When trying to understand the shifting landscapes around 5G, a common approach is to describe an ecosystem based on the particular industry or customer segment it serves. This customer-centric model focuses on customers with similar needs, and can be used to highlight potential solution synergies between different customers within the same industry. Join us and play along as we explore this approach with a deep dive into the gaming industry, mapping four different ecosystems within the larger industry and look at how 5G and cloud can create value in each.
What is an industry-centric ecosystem?
Earlier in our ecosystem evolution blog series , we explored five lenses for understanding the ecosystems around 5G – one of which was industry-centric ecosystems. An industry-centric ecosystem uses industries (energy, healthcare, manufacturing or gaming, for example) as an anchor for all the stakeholders. These ecosystems are usually large, as they involve players along the entire value chain who share a common structure in which they jointly create value. Consider the energy industry for example – this ecosystem would include all the companies that explore, produce, refine, market, store and transport consumable fuel such as electrical power or oil and gas.
Industry-centric ecosystems can be either global, like automotive or gaming, or local (those supporting specific demands from local markets) such as public sector agencies and municipalities. An industry-centric ecosystem can provide deep insights into the unique challenges and needs of the industry it serves – a great advantage in determining where and how to play. In order to take a lead role in the ecosystem and provide additional value to beneficiaries, orchestrators typically need to have specialized knowledge about the industry, as well as a very broad portfolio of products and services, or the capacity to act as system integrators – bringing together all the components and validating the solution towards the customer.
The gaming ecosystem: from downloading at home to streaming on the go
To bring the theory to life, let’s explore one industry-centric ecosystem – video gaming, where cloud and 5G are truly leveling-up the gaming experience for players. The video gaming ecosystem is complex and involves many stakeholders, including:
- Highly specialized hardware manufacturers, for example of graphics processing units (GPUs) or System on a Chips (SoCs)
- Original equipment manufacturers (OEMs) of devices such as smartphones, PCs and consoles
- Platform providers, such as app stores and game marketplaces
- Game developers and publishers
- Cloud providers
- Communication service providers, and many more.
Gaming has experienced a massive surge in players and revenue in recent years, likely due to nationwide lockdowns in many countries and more time spent at home or in isolation as a result of the COVID-19 pandemic. The global gaming market – defined as playing electronic games – is expected to grow by nearly 9 percent each year between 2022 and 2027 . According to data.ai and IDC, the largest segment in terms of consumer spending in video gaming globally is mobile gaming, which is expected to reach a market share of over 60 percent in annual global consumer spending this year .
One of the main reasons for mobile gaming’s popularity is its easy accessibility – via smartphones. At the end of 2021 there were 6.3 billion smartphone subscriptions worldwide . In addition, growing internet speeds make it very convenient to download and play games wherever you are. Other technological advancements and improvements, such as console-like graphics, cross-platform competition, social gaming features, augmented reality (AR), virtual reality (VR) and cloud gaming will further drive demand for video gaming – whether from the mobile, desk gold couch
Ultimately though, it’s the gamers who pay for games, devices, accessories, connectivity and more – therefore it’s the gamers whose needs and expectations must be met. Gamers’ expectations evolve over time, also driven by on-demand content models from media entertainment such as Netflix or YouTube, where personalized recommendations make it easy to find content that matches your personal preferences out of a broad catalog of content. With media streaming, access to content is instant, always, and everywhere.
While gamers can be segmented into various target groups that are very different – from those playing high-end console or PC games several hours a day, to those who occasionally play games on their smartphone on the train – they still have some key commonalities. They all play games because they want to have fun, and they all want to enjoy a smooth, seamless gaming experience – regardless of the technology they use.
So how can we use the ecosystem lenses for the gaming industry to better understand this complex landscape, and look at how 5G and cloud can deliver added value?
Using the ecosystem mapping framework we outlined earlier in this blog series, let’s take a deep dive into four different ecosystems that are part of the larger gaming industry, and the key roles, relationships and opportunities at play in each.
The console and PC gaming ecosystem
Console or PC gaming is what people have traditionally thought of when talking about video gaming. This ecosystem is mature and anchored around a stationary hardware – either a console or a PC – where video games are played first and foremost at home. It’s already been 60 years since the first home consoles with video games in very simple graphics appeared on the market. Typically, these early models operated using a ‘walled garden approach’, where the console manufacturers were also controlling the access to game content.
