The latest analyses of fifth-generation (5G) mobile infrastructure, apps and services from research company Omdia suggests mobile network operators (MNOs) will soon have the apps they need to entice consumers off their existing 3G and 4G subscriptions.
Omdia believes that the monetisation strategies applied to 5G technology are unlikely to be that much different from 4G/3G before it – in other words, focussing on faster mobile data download speeds and increased capacity that delivers a smoother, more reliable connectivity experience.
And many of the mobile applications and services already available – HD video and live event streaming, for example – can be delivered consistently over existing 4G architecture and subscription bundles. But telcos have a couple of aces up their sleeve in cloud gaming and augmented (AR) and virtual reality (VR) applications.
5G networks should deliver fast, latency and jitter-free mobile game streaming without the lag and interruption to gameplay that often infuriates their participants. And the network should also be able to support better innovative AR and VR formats for both gaming and other applications like 3D shopping, learning and immersive experiences, now referred to as the Metaverse.
Cloud gaming racing ahead
In its third annual Global Cloud Gaming Report: Infrastructure Edition, research company Newzoo documented a global spike in cloud gaming platform sign-ups during 2020, as people spent more time playing computer games during long periods of lockdowns. The surge in interest will help grow cloud gaming revenue from US$669m in 2020 to US$1.57bn in 2021, estimates Newzoo. By the end of this year, the company expects there will be 23.7m paying users of cloud gaming services, up from 13.5m in 2020, with average revenue per paying user (ARPPU) hitting US$66.3. Separate forecasts from ABI Research’s latest 5G Media and Entertainment application analysis report estimate that 5G will contribute US$1.9 billion of cloud gaming revenue by 2024.
Given their potential application in multiple use cases other gaming, AR/VR solutions sales are expected to generate much higher turnover, albeit after a slower start. Statista estimates that the market for AR/VR headsets will almost double from just under US$31bn in 2021 to US$58.7bn next year, before expanding rapidly to be worth US$297bn by 2024.
Enhanced revenue opportunities for 5G providers
We expect that the extension of 5G coverage coupled with the broader availability of lower-cost 5G smartphones in 2021 will accelerate that trend and specifically help telcos grow their service revenue.
Another recent report compiled by Omdia in partnership with Ericsson estimates that cloud gaming will account for 5.3% of total digital service revenue bundled with 5G subscriptions between 2020 and 2030, for example, expanding at a compound annual growth rate (CAGR) of 62% to be worth US$6.9bn by the end of that period. Augmented and virtual reality (VR) will deliver a slightly more significant portion, expanding at a CAGR of 80% to generate US$6.9bn for service providers.
5G enabled immersive media – which include in-venue digital services and advanced technologies such as holographic mobile displays and haptic VR controllers alongside cloud gaming and AR/VR – will provide over US$4.2bn of revenue for global services providers by 2030, half from AR alone.
Smartphone AR services that extend beyond gaming already available include 1010’s Lens service in Hong Kong, Japan’s AR Square app, and 3D AR shopping app from LG U+ in South Korea, the latter supplemented by Nreal, a set of smartphone tethered AR glasses. These apps and devices also allow service providers to take AR assisted advertising and mobile commerce (mCommerce) initiatives.
Cloud gaming and AR/VR partnerships to proliferate
Omdia also recommends that CSPs invest in managing 5G ecosystem partners to offer end to end solutions to their customers. Collaboration with cloud gaming companies is already a vital component of that strategy, with multiple examples of partnership in evidence.
MNOs that have worked with cloud gaming providers to deliver services include China Mobile, Chunghwa Telecom in Taiwan, Anstream in Singapore, and SK Telecom in South Korea. In Europe, the list extends to Deutsche Telekom, Vodafone, Telefónica, Proximus and BT. At the same time, all three major mobile network operators (MNOs) in the US – AT&T, T-Mobile and Verizon – have tested cloud gaming platforms in partnerships with Microsoft, PlayGiga, Hatch and Twitch.
The same is true for AR/VR services, through partnerships are at an earlier stage of their development. In the UK, Three is offering a 5G plan bundled with an Oculus Go VR headset and a subscription to the Melody VR service, which gives consumers the chance to watch live music events in 3D. And Singtel recently unveiled its XO Plus plans which provide users with a 5G handset, 150GB data allowance and a three-month complimentary subscription to both MelodyVR and its AR educational content on Bookful.
Telcos can also monetise 5G’s AR/VR capabilities by building apps used by various vertical industry segments, including broadcasting, tourism and healthcare. BT recently added 360-degree camera views to its BT Sport app Matchday Experience, for example, giving subscribers access to AR-type features during live broadcasts of Premier, Champions and Europa League football matches. And in South Korea, SK Telecom worked with the country’s Cultural Heritage Administration to launch an AR app developed in partnership with Google, Nexus Studios and Seerslab, which allows tourists to view Changdeokgung Palace with an immersive experience.
The world’s telcos and MNOs have spent big on buying 5G spectrum licenses and building 5G infrastructure over the last few years – cloud gaming and AR/VR could provide the instant, revenue-generating turbo boosts that help them recoup that investment in a shorter amount of time.