For almost a decade, the video gaming industry has talked about the potential for streaming from the cloud, which would unlock consumers from having to rely on the expense of purchasing both games and hardware and enable virtually unlimited access to a catalogue of titles.
We are all the beneficiaries of streaming services such as Netflix and Spotify, which have forever changed consumer access to video and music. This is the model that the latest gaming technology offers consumers.
Cloud gaming has been slow to build because of the need for speed and low latency — until now. With the adoption of 5G by telcos, cloud gaming and 4K video will become the most common applications for the residential market. Consumers will now be able to enjoy a catalog of subscription-based services and eliminate the costs and limitations of consoles and gaming PCs. Thanks to 5G, over time, the addressable market will greatly increase by offering high quality video games on the move, with imperceptible latency.
Providers Get in the Game
Currently, 53% of new games cannot run on PCs. With cloud gaming, since the processing takes place in the cloud, local processing requirements are greatly reduced, enabling publishers to expand their addressable market. Telecommunications providers can leverage cloud gaming and offer a subscription-based gaming service to their subscribers and eliminate the need for gaming PCs or video consoles.
Cloud gaming will have a significant impact on providers. During the last 10 years, telcos and cable operators have become huge distributors of digital content: pay TV, music and digital home services. For them, cloud gaming represents a significant opportunity because the interactive entertainment market is significantly larger than video and music.
Providers can readily capture this market by extending their existing portfolio of digital services. Plus, they already sell subscription-based services to the family segment — the initial target for cloud gaming services.
Apart from the fact that cloud gaming is a compelling case for telco customers to adopt the new 5G technology, it also provides an opportunity to upgrade customers to higher-value pricing plans, such as moving from asynchronous digital subscriber line (ADSL) to fiber, and increase the value of that customer base. Since gaming is a high-engagement service, it will also help telcos reduce churn.
Moreover, providers can defend their pay TV business by offering a game streaming service to their video subscribers, which would otherwise be under the threat of disintermediation by OTT players such as Google and Microsoft that have recently announced their cloud gaming projects.
Providers in Prime Position
Telecom providers are uniquely positioned to become a provider of choice for gaming as they have been for pay TV. With millions of subscribers in the target segment, they enjoy marginal cross-selling economics, and gaming is a natural extension of their pay TV offering. Plus, cloud gaming provides a compelling reason to promote their fiber and 5G rollouts.
There is no question that cloud gaming has arrived and will transform the way games are marketed and played by an increasing worldwide customer base. What is still in contention is whether telecom providers or global over-the-top players will be the first to grasp this opportunity.
The race is on.
Javier Polo is the CEO of PlayGiga, a Madrid-based cloud gaming company with services commercially available in four countries.