With technology advances over the decades, the player experience has evolved, not only from simple to photorealistic graphics, but also from sitting at home alone to building and interacting with fellow gamers and becoming part of communities around the world – a particularly strong driver for growth during the pandemic, as it offered a new way to connect with like-minded people during a time of physical isolation.
Today, popular PC video games such as Call of Duty come with massive memory space requirements (250GB) that first need to be downloaded and then stored on a person’s hard drive. If your internet connectivity is not good or the gaming server is busy, it is easy to waste enormous amounts of time watching the progress bar crawling slowly along. And if your leisure time is limited, nothing is more annoying than waiting for an entire game to download or update when you just want to get in and play!
Connectivity from console and PC to the cloud is key, not only to download and update game content, but also to enable video gaming as a social activity, allowing gamers to meet, form teams, communicate and play together. To ensure a truly smooth and lag-free experience, good connectivity alone isn’t enough – the video games also need to be hosted on specialized game server clouds close to the players.
The key players in this ecosystem are:
- The game marketplace providers (orchestrators)
Provide the platform and storefront on which games can be purchased and therefore hold the billing relationship to gamers. For example, Microsoft has the Microsoft Store marketplace – but they also take on several other roles in this ecosystem, through their Xbox console and their game publisher Xbox Game Studios.
- Console and PC manufacturers (contributors)
Supply the hardware on which games are run – for example, Microsoft or Dell.
- Game developers and publishers (contributors)
Develop and publish games – for example, Activision Blizzard, Valve or Electronic Arts (EA).
- Communication service providers (CSPs) (contributors)
Provide internet connectivity for online games or the downloading of games.
- Online gaming server providers (contributors)
Rent out servers for games enabling online gaming experiences for players – for example, ScaleCube, Cloudzy or Google Cloud.
- Gamers (beneficiaries)
Purchase and play the game – hardcore and regular gamers.
The key dynamics in the console and PC ecosystem center around the increasing competition among PC platforms. For example, Valve’s Steam is currently the biggest gaming platform on PC, but we see newcomers like Epic Games and Microsoft making inroads here, purchasing exclusive titles. These investments can be seen as early-stage maneuvers to prepare for the future revenue opportunities of the metaverse, securing them a strong position from which to capture the hype around these new digital realms – starting with gaming-driven metaverses like Fortnite, Minecraft or Roblox .
Another interesting aspect of this ecosystem is how gaming PCs and consoles are converging more and more, technology-wise – from both the console and PC sides. Xbox and PlayStation are beginning to use the same chipsets you would find in a PC, with their consoles growing to resemble PCs more and more with each generation. On the opposite side, PC-gaming focused brands like Valve are now launching handheld console devices which are basically small computers, blurring the lines between console and PC further.
The mobile gaming ecosystem
The mobile gaming ecosystem is anchored around smartphones or tablets, where players download games onto their device via Wi-Fi or 4G/5G, to play at home or on the go. Today, mobile games are the primary driver of digital game consumption, with mobile gaming expected to grow 1.7 times faster than the overall gaming market . The mobile gaming ecosystem is shaped by the two main platform providers – Apple and Google – that control monetization and distribution with their app stores.
The mobile gaming ecosystem includes players like:
- Mobile app stores (orchestrator)
Act as orchestrators of a closed, ‘walled garden’ style marketplace for gaming apps and hold the billing relationship to gamers – App Store or Google Play.
- Smartphone/tablet manufacturers (contributors)
Develop, manufacture and deliver the devices on which the gaming apps are run – for example, Apple or Samsung.
- SoC designers (contributors)
Design the computing and communication chips embedded into the device – Qualcomm or Apple, for example.
- Game developers and publishers (contributors)
Develop and publish the games that are listed on app platforms – for example, Activision Blizzard or Tencent Games.
- CSPs (contributors)
Provide the connectivity for downloading games, in game ads, but also, they facilitate online multiplayer games.
- Online gaming servers (contributors)
Host services and servers for games enabling online gaming experiences for players – generally either hosted by the publisher directly or Hyperscale Cloud Providers (HCPs) host services and gaming servers for the publishers.
- Gamers (beneficiaries)
Pay through in-app purchases, in-app advertising, a one-time fee (paid apps) or through a monthly subscription model – occasional and casual gamers.
