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The 5G Opportunity For OTT Video And Gaming Brands

Jonathan Kriegel is the Chief Executive Officer of DOCOMO Digital, the international payments business of NTT DOCOMO.

5G is poised to spark a transformative moment for how consumers, creators and developers experience OTT media and gaming, meaning media delivered directly via the internet, bypassing traditional platforms like cable or broadcast. These low-latency connections will dramatically improve video quality and enable faster renders and response times for an enhanced "life-like" content experience, leading to greater demand. For OTT media companies, online video revenues will reach $281.7 billion in 2022, with 3.9 billion users by 2026. Meanwhile, gaming is expected to grow into a $272 billion market by 2030, of which mobile and cloud gaming will be significant contributors.

OTT video leads the party.

Pandemic-induced lockdowns led to a spike in the consumption of OTT video content, but long before the onset of Covid-19, the OTT segment was already witnessing robust growth. The OTT segment is expected to become a $332.5 billion industry by 2025, with user penetration hitting 49.9% by 2026.

According to McKinsey, new use cases for 5G are likely to emerge, including films, television series and augmented-reality-driven immersive live sports experiences, with 8K resolutions delivered in low latency. For example, Amazon Prime subscribers can already live stream Thursday Night NFL games in the U.S. and Premier League soccer matches in the U.K. (Full disclosure: My company works with Amazon.), while Verizon enables VR viewing options for NBA League Pass basketball games.

Mobile carriers and OTT providers are keen to offer "bundles" of these services with 5G data tariff plans to drive faster adoption and revenue growth. Like Optus in Australia, some mobile carriers are now building marketplaces to help consumers manage multiple OTT subscriptions.

The future of gaming is mobile.

The spate of recent high-profile acquisitions of gaming companies demonstrates where tech heavyweights like Microsoft, Sony, Take-Two and Tencent believe the industry is heading — onto mobile and into the cloud. According to a global survey, the number of people regularly playing mobile games increased by 12% in 2020, to more than two billion, 6% of those who didn't play prior to the pandemic. China, the U.S. and Japan account for 66% of the total mobile gaming revenue share, leaving ample room for growth in other parts of the world.

Mobile gaming is now the largest and fastest-growing segment of the gaming industry, with 2022 revenue estimated at $94.8 billion. 5G networks will only fuel mobile gaming's exponential growth in the years to come.

Cloud gaming is set to soar.

In cloud gaming, games are hosted on remote servers and rely on edge computing technologies for most of the processing, thereby cutting out the need for expensive consoles. Most cloud gaming companies now essentially act as streamers for complex, processing-heavy games. 5G networks will make the cloud gaming experience as good as that of an expensive console, which is why Microsoft is heavily promoting its subscription service. Newzoo's 2021 Cloud Gaming Report estimates that cloud gaming generated $1.6 billion in revenue in 2021, set to expand to $6.5 billion by 2024.

An early foray into cloud gaming from Netflix launched last year suggests other OTT companies may add to the competition, with 5G adding additional market impetus. Microsoft's Xbox Gamepass, Google's Stadia (Full disclosure: My company works with Google.) and NVIDIA's GeForce Now have all steadily expanded their gaming libraries to leverage the broader rollout of 5G networks.

AR/VR gets 5G wings.

Emerging AR/VR devices are starting to deliver enhanced gaming and content experiences. A PwC report calculates that associated hardware and software revenue expanded to $1.8 billion in 2020, up 31.7% from 2019, as the price of VR consoles plummeted.

Platforms like Roblox, Minecraft and Fortnite already offer a taste of the immersive experiences possible with VR/AR technology, which are as much about social interaction as gameplay and can be extended to e-commerce, education and other activities. As 3-D gaming, AR/VR will play a more significant role in immersive experiences during live sports events and within the metaverse, ably supported by the higher capacities and lower latencies of 5G networks. AR/VR gaming revenue will undoubtedly continue to increase alongside overall AR/VR spending, with some sources estimating that total consumer spending on AR/VR will reach $72.8 billion by 2024. Niantic, the AR-game developer behind Pokémon GO, announced in 2020 that it would collaborate with carriers including Deutsche Telekom, Orange and Verizon (as well as device manufacturers) to build a "planet-scale augmented. reality platform."

Brands

The potential to reach millions of new customers, subscribers, and players has led many developers to adopt a mobile-first strategy for creating new content and titles. In contrast, recent attention to the fees charged by Apple's App Store and Google Play may lead to new acquisition models.

Telcos also could make life even easier for their 5G OTT and gaming subscribers by integrating mobile payment options into their data and content plans. Making it easy for consumers to pay for content easily is likely to deter them from frequently switching services.

To help their customers manage multiple subscriptions, they can become hubs or aggregators for many different services where the consumer pays for everything as part of their mobile bills.

Telephone Service Providers And OTT Brands: A Match Made For 5G

As 5G network rollouts pick up the pace, new partnership models between OTT brands and mobile carriers will emerge. OTT brands are as keen to grow beyond North America and Europe just as mobile carriers are to recoup their investments in 5G infrastructure and spectrum. Consumers will be the ultimate winners, with more choices and better experiences delivered to their fingertips — literally.


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