Why Telecom Companies Should Look At Gaming As Their Next Big Frontier
The video games industry generated almost $180 billion in 2020. In 2021, the video game market size in just the United States surpassed $85.86 billion. With such a massive market on the table, players from several different industries are looking to invest and diversify for a piece of the pie. Telecom companies are one of these players. The telecommunication sector is made up of companies that make communication possible on a global scale, whether it is via wires or wirelessly, or through the phone or the Internet. AT&T, Verizon, and T-Mobile are some examples of telecom companies.
Telecom companies are looking to diversify their offerings for a variety of reasons, the foremost of these being that their traditional revenue streams are falling behind and their markets are being saturated. This is a result of their core markets such as television, voice and messaging, and even music being undercut by services like Netflix and Spotify. While they’re losing out on revenue, they also have to keep improving their mobile data infrastructure thanks to the massive increase in mobile data consumption. To make things worse, churn rates (customers switching providers) are particularly high in the telecom sector, averaging between 10 and 67% annually. It is estimated that 75% of the 17 to 20 million subscribers signing up with a new wireless carrier every year are coming from another wireless provider.
It isn’t all bleak though. Telecom companies have a considerable advantage when it comes to today’s increasingly digital world. They have access to a huge customer base, an upper hand when it comes to infrastructure, and a good understanding of customer behavior and brand awareness. These advantages can be used while investing in new areas such as media, entertainment, and of course, gaming.
The Potential of the Gaming Market
As a result of the COVID-19 pandemic, gaming’s popularity has surged to new heights and telecom operators have already started investing in areas related to gaming on a huge scale. This shift in behavior appears to be well-established: gaming is much more than just a hobby, it provides entertainment and community for millions of people around the world. The gaming industry is estimated to be worth more than $270 billion dollars by the end of 2025. Lucrative areas like cloud gaming and gaming as a service (GaaS) both pivot upon 5G service providers being able to deliver low-latency and high bandwidth connections. In fact, for both mobile and other platforms, but especially the former, 5G is the next revolution whose infrastructure is in the hands of telecom companies. Cloud gaming can reduce the price entry barrier as customers don’t need expensive hardware. How they create value from it and monetise it successfully is their focus. Some of the roles telecom operators can play in the mobile gaming ecosystem include:
- Infrastructure provider– Telecom operators can use their technological capabilities to assure the quality of service and monetise it. They can also use their infrastructure to improve mobile edge computing capabilities.
- Ecosystem development partner– They can partner with gaming service providers and help develop new devices, content, and infrastructure and also educate customers on the value they’re building.
- Sales partner- They can sell gaming as a service they offer, whether it’s their own games or third-party titles.
We’ll look at these in more detail later.
What Telecom Companies Gain by Entering the Gaming Market
As we have already seen, there are several value propositions for telecom operators looking to establish themselves in gaming and it’s important to note that while there might not be significant revenue increases in the short term, there will be several long-term benefits. Some of these are:
- Brand positioning and popularity amidst younger audiences.
If you were to ask the younger generation about telecom operators, odds are they’ll dismiss them as phone service or broadband internet providers. These services are rather old-fashioned and might lead to these companies being seen as tiresome vendors selling uninspired, if necessary services. However, by associating with video games and the gaming industry and creating exciting value propositions such as low-latency connections, these companies might be viewed as game-changers. A great example of this is Verizon’s tie-up with Riot Games and its amazing promotional material. Verizon has partnered with Riot Games and invests heavily in the esports scene. The three-year partnership will allow Verizon to work with Riot Games to transform the gaming experience for developers, players, and fans alike.
Building increased customer loyalty.
Churn rates are particularly high in the telecommunications industry, averaging between 10 and 67% annually. If the newer generation is impressed by an operator’s venture into gaming and what they do in the space, then this may increase engagement and loyalty.
Higher average revenue per user (ARPU).
Let’s look at the previous example of Verizon, which partnered with Riot Games to be League of Legends’ LCS league’s Official 5G Wireless and Network Service Partner. The increased publicity and visibility for Verizon means it is likely that if their service is good enough, they’ll gain more customers. One more thing to note is that gamers tend to have higher data and internet usage and this can offset declining sources of income for telecom operators such as voice calling. Dedicated game-related products and services can also contribute to the ARPU.
- Improved customer experiences.
