Can Mobile Gaming Monetization Become a Game Changer for CSPs?

Mobile gaming is becoming pervasive. With well over 2 billion gamers worldwide and 60 billion USD in annual revenues (a number which has gone up by 10 percent each year), the industry is already supported by a variety of companies. These include pure-play providers like Activision, Electronic Arts, Niantic and Nintendo, and industry heavyweights like Apple, Disney, Epic, Google, Microsoft, Sony, Tencent and Warner Bros. Fueled by smartphone adoption and app-store ecosystems, mobile gaming demand has grown over the last decade, though the number of new games peaked in 2016, with 280 thousand games launched in the Apple app-store alone. Since 2016, the number has dropped dramatically allowing the market to mature with high profile games becoming increasingly dominant. A typical gamer only plays around 4 different games per month.

These gamers are selective, always seeking new creations and innovative experiences. While the current smartphone and app-store platforms serve the industry well, new immersive service enablers like wearables with integrated sensors, augmented and virtual reality and real-time artificial intelligence are poised to disrupt. Although nascent, these enablers are benefiting from tremendous investments across many industries, and, once available, are likely see robust consumer demand. Industry pioneers like John Hanke, CEO of Niantic (Google spinoff and creator of Pokémon Go) predict a new generation of gaming that replaces smartphones with wearables that give way to enhanced augmented reality and social interaction capabilities. Hanke, who also founded Keyhole, Inc. (the precursor to Google Earth) further says that there will be tremendous gaming opportunities once AR objects are localized and geotagged. Others like Tim Sweeney, CEO of Epic Games, look towards the growing collaboration between the gaming and film industries. With graphic processing innovations such as ray tracing (spearheaded by Nvidia), Sweeney anticipates a future, where these technologies being pioneered for high performance console games will mature and ultimately bring life-like graphics to mobile gaming.

With the app-store model, mobile gaming pulled value from mobile networks to the ecosystem peripheries, namely cloud app-stores and smart-phone devices. But as demand for higher resolution graphics and immersive and interactive real-time capabilities rises, smartphones and wearables aren’t going to be able to meet those computing needs. Increasingly gaming services will depend on cloud and edge computing to deliver the necessary performance requirements, bringing mobile networks and their value back to the fore. This will certainly be the case as 5G and edge computing capabilities are deployed with localized computing power, high bandwidth and low latency connectivity. Communication service providers (CSPs), tower companies and real estate investment companies are already building out edge compute infrastructure to address demand coming from services and applications like mobile gaming.

5G’s availability will turn high bandwidth connectivity into a capability all mobile game developers will have to work with. Low latency will likewise become mandatory for services like streaming for interactive and immersive games. Local breakout connectivity capabilities will likely be needed for these low latency instances and will depend on key innovations, such as Control User Plane Separation (CUPS), which has become standardized with 5G. This will ensure that mobile data user-planes can be terminated locally, rather than tromboning back to a central office or mobile switching center.

A perennial concern for CSPs is that they are becoming so called “dumb-pipes,” with value creation being driven out of their networks to the ecosystem peripheries. This has been the case for mobile gaming for a while, where smart phone devices operate games locally, or are peered directly to centralized cloud-based applications environments. However, as games become more sophisticated, value creation will come to the network edge and back to mobile networks. To ready themselves, CSPs must position themselves with the underlying infrastructure, software platforms, business models and services to capitalize on these opportunities as they arise.