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Operators have high hopes for online gaming

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The remarkable commercial success and technological development that online games have experienced during the last two years, especially through the cloud, represents a great opportunity for operators to increase their turnover with the subscription model. The arrival of 5G networks, which promise higher transmission speed and higher response time, as well as new immersive reality technologies, play in favor of the expansion of the gaming industry, as it is known. However, many international voices warn of the danger of addiction represented by the use and abuse of games. The recent comment by an official Chinese government media that gambling is an “opium for the mind” encapsulates, like it or not, part of a sad reality.

 

Digital games, first with dedicated consoles and personal computers and later with smartphones, have attracted a consistent and growing interest from billions of users across the world from different generations, which has then expanded dramatically with games electronic online and through the cloud and, above all, with the multiple platforms and subscription services increasingly improved and evolved.

 

The gaming industry, or video games, has more than half a century of history, with users of all ages, many of whom began as young people or even children and have continued to enjoy them, evolving at the pace that the world did. capacity and possibilities of the different devices, programs and transmission media. The bottom graph of  Visual Capitalist makes clear the magnitude and progress of the video game industry, estimated at 165,000 million dollars until last year.


By devices of use, mobile phones account for half of the total market, 85,000 million dollars, along with the growing importance of desktops and laptops as a used device, reaching 40,000 million dollars last year. The consoles, thanks to the periodic progress of benefits of the new generations of Nintendo, PlayStation and Xbox, have retained a very important user base and turnover, both with the sale of consoles and with video game cartridges. Last year it was estimated to have generated about $ 33 billion, a figure that has remained at a very high level for three decades.

One study suggests that 15% of gamers own a video game subscription service; although half of the players do not want to subscribe, it means that there is a potential market of 35%

It is clear that video games are a very popular pastime for people of all ages and countries and for many years it has been successful with both men and women. However, gaming is undergoing an important evolution with the arrival of online games through the Internet and dedicated platforms and with the best features that allow both the cloud and very high-speed connections thanks to fiber optics and 4G mobile networks and from now on 5G. In addition, when virtual reality and extended or extended reality systems are generalized, their possibilities will be much greater.

 

A report by the consulting firm Juniper Research puts the global turnover of adult virtual reality content at 716 million dollars this year and projects that in 2026 it will be 19,000 million dollars, representing 22% of the world market for adult content in value in 2026. For the consultancy, virtual reality subscription models will be key for the development of content platforms and will serve, in turn, to increase the market for devices, such as glasses. Naturally, not all virtual reality content will have a recreational use, but many will be totally professional, but both will drive the advancement of this market.

The subscription model, on the rise

A recent blog post by GSMA Intelligence highlights that 60% of the adult population of 20 large countries analyzed play at least once a week with consoles, computers and mobile phones and that more and more players are migrating from the console to the computer and, lately, to the smartphone.

 

The smartphone has long been cannibalizing the video game industry, due to its immense penetration and because the size and high resolution of today’s screens, around six inches, offer a remarkable experience. The multitude of existing applications for mobile phones and that many of them work through the cloud, with which the features of the device go to the background, explain its great popularity. The increase in monthly data consumption offered by operators at the moment, some of them unlimited and at a reasonable rate, close the virtuous circle of mobile games.

 

Another important element that is altering the classic positioning of the video game industry, with the sale of consoles and exclusive programs carried out by specialized companies of considerable size, is that the video game subscription model is also having great success, as has been the case for video or music industry. The recent announcement by Netflix that it wants to integrate video games on its platform, along with its popular series or movies, suggests that the video game subscription model is highly promising in the coming years.

Subscription is a great business opportunity for operators but it must be borne in mind that video games have more than half a century of history and competition is extreme between creators and the various platforms

In fact, Sony, with its latest generations of PlayStation consoles, has already offered the possibility of connecting to online games for a long time and has several subscription programs, which in the case of Microsoft with its Xbox is even more pronounced, because it is an integral part of your present and future strategy. The same can be said, albeit on a smaller scale, with Nintendo consoles.

 

In any case, with the subscription model through the Internet, the device used also goes into the background, such as games through the cloud, and the platforms allow the use of multiple devices, depending on the specific situation of each player. If you are at home, the usual thing is to play with a big screen, be it the television or a computer monitor, while if you are outside or on public transport, the laptop or the smartphone are the most convenient devices.

 

The offer is increasingly saturated, because the creators of content for video games, who previously worked mainly for one or several manufacturers of consoles under franchise and exclusivity, their market has expanded with mobile phones and platforms. Although many video game contents maintain exclusivity for a single console, platform or subscription regime, most are open to multiple platforms, with the payment of a monthly subscription, of an amount depending on the quality of the catalog, or by use of a specific game .

