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Network slicing for 5G cloud gaming: The game-changing opportunity to drive incremental revenue

inCode, the strategy consulting arm of Ericsson North America, has just released a paper exploring the rise in cloud gaming, the demand for better connectivity among cloud gaming subscribers, and the potential revenue growth for service providers that leverage upcharges from gaming slices.

Head of inCode Consulting, Ericsson

Network slicing for 5G cloud gaming: The game-changing opportunity to drive incremental revenue

Head of inCode Consulting, Ericsson

Head of inCode Consulting, Ericsson

Contributor (+2)

The rise of cloud gaming

Cloud gaming revolutionizes the way gamers play, and 5G helps increase its accessibility to new audiences. By 2031, it's estimated there will be 99 million cloud gaming subscribers in North America, or approximately one-quarter of 5G subscriptions.

As the number of cloud gamers rises, so too does the demand for better connectivity. But how can service providers give cloud gamers what they want while also driving revenue growth in the process?

Before we explore how this is possible, let's first examine what is propelling this rise:

Targeting 'on-the-go' gamers: Cloud gaming providers are implementing a multi-screen strategy to reach new audiences.

Attractive subscriptions: Gamers can play a broad catalog of titles anywhere at affordable monthly fees.

Shift in preferences: Recent trends demonstrate gamers favor streaming over hardware upgrades so long as connectivity demands are met.

Mature cloud-services ecosystem: Facilitates access to computing resources at the network's edge to stream games closer to gamers.

Rapid adoption of 5G: Estimates show 67 percent of cloud gamers will have a 5G device within 5 years, growing to 100 percent by 2031.

As cloud gaming is a fast-growing market, it is important to realize the monetization potential. Why do gamers demand better connectivity? How much would they pay for superior experiences? What revenue gains are possible? The answers could help inform service providers' strategies to realize returns on their 5G investments.

The power-up gamers demand

When it comes to gaming, ensuring accurate content display in response to gamer commands without disrupting the experience is key (cloud gaming needs latencies under 50ms).

Imagine you're engaged in an edge-of-your-seat battle in Fortnite. You've painstakingly whittled down your competitors to just one. You locate your opponent and line up the perfect shot, but then…

You experience lag. Your opponent moves and you miss. It didn't matter that you were on top of your game, your connection wasn't.

Unless cloud gaming matches the performance of traditional console/PC gaming, gamers won't be convinced of its worth, regardless of the freedom it enables. Cloud gaming providers understand this and demand stringent requirements from service providers. Xbox and Stadia, for instance, request minimum speeds of between 10 and 15Mbps.

Fortunately, thanks to 5G investments, service providers are well-positioned to manage the infrastructure needed to serve cloud gaming, leveraging 5G's benefits to capitalize on gamers' demands.

Unlocking the next level on the path to monetizing 5G

With network slicing, service providers can assign gamers a differentiated slice every time they start a game on their portable devices, guaranteeing performance metrics like bandwidth and latency. Additionally, with edge infrastructure enabling workload execution closer to subscribers, it's possible to reduce lag times between gamer commands and subsequent actions.

inCode analyzed market trends and studied the major drivers to forecast possible revenue growth. It found that almost 80 percent of cloud gamers would pay more for better connectivity on top of their monthly 5G subscription, identifying one segment that would pay USD 10.99 more for an advanced performance slice and one that would pay USD 5.49 more for a moderate performance slice.

Using this data, inCode simulated a 5G network that serves cloud gamers and mobile broadband subscribers through three slices to estimate the monetization opportunity and the cost of building and operating the 5G sites required to serve this demand.

The simulation found that by leveraging upcharges for enhanced connectivity from gaming slices alone, service providers can expect a 4 percent revenue increase by 2031. Additionally, despite cloud gamers' data usage being significantly higher than average 5G subscribers, the modeled capacity growth plan of the 5G network supports the traffic contribution of both gaming slices and the mobile broadband slice without further capacity expansion and investments.

A win-win for service providers and gamers

Gamers and service providers share a lot of the same goals; collect as many coins as possible, level up your capabilities, reach the next stage on your journey, and achieve top-ranking on the leaderboards.

In this new streaming era, cloud gamers need to rely on more than just razor-sharp reflexes to meet these goals; they also need connectivity that can keep up with the action. By leveraging the capabilities of 5G networks and upcharging for dedicated network slices, subscribers get the gaming experiences they want while service providers unleash new revenue streams. Everyone wins.

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