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Mobile, Cloud and eSports Set to Drive LatAm Gaming Revenue

May 27, 2020

Luisa Muneratti

VP – Europe & Latin America

Greg Sigel

VP - Partnerships

With consumer spending on mobile games set to grow faster than any other content segment, mobile network operators (MNOs) can help games publishers sell their titles to smartphone users that will demand a fast, convenient and secure method of paying for it.

Mobile gaming was the largest segment of the US$152bn gaming industry in 2019, according to market research firm Newzoo, representing 45% (US$68.5bn) of the total, up 10.1% on 2018. Newzoo also forecasts that the majority of future expansion between 2019 and 2022 – set to see global consumer spending on mobile games to increase at a compound annual growth rate (CAGR) of 11.2% to reach US$93.6bn – will come from emerging markets.

That includes Latin America, which in 2019 accounted for around 4% of the global total ($6.1bn, up 11% in 2018). Two countries in the region take up the majority of that share – Mexico at US$1.58bn, and Brazil (US$1.45bn) – three times the value of third-placed Argentina at US$448m.

That is modest compared to other regions of the world like Japan, South Korea and North America. But while spending levels in those parts of the world may have plateaued, particularly for mobile games, Latin America shows significant potential for much faster growth from a smaller base.

5G will drive further gaming expansion

The emergence of fifth-generation (5G) mobile networks will accelerate the trend in the longer term. However, they will account for only 51m of total mobile connections in Latin America by 2025, according to the GSMA. Adoption rates currently trail most other regions of the world while the coronavirus pandemic in the first half of 2019 is likely to delay rollout plans further. But whatever the eventual timescale, there is no doubt that 5G is coming to Latin America. MNOs, including Claro, working with Ericsson and Qualcomm in Brazil, and Antel partnering Nokia in Uruguay, have already conducted trials of the technology.

The higher bandwidth (eventually up to 1Gbit/s), lower latency, better coverage and improved reliability that 5G provides are ideally suited to support online gaming which needs fast response times. It will also deliver the enhanced bandwidth and in-game experience required to optimise the new generation of 4K and virtual reality (VR) titles with complex graphics rendering requirements which have started to emerge in the last year. After being launched this time last year, for example, content for Facebook’s game-changing Oculus Quest VR headsets has exceeded US$100m globally, though COVID-19 induced supply chain problems have restricted supply of the hardware itself.

While 5G networks continue to evolve, telcos and mobile network operators will continue to expand their fourth-generation (4G) coverage across Latin America, bringing more mobile bandwidth and lower latencies to gamers than existing 3G infrastructure in the medium term.

eSports expansion led by Brazil and Mexico

Those 4G networks are already increasing the popularity of electronic sports (eSports) in Latin American countries, with millions of consumers now participating as both competitors and audience members, alongside a small core of professional gamers.

One of the largest mobile gaming companies, Wildlife Studios was founded in Brazil. Wildlife has over 70 titles to its name, with over 2 billion downloads thus far globally.

Mexico-city based Pro Play Esports has been running local games tournaments in English and Spanish on its specially developed commercial platform since May 2019, since expanding to organising events in Europe and North America too. As of October last year, it was running about 37 events a week covering 18 titles including Fortnite, Rocket League and League of Legends, including its first competitive seasons. It sees the potential for the expansion of mobile eSports game streaming as particularly notable, particularly in the largest markets of Brazil, Mexico, Argentina, Colombia, Venezuela and Chile.

The Mexican eSports Federation (Femes), endorsed by the country’s National Commission of Physical Culture and Sport (Conade), was created in 2019. Statista estimates that revenue from eSports in Mexico alone will reach US$22m by 2023, with total gaming revenue in the country forecast to hit US$1.2bn. The coronavirus pandemic has provided the additional impetus with the Mexican Football League announcing the eLiga MX. This FIFA 20 esports video game tournament will replace the physical championship during the country’s lockdown. In fact, sports clubs in Mexico (Club America) and Argentina (River Plate) have “fielded” their own eSports FIFA teams in the virtual football organisation (VFO) since 2016.

The Movistar-sponsored Liga Pro Gaming (LPG) professional eSports league is currently expanding beyond Peru into neighbouring Bolivia, Chile and Columbia in May 2020. The revamped league will cover ten titles – Dota 2, Counter-Strike: Global Offensive, Fortnite, Clash Royale, Rocket League, Street Fighter V StarCraft: Remastered, rFactor 2 and now League of Legends, Teamfight Tactics, and Rainbow Six Siege.

Broadcasters too are helping expand the market, with AMC Networks International Latin America (AMCNI-LA) partnering Temporada de Juegos (TDJ) to debut La Liga Pro, the only Counter Strike: Global Offensive (CS: GO) event that covers all of Latin America in April this year [2020].

While cloud game streaming has failed to gain much traction in Latin America so far, one of the world’s first game streaming service, GLOUD, was launched in Argentina and Chile as far back as 2017 by Turner International’s Digital Ventures & Innovation team, costing US$10 a month. And having purchased Spanish video game streaming company PlayGiga for €70m in late 2019, Facebook is now better equipped to drive the expansion of its Facebook Gaming platform into the region. PlayGiga already operates in Argentina and Chile in partnership with Turner and has worked with US telcos on 5G enhancements to its platform. Similar initiatives are expected from Google Stadia, Microsoft xCloud, Electronic Arts’ Project Atlas, Nvidia’s GeForce Now and Sony’s PlayStation Now in the near to intermediate future.

Telcos and DCB have a major role to play

As participation in mobile gaming, cloud game streaming and eSports expands, the way that players and audience members in Latin America engage with gaming platforms and pay for content will inevitably change in parallel.

Up to 50% of citizens in Latin America did not have bank accounts in 2017, and even less use credit/debit cards. Those lower levels of financial inclusion have been incubated by a widespread lack of trust in banks, due to weak regulation, coupled with the comparatively high cost of banking services, due to low levels of competition, found the Centre for Global Development. But the percentage of the region’s population that used a smartphone in 2018 reached 66%, according to the GSMA’s Mobile Economy Latin America 2020 2019 report, a number forecast to expand further to 79% by 2025.

The gulf between bank account holders and smartphone users expands even further for younger sections of the Latin American population which are most likely to engage in online gaming. For 16- 25-year-olds, being able to pay for downloadable content, monthly subscriptions and tournament access fees quickly and easily using their smartphone itself is often the most convenient and secure way of funding those purchases, especially if it links to biometric authentication mechanisms like fingerprint scanning and facial recognition tools embedded in the device itself.

Regional telcos and mobile network operators are ideally placed to facilitate those payments via direct carrier billing (DCB). They can help games developers and publishers reach a wider audience through access to their large subscription bases. Telefónica, for example, is currently developing DCB in partnership with DOCOMO Digital to drive adoption of content and digital services among its subscribers in Latin America, starting with Movistar Chile. The platform allows mobile subscribers to pay for digital content from games developers, digital merchants and app stores by adding charges to their existing mobile phone bills.

With online gaming innovation on course to blossom as 5G networks spread across the region over the next five years, building a scalable mobile payment ecosystem now is likely to reap significant rewards in the long term.

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