An increased number of customers using gaming services can lead to operators having greater amounts of data related to their behavior. This will help them understand what customers appreciate and require and provide better customer services. For instance, Telkomsel partnered with those behind PUBG Mobile to activate special in-game offers for their customers. The success of this convinced them to launch their first mass online battle arena and first-person shooter game Shellfire, which was well-received by their audience.
How Telecom Companies can Enter the Game Industry
- As a distributor: Telecom companies can acquire rights to exclusive releases and create packages specially for gamers with value add-ons like increased speed or bandwidth.
- As developers: Telecom operators can participate in game development and offer localised servers, apart from doing everything distributors do. They can even own game development end-to-end, as Telkomsel did with Shellfire.
- Involvement with game publishers and platforms: Telecom companies can collaborate with game developers and publishers which build gaming technology. A good example of this would be SK Telecom announcing an exclusive operating partnership with Microsoft’s cloud gaming service in Korea. Based on this relationship, SK Telecom is expected to help Microsoft strengthen its position in the mobile gaming market by leveraging its world-leading mobile infrastructure. US operator AT&T joined forces with NVIDIA to offer 5G GeForce NOW subscriptions, which it claimed offers “one of the world’s best gaming experiences.”
- Investment in esports: Telecom companies can sponsor game tournaments to appear as an important part of the ecosystem and build goodwill and a following. A great example of this is Verizon x Riot Games where the former is the title sponsor for their game VALORANT’s ‘Game Changers’ series in North America.
Key Avenues Telecom Operators Could Invest in
Telecom companies are already equipped to secure an immediate foothold in the video game industry by utilising their existing capabilities. We’ve looked at the benefits for telecom operators already, but which areas are advantageous for them to invest in? One is 5G, which is shaping up to be a game changer for connectivity thanks to its faster speeds and higher data bandwidth.
- Cloud Gaming: Telecom companies should look into cloud gaming as a frontier to capitalise on the investments they’ve made in the 5G space. They have already invested in bringing about low latency for 5G networks. By offering dedicated 5G connections to gaming companies that then offer a low-latency experience to their end customers, telecom operators can transform gaming on the go while also expanding their customer list. Cloud gaming is expected to grow from 3 million active users in 2019 to 177 million active users by 2024 so this is definitely an area worth considering. They can also partner up with gaming companies that would like to leverage the telecom operator’s customer base.
- Game Development and Publishing: Game developers and publishers can tie up with telecom companies with exclusive deals which both parties can benefit from. One of the best examples of this was Telkomsel and the people behind PUBG Mobile offering a data plan which was a great deal for the customer. Operators can also have their own app stores where exclusive games can be downloaded and played. Eventually, Telecom companies can even develop and publish their own games, such as Telkomsel’s release of Shellfire.
- Games as a Service: By providing low-latency and high-bandwidth connections, whether 5G or wired, Gaming as a Service (GaaS) is much more viable, especially with cloud gaming getting a buff. This reduces the need for expensive hardware and increases accessibility as well — gamers can play anywhere, anytime as long as they have a laptop/tablet, and a good internet connection. Telecom operators can use their existing infrastructure to tie-up with both game publishers and developers. They can also, like mentioned previously, eventually develop their own games.
- AR and VR: Mobile phones are perfect for the kind of interactions AR requires. This is a result of significant improvements in hardware over the last decade, higher camera quality, and improved internet access. Verizon, Deutsche Telekom, EE, Globe Telecom, Orange, SK Telecom, SoftBank Corp. and TELUS have joined Niantic’s Planet-Scale AR Alliance, which has a mission to create “amazing real-world AR experiences that demonstrate the possibilities of 5G.” For VR, the data requirement is also quite high and raises the question of whether networks are capable of providing the necessary connections. Telecom operators have the infrastructure ready for both 5G technology and high-speed internet. The networks that can handle the high-resolution images, videos, and data required by new games and apps will likely be the ones that get the most customer retention and loyalty.
Examples of Telecom Operators Successfully Entering the Gaming Space
Telkomsel is a leading Indonesian telecom operator that has managed to integrate gaming into its offerings quite successfully. It has achieved a 22% market share of Indonesia’s gaming industry. They did this with their multi-pronged approach, including dedicated offerings for gamers, partnerships with popular games, and investing in Indonesian esports.