A key trend in the mobile gaming ecosystem is a shift in business model. Both Apple and Google have launched play pass subscriptions (Apple Arcade and Google Play Pass) that offer an “all you can eat” subscription model with a monthly fee and access to a rich catalog of game titles without ads or in-app purchases. However, those subscription models still require gamers to download all games they want to play – in contrast to cloud gaming.
Another important factor is that mobile games are increasingly being played in real time online on the go. For example, ‘battle royale’ format titles such as Garena Free Fire, Fortnite and PUBG: Battlegrounds are now played on smartphones and tablets, something that was previously only possible on PCs and consoles. Taking these multi-player games mobile not only means that 4G, 5G and cloud infrastructure need to meet high requirements necessary to keep each player’s game client in sync for each rendered frame, wherever the players are, they also need to cater for large downloads, as such games come with massive memory requirements.
Smartphones are also an ideal device to use for AR games, where the inbuilt camera and GPS location information act as input to the game, combining virtual elements with the player’s surroundings. This journey started with a bang in 2016 with the release of the extremely popular Pokémon Go, however no real further success has been seen since when it comes to AR mobile games.
However, this seems likely to change, as more and more investments are being made to improve device technology, indicating the ecosystem is maturing. Rumors suggest that lightweight AR glasses (such as Apple glasses or TCL wearable display glasses) will hit the market in the next two years, which will likely boost the adoption of AR mobile games – and the number of AR titles launched. 5G and edge solutions will be crucial, as the more comfortable the glasses are for the user, the more computing and storage capacity has to be moved from the device to a server and streamed from there.
The cloud gaming ecosystem
Cloud gaming completely changes traditional structures and distribution models, disrupting both the console and PC and mobile gaming ecosystems. It is centered around cloud capabilities, streaming media services, global content delivery networks and connectivity networks to deliver a smooth gaming experience, independent of the gaming device.
Instead of downloading and running the game on your hardware, cloud gaming services run it on their servers, backed with high-end graphical memory. The game responds to the gamer’s commands, and every frame gets streamed directly to the player’s device. There is no frustrating waiting time for downloads or updates. Players can instantly enjoy games out of a broad catalog of titles from a cloud gaming provider. As the computational power is moved from the device to the cloud, there is no need to purchase high-end gaming hardware, or upgrade to keep up with the latest high-spec requirements.
Provided there is a high-speed internet connection, the user experience is very similar to that of conventional console and PC gaming. It comes with an “as-a-service” business model, which allows the decoupling of gaming from hardware, as well as lowering the barriers for casual gamers to experience more high-fidelity gaming. Cloud gaming services allow gamers to enjoy high-end game titles either at home or on the go, and on a wide variety of devices including smartphones, tablets, low-powered laptops or even TVs.
The cloud gaming ecosystem includes players like:
- Platform providers (orchestrators)
Provide access to cloud gaming, host their own cloud gaming infrastructure and collect revenue through subscription fees and game sales. They own the billing relationship towards gamers – for example, Microsoft’s Xbox Cloud, NVIDIA’s GeForce Now, Amazon Luna or Google Stadia.
- CSPs (contributors)
Provide the high-throughput and low-latency connectivity necessary for cloud gaming to run smoothly. Some CSPs have partnership agreements with platform providers, often bundling mobile cloud gaming with premium 5G data plans. CSPs can even take an orchestrator role in the cloud gaming ecosystem by hosting one or more gaming platforms, bundle the gaming subscription with a 5G data plan and enhanced connectivity (such as network slicing) and own the primary billing relationship with the gamer. Gaming content and the enhanced connectivity required for gaming serve as value-added services provided by the CSPs.
- Game front-end applications (contributors)
Provide the front-end application through which games are accessed that is downloaded to the gamer’s device – for example, Steam or Epic Games.
- Gamers (beneficiaries)
Pay a monthly subscription to get unlimited access to game titles and play regardless of device – hardcore, regular, and casual gamers.
Cloud gaming is still an early maturity ecosystem with high growth rate of nearly 46% per year forecast from 2022 to 2030 . There is intense competition, with big, global-reaching tech companies like Microsoft, NVIDIA, Google, Amazon and Facebook all trying to launch their own cloud gaming services and capture market share. In addition, independent players such as Shadow are also going after market share by offering to run gamers’ PCs in the cloud, so they can enjoy Windows and all their purchased games.
