Market research firm Newzoo expects the value of the mobile games market to grow from US$70.3bn in 2018 to be worth US$106bn in 2021, while GlobalData extends the figure to US$300bn by 2025. The majority of that mobile gaming revenue will come from smartphones and the steady expansion of 5G network and handset availability over the next few years is certain to grow the market further given the game-friendly features the new infrastructure provides.
Gamers will get more bandwidth to support enhanced video resolutions (up to 4k) for example, alongside lower latency that reduces lag in multiplayer environments and more reliable connectivity to better support real time interaction between participants. 5G also offers the potential to enable virtual reality (VR) gaming through a headset connected via the mobile device, particularly if games streamed from the cloud remove much of the local processing overhead to bring the cost of the associated end user hardware down.
Over three quarters (76%) of all app revenue in 2018 came from mobile games according to Newzoo, predominantly popular titles like Candy Crush Saga, Fortnite and Pokemon GO. App store purchase prices and subscriptions provided some of that turnover, but there was supplemental income too from in gaming purchases of customer characters and levels alongside playable brand ads and branded integrations. Just as they do with existing 4G networks and app downloads, 5G presents telcos and mobile network operators (MNOs) with an opportunity to use existing customer accounts to pay for in gaming purchases within “fremium” or “paid” models (or a “paymium” combination of the two). That requires direct carrier billing relationships with app store providers such as Amazon, Apple Google, and Samsung and/or specialist payment service providers like DOCOMO Digital that bring together merchants and operators onto a single platform.
Direct carrier billing has so far proved most popular amongst buyers in markets where credit card penetration is low and alternative payment methods are limited, while various partners and stakeholders will inevitably take a percentage of the payment fees. But while the anticipated increase in mobile gaming activity in parallel with 5G rollouts will almost certainly make it worth the telcos’ while from a volume perspective, a bigger opportunity to increase their revenue may come from game streaming.
The delivery of cloud-hosted games to smartphones and other devices over 5G presents could enable operators to cement a stronger hold in the gaming market than handset, PC or console hosted hosted titles which relegated them to the status of connectivity providers previously allowed. Porting games to multiple screens – including PCs and television as well as smartphones – adds another component to telco triple/quad-play subscription strategies that already sees them bundle broadband connectivity, mobile voice and data, and video/audio streaming to any device, for example. If MNOs can establish themselves as the gatekeeper to cloud hosted games, they can use popular titles to attract customers onto their networks and other services.
The scope of that opportunity does not appear lost on the telecommunications industry, though it faces stiff competition from tech giants like Google (Stadia), Apple (Arcade), Samsung (GalaxyPlay) and Microsoft (xCloud) which have recently launched similar cloud game streaming services of their own. Two telcos which have already announced rival platforms include Deutsche Telekom (MagentaGaming) and Sprint (Hatch).
Currently in beta, Deutsche Telekom’s MagentaGaming service will be rolled out to the telco’s full customer base in Germany in 2020. Streamed games will run on smartphones, tablets, smart TVs and PCs with longer term plans for 4k resolution, Dolby 5.1 surround sound and integration with DK’s MagentaTV service. On the other side of the Atlantic, Sprint describes Hatch’s curated catalogue of available games as a “Spotify” or “Netflix” style service with additional social features. By providing a greater choice, the US telco believes buyers are more likely to find a title that interests them and with 5G install, configure it and start playing more quickly. Providing games under a monthly subscription means no delays or complexity with in-app purchases, just unrestricted access for customers to try whatever is available. Fast 5G networks will be one essential component to any success, but so will a compelling library of attractive games to entice people onto the service in the first place.