 

Competition for the video game content market is already fierce, as has happened with the film and series market. The pandemic, by forcing people to be more at home, has notably boosted the video game market and its increased use. The profusion of access channels and offers of all kinds is what, however, augurs a strong market explosion. It is more than likely that in a few years there will be a substantial consolidation and clarification of the offer, as has happened in other sectors but, for now, consumers will be able to choose at will and with very advantageous prices, even if it is based on going for a temporary promotion to another.

Opportunity for telecommunications operators

Telecommunications operators are beset by the strong competition they have in their domestic markets from other operators and from virtual operators, which causes a drop in convergent rates, both for broadband and mobile connection, while their costs rise , especially with the appearance of 5G networks and the need to update infrastructures.

 

A clear alternative for operators is to take advantage of their customer base to introduce a subscription rate for video games, shared with the big players in the video game sector or with the big technology companies, which they have seen in this sector for a long time. a great opportunity. This increased competition augurs that profitability, if entering this business, will not be very high, but neither will the opportunity cost, so an increase in profit margins will be welcome.

 

Blended offers, with convergent rates that include various subscription models, even with smartphones, is a widely used and well-known resource. It is only enough to remember the bid for the audiovisual rights of football at the national or planetary level and the lower weight of the bargaining power of the television networks for the benefit of the large operators.

 

The previous study by GSMA Intelligence suggests that 15% of gamers in the 20 large countries analyzed already have a video game subscription service and that half of gamers are not interested in subscribing to a subscription service, at least for now. This shows that the initiative is by no means new, but it also makes it clear that there is 35% of the potential market that can subscribe to any of the subscription offers that are put forward, a percentage that in absolute numbers is enormous.

 

The business opportunity, therefore, is very clear for telecommunications operators, although its profitability is much less due to the fact that all the players are thinking about it. 5G networks also offer an additional attraction for consumers to subscribe and use. Always, of course, that 5G networks offer the speed and latency that they promised at the end of the last decade, in full promotion of a future service that is taking longer than expected. Connectivity to services hosted in the cloud, either through fixed or mobile networks, is much higher than five years ago, so the experience offered by these services is high.

The danger of video game addiction

For now, if gambling games, which represent a completely separate market, are put aside, video games are intended for the use and enjoyment of users, without rewards of any kind. However, this may also be changing, because increasing competition is driving video game providers and their platforms to seek systems to retain more players, with incentives such as leaderboards or rewards and greater visibility in tournaments, for example.

 

Another strategy is to reward content creators more for the longest time spent on a given game, or to retain more players. This causes, for some, to adopt loyalty tactics that can be addictive in the end, as happens with online gambling. In any case, it is still a very minority phenomenon, but it can grow as the market becomes more competitive and larger.

 

One of the countries where there is more love for video games is South Korea. Its operators are making an important promotion of the best experience that is achieved with 5G networks, in a country very prone to using high-end mobiles and all kinds of applications. The other country where the love of gambling has been widespread since ancient times is China, both the mainland and Hong Kong, Taiwan or Macao. It is not surprising that this last island near Hong Kong and a former Portuguese colony has the highest concentration of casinos and betting houses in Asia.

 

The recent decision of the Xi Xin Ping government to carry out a strict control of large electronic payment platforms, such as Tencent, in addition to prohibiting access to US capital markets and prohibiting the output of any data from China to companies in the country he already implied that the situation had changed. That the Chinese government was thinking of tighter control of the video game market became clear in early August when an article in the Economic Daily, an official media outlet, described video games as “mental opium” and “electronic drugs.” . The article was deleted shortly after, but to no avail.

 

Shares of Tencent, the Chinese Internet, fell 17% in just over a week, with the company losing a market capitalization value of close to $ 10 billion, although the company had not been explicitly cited in the article. In recent weeks, for one reason or another, including the trade tension between the United States and China, the volatility of the Shanghai and Hong Kong stock exchanges is extreme. The only ones that seem to be saved at the moment are the three large Chinese mobile operators, which have ceased to be listed in New York to be listed on the Shanghai and Hong Kong stock exchanges, with good results for the moment.

 

The interest of the Chinese authorities in trying to control the video game market goes back several years. In 2018, the authorities temporarily suspended licenses to give prizes in video games, to reduce addiction. In November 2018, a law prohibited Chinese minors under the age of 18 from gambling for more than an hour and a half a week between 10:00 p.m. and 8:00 a.m. This law forced video game companies to limit the time in front of the screens and Tencent even announced that it would introduce a facial recognition system in certain video games.

 

Throughout the month of August, the values ​​of Chinese technology companies have fallen sharply. Although it is part of a Chinese government strategy to better control technology stocks and electronic purchases and does not necessarily mean that an excessive accent will be placed on the control of video games, it is clear that the expansion of one of its large markets is questioned.