Leveraging their cloud technology, know-how and global scale, HCPs are well positioned in the cloud gaming space. On the other hand, NVIDIA, leveraging their own GPUs, have created their own cloud gaming offering called NVIDIA GeForce Now, where they support third-party games in order stay competitive in the market.
In the mobile gaming ecosystem, we have seen mobile app stores (such as Apple’s App Store) try to maintain their dominance by not allowing cloud gaming apps on their stores. In response to this, cloud gaming platform providers developed progressive web apps that run through the browser, bypassing mobile app stores completely.
To run cloud gaming smoothly, typically 10Mbps minimum throughput is required, depending on the resolution. However, speed from the device to the cloud is not sufficient for a lag-free game experience, as it also depends on how far away the next server is located. Guaranteeing minimum speeds and low latencies under 50ms between the cloud server and gaming device is key to attracting gamers. For mobile cloud gaming to pick up, 5G networks need to match the performance of home Wi-Fi, otherwise cloud gamers won’t be convinced of the value of mobile cloud gaming, regardless of the freedom it enables.
CSPs are well positioned in the mobile cloud gaming ecosystem. Many CSPs are also Internet Service Providers (ISPs), through which they enable cloud gaming via the ISP connectivity and have an existing billing relationship. They can expand to mobile cloud gaming with 5G, where they can enable network slicing to guarantee a certain quality of service and, by utilizing edge infrastructure, can enable execution of workloads closer to gamers. Several leading CSPs have partnership agreements with cloud gaming platform providers, where generally the mobile cloud gaming services are bundled with a premium 5G data plan to differentiate in the market and drive revenue growth.
The VR gaming ecosystem
The VR gaming ecosystem is anchored around the VR headset for gaming purposes. It is a very low maturity ecosystem, as VR headsets still have a very low uptake among consumers. For example, VR headset users on Steam – a digital distribution service and storefront of Valve – make up only roughly 2% of all Steam users . However, with so much buzz around the metaverse , where virtual reality plays a key role, the VR gaming market is expected to grow at a rate of 33% per year from 2021 to 2027 .
The key players in the VR gaming ecosystem are:
- VR headset device and platform providers (orchestrators)
Develop their own VR headsets and provide a platform for gamers to purchase a VR games – for example, Oculus, Valve Index, HTC Vive.
- VR SoC providers (contributors)
Design the computing communication chips embedded in standalone VR headsets – for example, Qualcomm or Intel.
- Real-time 3D game engine providers (contributors)
Provide a software framework for game developers to build real-time 3D gaming experiences – for example Unreal or Unity.
- Console and PC manufacturers (contributors)
Make the console or PC hardware which renders the gaming experience on the tethered VR headsets – for example Sony PlayStation VR or Dell.
- CSPs (contributors)
Enable the downloading and updating of VR games as well as facilitate online play (which is becoming more and more popular with hype around the metaverse). On top of this, CSPs could take a bigger role in the VR gaming ecosystem by hosting one or more gaming platforms, bundle the gaming subscription with a 5G data plan and enhanced connectivity (such as network slicing) and own the primary billing relationship with the gamer. Gaming content and the enhanced connectivity required for gaming serve as value-added services provided by the CSPs.
- Online gaming server providers (contributors)
Provide servers for online play – HCPs.
- Gamers (beneficiaries)
Pay for the games and the required VR gaming hardware.
Due to their next-level immersive experience, VR games are different to flat-screen console and PC games. Game publishers need to dedicate investment specifically for VR games. As this is an ecosystem in an early development stage, there are also a lot of competing standards. For example, we see Oculus pursuing a more closed, ‘walled garden’ approach, while Valve is trying to build an open ecosystem. It’s not yet clear in which direction the ecosystem will evolve – likely there will be different niches here.
Valve also takes multiple roles in the VR ecosystem. They’re releasing their own VR headsets (Valve Index), providing an open development platform for publishers, and have also published their own games such as Half-Life: Alyx in 2020, which was regarded as the first AAA game (a high- budget, high-profile game from a large, well-known publisher) for VR.