Initially, it launched its Dunia Games web portal in 2013, where customers could download games and directly charge them to their phone bills. In 2017, in an initial developer play, Telkomsel partnered with the folks behind games such as PUBG Mobile to activate special in-game offers for customers subscribed to their dedicated online games data package.
It then switched to its own game releases with the successful launch of Shellfire, in 2018 — with plans to develop seven additional games. All this time, they were active on the complementary front of esports — they launched the Indonesia Games Championship eSports tournament as well as PUBG LAN events. They also boosted the Dunia portal with gaming articles, reviews, and trend reports.
Verizon has been very active when it comes to creating excellent value for their 5G and AR offerings. It was one of the first global members of the Niantic Planet-Scale AR Alliance, which is creating 5G-ready AR services for consumers. It also has a partnership with Niantic, best known for developing AR-based game Pokémon GO, for exclusive collaboration on high-performing interactive experiences for gamers. It recently announced that it, along with Doug Liman’s 30 Ninjas and in association with France-based immersive studio Novelab, will collaborate on an Augmented Reality (AR) Adventure Thriller.
Verizon was also giving away 6 and 12-month subscriptions to Apple Arcade and Google Play Pass to add more bundled content offerings to their wireless subscriptions. In recent years, it has also partnered with Riot Games, Electronic Arts, Dignitas, and Team Liquid for the development of new services in the esports and the gaming space, utilising its 5G network and real-time Mobile Edge Compute (MEC) technology. Their partnership with Riot Games and investment in North America’s esports scene has helped build their reputation and credibility with game enthusiasts. Verizon’s status as the official 5G network for League of Legends‘ LCS, and as the title sponsors for VALORANT Game Changers NA has given it a certain cachet.
In addition to Verizon, Deutsche Telekom, EE, Globe Telecom, Orange, SK Telecom, SoftBank Corp. and TELUS have joined Niantic’s Planet-Scale AR Alliance, which has a mission to create “amazing real-world AR experiences that demonstrate the possibilities of 5G,” including ultra-reliable low latency, enhanced mobile broadband, network slicing, and edge computing. Several telecom operators have also made investments in cloud gaming, 5G infrastructure, and esports.
Esports as an industry especially has unique factors which make it extremely attractive to telecom companies. It needs high-definition broadcasting capabilities, high-speed and quality connectivity, low latency, and more. Telecom operators already have a leg up in that regard as they’re used to delivering such services and can use esports as a platform to announce their capabilities to a wider audience in the gaming industry. If someone’s favorite game or player is known to use a particular service provider, odds are they’ll see a spike in ARPU.
The Future of Gaming and Telecom Providers
We’ve looked at how and why telecom companies can benefit from investing in the gaming ecosystem. But what does the future look like for both these operators and the industry as a whole?
It seems likely that telecom companies will be able to add gaming to their service bundles and use third-party content to generate value. In fact, they can capitalise on existing problems such as those arising due to platform monopolies to create opportunities for both their customers and themselves. Lawsuits like the one where Epic sued Apple and Google for forcing it into a payment system where the app stores got a thirty percent cut of all individual transactions on the platform, such as skins, battle passes, and the like are a consequence of such monopolies. As a result, Apple removed the game from their store and gamers could no longer access it on their devices. Telecom companies could step in and provide access to these apps to their customers via their own app stores or cloud platforms. Game developers and platforms might be more open to using telecom operators for billing and aggregation.
There is also a rising interest in edge computing, especially for mobile devices. With the huge market for mobile gaming, telecom operators who can deliver on this front will likely profit significantly. They are also ideal providers considering their existing investments and infrastructure. Other opportunities in the gaming industry which we’ve looked at are AR, GaaS, and cloud gaming. We’ve already looked at several partnerships which are succeeding so far, but only time will tell the magnitude of this success. We’ve also examined how esports and telecom companies investing in the industry can benefit them through both increased revenue and reach. Apart from providing high-quality connections, they can also enable and promote esports tournaments, build online communities, and create esports content that can boost engagement. If done properly, telecom companies can create experiences that will win them loyal customers who also advocate for them and increase ARPU.
If you’re a telecom company looking to venture into gaming, we can help. Gameopedia works with clients across the gaming industry on custom requests and can provide in-depth game data across PC, consoles, and mobile games. Reach out to us for data that can empower you to new heights.