Online gaming will grow to be one of the key driver of direct carrier billing (DCB) revenue for telcos over the next four years, according to forecasts by research company Omdia.
The Global Carrier Billing Summit held in October 2020 brought together telcos, games publishers, cloud gaming companies, games retailers and payment service providers to discuss what carriers can do to better help content providers distribute their games to consumers worldwide, while simultaneously expanding monetisation through direct carrier billing (DCB) and other payment mechanisms. I was privileged to represent DOCOMO Digital at a panel discussion focussed on the gaming vertical.
We believe that gaming is now a predominant area of growth for payment service providers having noted that up to 95% of its DCB revenue from the app store partnerships it manages (Apple Store, Google Play, Huawei App Store, Samsung Galaxy Store etc.) comes from game downloads in-game content.
Olivier Avaro, chief executive at cloud gaming company Blacknut, believes that streaming offers the potential to turn every connected screen into a gaming console and open up the premium games market to a much broader audience. Blacknut distributes its library of over 400 games directly through business to consumer (B2C) channels, but also via carrier-branded services in various regions of the world. Those consumers are not hardcore gamers with consoles and super tuned PCs, but the general public interested in consumer entertainment much as they are interested in monthly subscriptions to streaming services like Netflix or Spotify that do not require any long term commitment.
“The OTT subscription model is coming to the gaming industry, and that is a big disruption. But the target audience is new and will not cannibalise the existing gaming customer base,” he said. “Carriers already sell fibre broadband and 4G connectivity subscriptions to households and are used to handling DCB, so they are in a great position to help game publishers bring content to a new audience and Blacknut is the middleman between them.”
“5G and cloud gaming will shake up the industry and make it easy for games publishers and developers to distribute their games and for players to play across multiple platforms,” added Rivai Adidharma, director of business development at gaming lifestyle company Razer which provides a payment and content distribution platform for gaming companies including Activision and Ubisoft in emerging markets such as Latin America, South East Asia and the Middle East. We are proud to be partnering with Razer on payments, announced recently.
DCB most convenient payment option
DCB offers one way for gamers to pay for things like title downloads, in-game content, upgrades, and cloud gaming subscriptions. Games publisher Level Up, a subsidiary of Tencent focussing on the Latin American market, is already seeing 25% of its revenue from the game and in-game credit purchases sourced through DCB since it first started offering it as payment options six months ago.
“We have invested a lot on distribution recently, and the idea is to make it easier for gamers to purchase games and credits in a way that is more convenient to them,” explained Level Up CEO Julio Vieitez. “Buying through a mobile carrier solution is super convenient, and if players can buy credits now and pay only when their phone bill arrives, that is an extra benefit.”
Veietez believes that telcos’ large subscriber base make them one best distribution partners available. But he also feels that carriers can do more to bring people onto Level Up’s gaming platforms and increase their own revenue through DCB by orchestrating better marketing campaigns and cross-selling initiatives and improving game performance via traffic peering.
“In Brazil, the carriers have 50 to 70m customers, and there are already some games with over 20m active users,” he explained. “That suggests there are lots of things that could be done in terms of cross-promotion, such as special or random game items and hard currencies distributed to the users of that carrier. If I use one specific carrier and receive a gift for a game, I love, that inspires loyalty.”
Adidharma also feels that improving game performance is another route to attracting new subscribers and retaining the loyalty of existing customers, particularly as 5G networks come online over the next few years.
“As owners of the infrastructure telcos will need to work hand in hand with the gaming industry on how to smooth data traffic,” he said. “Some of my clients say that when they have high traffic in certain countries, the telco turns down the down bandwidth, making the game difficult to be played on the network.”
“They can definitely improve the user experience with infrastructure, by moving cloud gaming platforms close to the edge and delivering lower latency,” added Avaro.
Is gaming the new “Sheriff in Town”?
There is also a sense that not all telcos and MNOs fully appreciate the potential value of gaming to their business strategy or the full extent to which partnerships with gaming companies and publishers can help them offset shrinking revenue from other services and improve subscriber retention rates in a competitive landscape.
“Value creation has shifted elsewhere, and carriers can no longer treat gaming companies as value-added service (VAS) providers of ringtones and wallpapers, but as equals and accommodate business models and requests that no longer favour them as operators.”, suggested one of the panellists.
“I think the telecommunications industry is becoming more mature about what gaming is,” argued Avaro. “Before it was the ringtone type category, but now it is an entertainment category alongside OTT video and music, and they [carriers] do understand what those can bring to the wider telco audience. We are working with the smarter carriers in the world who are super aggregators, and we are going to see cross-selling and cross-promotion between OTT services, gaming companies and telcos within the ecosystem.”
Cross-selling and customised offers could also be enhanced if telcos shared the analytical data they have amassed on their subscribers’ habits over the years. That includes how many times purchases are abandoned, particularly in emerging markets, because the consumer has run out of money or credit.
“Operators have over 40m lines of data on every user on their network each year,” he pointed out. “If that information is cleverly managed it would offer great benefits to partners in terms of customer acquisition, retention, marketing and promotion and I don’t think that has been leveraged enough.”
The pace of development will invariably differ from one country and region of the world to the next. However, there is little doubt that global telcos and MNOs cannot afford to neglect their relationships with gaming companies or hold back on establishing the partnerships needed to expand their DCB revenue through game distribution.
We believe, the telcos not doing anything in terms of partnerships or bringing new and engaging content like gaming to their consumers, they may not continue to be as desirable as the ones that do.