Marek’s Take: With mobile gaming, operators face a familiar dilemma

Marek's take

With die-hard gamers increasingly ditching their gaming consoles in favor of cloud-based games that can be played on-the-go, many wireless operators are hoping to capture some of this lucrative business. After all, with 5G’s low latency response times and faster speeds, cloud gaming has always been considered a very compelling use case for 5G. 

Mobile cloud gaming has long been viewed as a potential big opportunity for 5G and some operators are already starting to try to get a jumpstart on it. In Ericsson’s November 2020 Mobility Report, the company said that out of 106 service providers that have launched 5G services, 22 are offering cloud gaming services with a separate subscription fee (ranging from $6 to $18 per month). And 19 of those 22 operators are offering cloud gaming in partnership with a cloud gaming provider.

Plus, according to analyst firm Omdia, cloud-based gaming will surge in 2021 with revenues reaching $4 billion, which is a growth rate of 188% compared to 2020. And by 2025, the firm expect cloud gaming revenues to hit $12 billion.

This potential is probably why we are seeing U.S. mobile operators such as Verizon start to form partnerships with gaming platforms. Just last week Verizon announced it was teaming with Unity, which makes a gaming platform that powers more than half of the top console, PC-powered and mobile games. Unity says that more than 3 billion apps developed by the company’s developers are downloaded every month.

According to Steve Szabo, vice president of IoT wireless and partnerships at Verizon, the Unity partnership is closely tied to Verizon’s mobile edge compute (MEC) platform. Unity can combine its platform with Verizon’s MEC and 5G network to deliver games but also to provide new 3D applications that go beyond providing consumers with games but also delivering tools to enterprises. For example, Szabo said Unity developers could build 3D applications for retailers or even manufacturers that could then be used in warehouses and retail stores.

“This helps us to get into new spaces while at the same time benefitting from the gaming. We believe we can create a differentiated experience that will allow them [Unity] to also participate in new segments,” Szabo said.

But how would Verizon make money from this type of partnership?  Szabo said that one model has Verizon charging for the storage and compute resources it’s providing as well as its 5G network.

However, Szabo stresses that Unity’s partnership is about more than just creating a revenue opportunity. Because Unity has a huge developer community (more than 1 million developers use Unity’s tools), Verizon hopes to be able to access those developers so they could come up with new applications that would take advantage of 5G and MEC. “We envision being able to partner with them. For example, they might help us offer a solution to a manufacturing plant that uses 3D modeling,” Szabo said. “Or some other type of cool use case that we haven’t seen yet.”

This emphasis on building partnerships with companies as a way to not just access their platform but also get in front of their developer community isn’t a new concept. A decade ago when 4G networks were in their infancy, mobile operators followed a similar path and tried to attract developers. The goal at the time was similar to what we are hearing today — get developers to build applications for the newly launched 4G networks that would exploit its better performance and capabilities over the existing 3G network.  

The Wild West
Although gaming is considered a big consumer opportunity, operators such as Verizon are clearly angling for the enterprise market as well because that’s likely to result in a bigger payoff. According to Lynnette Luna, principal analyst with GlobalData, it’s unclear whether consumers will pay more for a better connection for gaming. That’s why these partnerships like the Unity deal are so important. “I think there is a value add,” Luna said. “Carriers can use these partnerships for not just straight gaming but also to create bundles or sticky services around cloud gaming.”

However, similar to the 4G era, we are in midst of a lot of experimentation to try to figure out what model will work best. “It’s the Wild West right now,” Luna said. “We have handset vendors also trying to bundle gaming with 5G devices. It’s going to take some leg work to figure out what is the best way to come to market.”

Verizon’s Szabo acknowledges that much of the success of cloud gaming with consumers depends upon the adoption of 5G devices. “There needs to be enough device penetration for it to matter,” Szabo said.

And he also acknowledges that it is a bit of a race right now to get deals with gaming companies while at the same time expanding the 5G network and also getting new 5G devices into consumers’ hands. “Our job is to make sure all the tools are in place.”

The timing for mobile operators couldn’t be better. With cost-conscious consumers closely watching their entertainment budgets, cloud-gaming is an appealing alternative to purchasing pricey gaming consoles. But operators first need to solidify their gaming strategies and develop compelling packages that will exploit the advantages of 5G over 4G and entice consumers to upgrade their devices.