Today, multi-user, free-roam and fully immersive experiences typically require a VR headset that is wired to an ultra-performance gaming PC to run computation and graphical processing nearby. Technically, you could put the gaming PC in a backpack on the gamer’s shoulders, however, it would not only be very heavy and get very hot, it would also come with a low (15 to 20 minute) battery life. Furthermore, connecting the headset with the gaming PC via Wi-Fi doesn’t work in a multi-user scenario in one location, due to the risk of external interference.
To solve this challenge and bring an immersive VR experience to life with 5G , Ericsson collaborated on the Harry Potter, Chaos at Hogwarts experience, working together with AT&T, Dreamscape Immersive, NVIDIA, Qualcomm, and Wevr. In this proof of concept, computing power was moved from the backpack gaming PC to the 5G network edge for rendering of graphics, using 5G mmWave spectrum on a 5G private network to stream the immersive experience to the latest VR headsets. This allowed gamers to use haptic devices, move around freely without any interference and fully immerse themselves in the VR experience. This was a clear demonstration of what today’s technology is capable of, and how VR gaming is a crucial stepping-stone towards a fully realized metaverse.
Mobile cloud gaming: a game-changing opportunity
The possibilities for revenue and growth that are emerging in the mobile cloud gaming world are exciting – but there’s work to be done before they can be fully realized. As an emerging ecosystem, capturing the full potential of mobile cloud gaming will take time, as devices and network capabilities continue to improve and penetrate the market.
Firstly, we know this will need more devices on the market that are capable of network slicing. We also know that millions of smartphones used globally are not powerful enough to run mobile-designed and optimized games downloaded from app stores. But they do have the capacity to stream those same titles, with the support of cloud infrastructure and high throughput mobile networks. Multi-device and multi-platform games accessible for all, regardless of the hardware, will create new opportunities in the video gaming ecosystem.
This is where CSPs come into play. They need to have the 5G network ready with network slicing deployed and enough capacity and coverage, and have suitable offerings built with and for the gaming community, understanding their needs. From here, the opportunities can really start to grow.
For the mobile cloud gaming ecosystem, 5G and cloud will be particularly fundamental, where high throughput, low latency, and also stable and consistent network connectivity are key to get a high-fidelity image through to the player. 5G and edge computing can deliver on those capabilities, transforming the smartphone into a high-end gaming PC in your pocket – anytime, anywhere. 5G will also help increase accessibility to new audiences. By the end of this year there will be more than 1 billion 5G subscriptions globally, with 4.4 billion subscriptions expected by end of 2027. This is an enormous market size that can be leveraged for targeting gamers on the go.
For CSPs, mobile cloud gaming is a promising space to expand into – moving from providing network connectivity alone and/or ISP gaming offerings, into a more favorable role in the ecosystem and from which they can capture gaming revenue opportunities. As explored in our first episode on how the cellular ecosystem is evolving with the 4G to 5G transition, 5G unlocks new capabilities like network slicing, making it possible to guarantee bandwidth and the increased flexibility to manage edge cloud in the network, reducing the lag between a gamer’s command and the response on the device.
Of course, the gaming ecosystem is competitive, and any player trying to get a more favorable role needs to answer the question of what value they can add and contribute. Why should game developers and publishers partner with me? What are the capabilities, assets and infrastructure I can leverage?
Typically for CSPs this starts with ISP gaming offerings, then bundling data plans with cloud gaming platform memberships and re-selling hardware through retail outlets. Over time, as new iconic devices such as lightweight AR or XR glasses emerge, mobile networks must be prepared to handle the increasing demands from on-the-go immersive experiences for multi-user games in dynamic environments. Otherwise, there is a high risk that tech giants will continue their over-the-top play, limiting monetisation possibilities for communication service providers.
Whatever area or industry you’re focusing on, understanding the ecosystem, key players and their roles will be critical for collaborating and partnering to create value and innovate in this exciting evolving landscape.
Contact the authors
If you have questions about industry-centric ecosystems, ecosystem mapping, or if you have any suggestions for what you’d like to see in our upcoming final post of the series, please contact the authors via email or reach out to them directly via their LinkedIn profiles: Harald Baur, Matthias Hase, Raj Sonak or Peter Linder.
Acknowledgment: The authors of this ecosystem evolution blog series would like to acknowledge the work and contributions of Arthur D. Little, who conducted a joint analysis with us earlier in 2022.
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