Coronavirus related lockdown restrictions helped drive increased consumption of video and game streaming worldwide over the past few months – see my recent blog Social distancing results in an unprecedented surge in video streaming and online games for further discussion. But as the pandemic subsides, gradual rollouts of fifth-generation (5G) mobile networks over the next four years will expand that usage beyond residential fixed/mobile broadband services onto external cellular networks that allow consumers to stream content on the go from wherever they happen to be.
That’s the conclusion drawn by ABI Research, whose latest 5G Media and Entertainment application analysis report estimates that 5G will contribute US$1.9bn of cloud gaming revenue by 2024, accounting for 42% of the total.
The 5G and cloud streaming advantage
Just as video and music streaming pushed consumers to upgrade from 2G/3G networks and handsets to 4G equivalents, cloud gaming could emerge to be the “killer app” that drives consumers to use those 5G networks. The evolution and implementation of 5G infrastructure that provides more reliable connections, faster bandwidth (anything from 100Mbit/s to 1Gbit/s) and lower sub-1-millisecond latencies compared to current fourth generation (4G) equivalents is already underway. Tests conducted by Mitsubishi Electric and NTT DOCOMO in Japan have even achieved mobile transmission rates of 27Gbit/s.
Upgraded 5G networks will also support much higher densities of end-user connections per square kilometre of up to a million. That is ten times more than 4G equivalents and will allow more gamers to maintain concurrent, high-speed connections near each other in densely packed public spaces and buildings. Boosting mobile speeds to 500Km/h will also allow gamers to maintain 5G connections and performance while travelling on trains and other forms of transport.
Lowering the cost of gaming hardware/software
Those speed and capacity improvements are essential, not least because they will allow high-performance gaming to be delivered to low specification smartphones. In the past, the types of game people played on their mobile devices was mostly dependent on the individual device’s CPU, RAM, storage and graphics processing capabilities. But the emergence of cloud game streaming platforms like PlayStation Now, Microsoft’s Project xCloud, GeForce Now and Google changes that dynamic. Primarily, the game is hosted on powerful servers situated in a super scale data centre, with the player’s smartphone providing little more than a window and input/output (I/O) directions to action which is being processed elsewhere.
That type of configuration also enables the delivery of smooth and responsive virtual (VR) and augmented reality (AR) content to end-user devices. Those applications can go beyond gaming to deliver other immersive experiences such as 360-degree tours, virtual video conferencing, digitally enhanced shopping trips, for example. To get that type of gaming experience from a cloud streaming platform, consumers will no longer have to invest hundreds or thousands of dollars in expensive PC or console gaming hardware – the device they have in their pocket should be able to handle most of the titles they want to play.
In its report Cloud gaming: New opportunities for telcos?, consultancy firm STL Partners suggests that cloud game streaming could deliver a high-end gaming environment at half the cost of a traditional, console-based approach for example because it eliminates the need not only for high-spec hardware but also retailing, packaging and distribution of associated hardware and software.
Handset production ramping up
The single most significant expense cloud gamers are likely to meet is, therefore, the cost of the smartphone itself. And while the price of the few early models which are currently available remain prohibitively expensive for most consumers, suppliers will ramp up both production and commercial availability from this year onwards. Leading manufacturers like Samsung, Huawei, Xiaomi, Vivo and OPPO were scheduled to broaden their 5G smartphone portfolio in the second half of the year 2020 with Apple also rumoured to be preparing a 5G enabled device of its own for launch before January.
In a report, The Evolution of Gaming Through 5G commissioned by smartphone chip specialist ARM, market intelligence firm Newzoo estimates that by the end of 2019, 0.2% of all active smartphones globally (around 7.5m devices) were 5G ready. That number will grow at a compound annual growth rate (CAGR) of 411% to reach over a billion devices by 2022 however (21.8% of all devices), with China alone accounting for 392m, a third of the country’s total. Currently, South Korea has the most extensive 5G penetration in the world, with 11.3% of all active smartphones in the country 5G-enabled.
Telcos must target media and entertainment more effectively
As the combination of faster bandwidth, lower latency connections and centralised processing capabilities bring premium, high-resolution titles to the smartphone, telcos, MNOs and other communications service providers (CSPs) are in a good position to engage with the larger volumes of gamers expected to access cloud streaming platforms.
Yet ABI believes that in order to capitalise on the future opportunity fully, telcos and MNOs need to look beyond consumer user cases and target enterprise applications within the media and entertainment industry itself. The research company points out, with some justification, that revenue from the consumer domain alone will be unlikely to pay off the large financial investment telcos have made in 5G planning and implementations to date. Telcos could build partnerships that combine smartphone provisioning, game development platforms and cloud hosting infrastructure as part of the complete package. That could include optimising performance further by hosting content closer to the end-users themselves at the network edge, for example.
Operators engaged in cloud gaming
Some have already made tentative steps down that route, while others are partnering with media companies to deliver cloud gaming platforms of their own. Swiss telco Sunrise launched its cloud gaming service in November 2019, partnering with Gamestream to deliver 4K content over its 5G network for around US$10 a month. In Germany, Deutsche Telekom unveiled a beta version of its MagentaGaming platform in 2019 with a commercial launch date set for some time this year. Germany also saw Vodafone partner Hatch – the mobile cloud gaming service owned by Angry Birds creator Rovio – give its subscribers access to the 100 games available on its platform from their Android 5G devices for around US$7.70 a month. Hatch has similar deals with other mobile operators in Europe as well as Sprint in the US.
In Asia, SK Telecom outlined plans to deliver 5G-based cloud gaming in Korea late last year, via an exclusive partnership deal to deliver Microsoft Project xCloud’s service to its 5G subscribers at some point in 2020. Singtel too is currently working with the country’s telecoms watchdog Infocomm Media Development Authority and gaming hardware manufacturer and mobile payment provider Razer to test the suitability of its 5G network to support cloud game streaming services.
Convenient billing arrangements laid on
Cloud gaming partnerships could also extend to billing arrangements since most titles made available on streaming platforms will be free to own – access is primarily leased for a small monthly subscription fee. The convenience factor delivers a major advantage for telcos and MNOs, with many consumers already comfortable with paying for digital content through bundled subscriptions via direct carrier billing (DCB). Paying for cloud gaming subscriptions and any transaction-based downloadable game content (skins, upgrades, add-ons, characters etc.) through their mobile phone bills also circumvents any problems with younger segments of the population which are unlikely to own credit or debit cards.
Cloud gaming is still its infancy, and there remain technical and cultural challenges to be overcome. But its potential to reinvent the online gaming world and change the way consumers access and pay to play the latest titles is enormous.