Whether it's from Amazon or Microsoft or Google, the perfect storm of online game streaming is coming, and those operators that are unprepared will soon stand out.

Mike Dano, Editorial Director, 5G & Mobile Strategies

August 13, 2020

5 Min Read
Operators need to prepare for the game-streaming tsunami

Remember the early days of video streaming? Netflix only had a handful of good titles to watch, they were generally only accessible on desktops and laptops and the stream was often interrupted by slow and janky network connections.

Those days are gone for good. Netflix is everywhere, on every possible screen, and most video streams – even over 3G connections – are good enough to get through every single episode of "Tiger King," whether you want to or not.

And, for Netflix at least, the proof is in the pudding: Netflix raked in another 10.1 million subscribers in the second quarter of 2020, stomping its forecast of 7.5 million and extending its worldwide paid base to 192.95 million.

This evolution in streaming video is due to an enormous amount of work by Netflix, of course, but also the network operators hefting its traffic. Gone are the days of stalled connections and out-of-synch audio. Video streaming is now HD on big-screen TVs in addition to phones and laptops. It's reliable. And it's available just about everywhere you go.

But network operators shouldn't rest on their laurels. The online game-streaming tsunami is coming, and they better start getting ready for it.

A huge market
First, the numbers: NPD Group found overall consumer spending on video gaming in the US reached $11.6 billion in the second quarter. Meantime, the world's 2.7 billion gamers will spend $159.3 billion on games in 2020, according to a forecast by market researcher Newzoo and reported by VentureBeat.

But, just like everything else in the world, these figures are getting corona'd. The pandemic that's forcing everyone to stay home is also apparently driving them to video games for comfort. For example, NPD Group said that video game spending in the US grew 30% in the second quarter year over year, reaching its highest quarterly spending levels in US history.

Consider:

  • Nintendo's operating profits skyrocketed 428% in its most recent quarter to $1.4 billion.

  • Electronic Arts' revenue grew 21% in its most recent quarter, gaining it tens of millions new players during the period.

  • And Activision Blizzard's earnings beat Wall Street expectations as the company netted 21 million new players in its most recent quarter.

But a generation of COVID-19 gamers isn't necessarily what should worry network operators. Instead, it's that development coupled with the trend toward online game streaming driven largely by social-networking savvy webscale giants like Facebook, Google, Amazon and Microsoft. After all, these are the companies that drove operators out of the datacenter business just a few years ago, and they're the ones that are now carefully encroaching into the very heart of the networking business itself.

ISPs for gamers
One of the big catalysts for the online game-streaming sector was Google's Stadia announcement last year. The service promises to store big, complex games inside of a datacenter but deliver them to players via a video stream onto just about whatever device they want to use. Just like Netflix and other video streaming services redirected hours of TV watching onto the Internet, so can Stadia redirect hours of gaming from local consoles to online streams.

However, the demands imposed on networks by Stadia and other such services are entirely different than the requirements of a Netflix – instead of passively sitting back to a stream of "Tiger King," for example, Stadia players interact with their games virtually every millisecond.

Thus, network operators of the future may no longer be judged by their 1Gbit/s connections but instead by the reliability of their 1 ms latency. That could potentially necessitate a serious redesign by operators toward edge computing and other latency-enhancing architectures.

This space is still evolving. For example, Omdia games analyst Louise Shorthouse reported that Stadia's video games don't seem particularly sticky, given that its user retention rates drop to around 0.7% after a month of running on Android devices.

Nonetheless, Stadia continues to push the boundaries of what is possible in online game streaming – the company recently began allowing players to connect over 4G and 5G signals, not just Wi-Fi.

More competitors, more questions
Moreover, Stadia is just the tip of the iceberg. For example, Amazon recently rebranded its Twitch video game offerings to Twitch Prime, a signal that the cloud computing giant may be working on a cloud gaming service of its own. Separately, social networking giant Facebook is launching a Facebook Gaming app, though it has run afoul of Apple's strange iOS guidelines for such services.

But that's all small potatoes compared with efforts by Microsoft, Sony and Nvidia. All three companies will be offering cloud gaming services by the fall, and all three are already major, established providers of video gaming services running on customers' local hardware.

Collectively, these companies already count millions and millions of video game customers. And, collectively, they could create serious issues for network operators unprepared for the data their streaming services may generate online.

After all, Microsoft, Sony and Akamai have already acknowledged the threat their video gaming services pose to networks. The companies during the height of the COVID-19 pandemic said they would take steps to reduce the amount of online traffic that video games generate during peak usage hours, just like Netflix and YouTube did in Europe.

Finally, if the market for video streaming is any indication, this video game situation could get way more complicated really quickly. After all, new video streaming options now range from Disney's Disney+ to NBCUniversal's Peacock to WarnerMedia's HBO Max – and that all comes just a few years after analysts had expected big things from linear TV video streaming providers like Sling TV, DirecTV Now, YouTube TV and Hulu Live, which have now stagnated.

And what of the nexus of virtual reality and video gaming, as highlighted by Facebook's Oculus and Sony's PlayStation VR? Only time will tell, but it's a safe bet such services won't reduce network traffic volumes.

The bottom line here is that the combination of sticky social networking services like Facebook, game-streaming technology like Stadia, unknowns like VR, and a pandemic that could flare up again during the winter may create a perfect storm for flatfooted network engineers still marveling over TikTok traffic increases.

Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

About the Author(s)

Mike Dano

Editorial Director, 5G & Mobile Strategies, Light Reading

Mike Dano is Light Reading's Editorial Director, 5G & Mobile Strategies. Mike can be reached at [email protected], @mikeddano or on LinkedIn.

Based in Denver, Mike has covered the wireless industry as a journalist for almost two decades, first at RCR Wireless News and then at FierceWireless and recalls once writing a story about the transition from black and white to color screens on cell phones.

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