud-based services right away but cloud gaming will emerge as an additional sales channel,” Sinibaldi said.

Facebook acquired PlayGiga, a Spanish cloud gaming technology provider, and it is likely that large gaming labels will acquire smaller cloud gaming technology providers.

Sinibaldi said that mobile cloud gaming services will grow from zero to 42% of the consumer spend over fixed users since growth will be determined by the development of a 5G network.

“5G network is necessary to make mobile cloud gaming services available for users as 4G could not guarantee the consistent speed and latency for most latest titles.  In 2024, cloud gaming will attain 6.4% of the total digital gaming spend,” he said.

Advisory firm ABI Research revealed that 5G alone will contribute revenues of almost $1.9b to cloud gaming (accounting for 42% of overall cloud gaming revenues) as well as $67.5b in cloud video (accounting for 31% of cloud video revenues) by 2024.

Game streaming has the potential to revolutionise the gaming market but as of today, Sinibaldi said that it is still an emerging technology. 

“Most telcos’ networks have the capacity to address the consumers’ demand for cloud gaming services because it is still at an early stage. However, most of their networks need to upgrade capacity and routing to address throughput demand from such services once they will be mature, but we are years from that,” he said.

(Image credit: Analysys Mason)

(Image credit: Analysys Mason)

(Image credit: Analysys Mason)

A range of options for telcos

Gaming is an entertainment service where content is the king, so the support of publishers and developers will be necessary for the success, he said.

However, he said that most of the publishers are still reluctant to give high-end content for streaming while the high-end gaming content is still best monetised outside of game streaming services and publishers are waiting for the ecosystem to mature.

Remy Pascal, senior research analyst at Analysys Mason, said that operators have a range of options for cloud gaming depending on the market segments they wish to target such as TVs, PCs and smartphones.

He added that fixed- and pay-TV operators can use cloud gaming on the TV to strengthen their STB value proposition while operators can use fixed cloud-gaming services to market premium broadband plans and cloud gaming on smartphones with 5G and with unlimited data plans.

However, he said the expected benefits for operators are additional revenue from gaming add-ons from subscribers and increase customer retention.

Value-added services such as cloud gaming are likely to increase “customer satisfaction”, potentially decrease churn and offer new monetisation opportunities to operators.

When asked about AR and VR gaming, he said that they are still a niche for now but have the potential to drive revenue for the operators in the future.

“AR and VR gaming is drawing interest from operator-led services and is already available in China and South Korea,” he said.

Edge cloud platforms have an edge

Sinibaldi said that cloud gaming is the next step in digital gaming and to offer game streaming, cloud gaming servers have to sit on the edge to boost performance and to lower latency.

 “Operators can use cloud gaming as one of the potential business use cases of 5G and edge cloud investments. Operators should quickly build the necessary edge cloud capabilities to offer cloud-gaming platforms,” Sinibaldi said.

Moreover, he said that operators that enter the cloud-gaming value chain early on will be able to accelerate the development of the cloud-gaming market and secure a larger share of the value in the long term.

Furthermore, he said that operators with own-branded game streaming services and those that support a third-party service can use their consumer and edge cloud platforms to take on the role of cloud-gaming service aggregators.

However, he said that operators should move quickly to avoid being overtaken by public cloud and data centre companies and to make the most of their advantage in marketing cloud-gaming services before the cloud-gaming market matures.

He said casual (PC, TV and mobile) requires less than 100ms, racing/action (mobile) requires 50-60ms, racing/action (PC and TV) requires 40-50ms while AAA immersive action titles (PC and TV) requires 20ms latency.

“Broad adoption of 5G to drive cloud gaming services while the development of 5G infrastructure is expected to foster the growth of the market,” he said.