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5G Cloud Gaming: The $150 billion opportunity

September 16, 2020 - Martin Morgan

Martin Morgan, VP Marketing, discusses Sony launching PS5 to keep existing customers before new 5G gaming offers shake up the gaming market

Sony have just launched their PlayStation 5 gaming console via an event broadcast on YouTube which was watched by 2.5 million people worldwide.

According to an article by Nikkei Asian Review Sony’s goal here is mainly to keep existing PlayStation customers from the clutches of the new 5G cloud gaming offers. The article says that, “The Japanese Entertainment Company hopes to corral PS4 users and video game players before Google and other American technology giants attract them to cloud gaming when fifth-generation mobile communication services, boasting high speeds and huge capacity, enter widespread use.”

If Sony is worried about competition from 5G cloud based gaming…………..

There does seem to be a significant opportunity for 5G gaming. At present most on-line gaming is played over wi-fi. But if you live in the same house as a gamer you’ll be sure to have the heard the complaint, “why is the wi-fi so rubbish?” You’ve probably heard it a lot more this year. When the world moved indoors back in March the appetite for data has gone up and up and up. This has gone hand in hand dropped zoom calls, interruptions to streaming movies and music stopping mid-track. These are annoying, but not the end of the world. However, gamers seem to be more vocal about poor wi-fi than most. After playing a multi-player game for 3 hours straight, they may lose connection and when they do get back on, they’re either out of the game or lost whatever advantage they had. Maybe they do have something to complain about.

This may explain why a recent study of ‘ardent gamers’ called out “a $150 billion incremental opportunity in cloud gaming for carriers offering 5G networks, with their enhanced performance and improved service experience.”

Research firm Sapio carried out a survey in April and May this year, on behalf of Ribbon Communications Inc, that got the views of over 5000 gamers from the US, the UK, Germany, Korea and Japan. The gamers surveyed played at least three hours per day, so it’s fair to describe them as ardent. The results of the survey showed that:

  • 58% already pay a premium to their provider to enjoy the best gaming experience possible.
  • 79% would consider replacing their home broadband and mobile connectivity with 5G for a better gaming experience.
  • 95% would pay more for this improved experience, with 60% willing to pay 50% more (or $126 per month compared to the current monthly average of $84).
  • 58% would switch connectivity provider as soon as they could if a competitor offered a high-quality gaming service with a new 5G subscription.

These are fairly staggering figures. The opportunity to provide guaranteed quality of service for a 5G network gaming slice will take away the issues of contention and the ‘why is the wi-fi so rubbish’ question. It suggests that service providers that provide 5G gaming as they roll out 5G services, as a targeted offer could get results.

The willingness to pay more for an improved gaming experience is interesting. Most service providers don’t charge a premium for 5G connectivity. It could be argued that customers view connectivity as a commodity and therefore the lowest price will win out. However, once you start to bundle services, that are enabled using 5G, that people care about then you’re moving away from providing a commodity to providing a service that people value. Gaming is a prime example here. 

The figure of $150bn is based on extrapolation of the survey data and public forecasts on the gaming market from Newzoo. Even if it’s 50% accurate that’s still a huge opportunity based on the ability of 5G to deliver the right level of quality of service. The research report quotes Lynnette Luna, Principal Analyst, GlobalData, "Cloud gaming presents an important and lucrative opportunity for carriers who embrace 5G and deliver the improved service experience gamers crave," Luna continued. "The rapid shift to mobile and cloud-based game delivery, combined with the higher data speeds and reduced latency 5G offers, create a better user experience for gamers and a revenue-rich eco-system that carriers shouldn't ignore."

While 5G is attractive to gamers, it also is an attractive channel to the gaming companies. Just as Netflix and Spotify partnered with service providers in 4G we may well see the large gaming companies work partner with 5G service providers to ensure a new channel to market for their games. If the service providers can offer wholesale service level agreements to the gaming companies guaranteeing the right level of network quality for the end customer, then this will provide the assurance that may be needed at the start of these partnerships. Sony doesn’t have to see 5G as a competitor. 5G can offer a new route to market for Sony and they can form partnerships with leading 5G service providers.

However, the big name gaming companies may initially be nervous if the customer experience isn’t what they’d expect. Poor network quality of service will damage the gaming companies’ brands and lose them customers. On the other hand, delivering the right level of network experience for 5G gaming will open up new channels for the gaming companies, deliver revenue share and upsell opportunities, and keep a lot of gamers happy. Which will give the rest of us a bit of peace without having to explain why the home wi-fi is rubbish. And that is something that I’d happily pay for premium for.

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