Immersive reality demos have been hard to miss at this year’s mobile and technology conferences, with most of the leading VR and AR companies focused on enterprise applications. Industrial use cases have looked convincing, demonstrating clear cost savings and relatively well-stocked content libraries. Hardware form factors continue to move towards a glasses-style model, with significant silicon processing power improvements enabling further miniaturisation. Meanwhile, gaming is the most visible consumer-side play. While there are longer-term punts with live entertainment and social VR, the nearer term outlook is far more subdued on the consumer side.
Enterprise - all systems go. Consumer - wait and see
Three key factors influence immersive reality take-up: content availability, economics, and customer experience. All currently work better for the enterprise segment.
The content library for enterprise may not be as big as for consumer, but it is targeted at specific needs. Common examples are product development, training and remote collaboration. There are clear, demonstrable cost savings – for example, from reductions in product development lifecycle or travel costs. Consider oil rig or mining workers conducting remote rather than on-site inspections, for instance. For example, Bentley Systems, a construction company, has showcased a collaborative experience of 4D objects in space and time, as opposed to traditional interaction with a 2D screen depicting 3D objects.
Open access platforms have helped drive scale and ensure economic viability. For example, enterprises can use Hololens with Mixed Reality (MR) apps from non-Microsoft stores and use Azure MR apps with iOS and Android devices – as we highlighted in our recent research, Future of Devices. Partnerships across multiple industries to create customisable immersive reality applications are also helping expand the enterprise content library.
The consumer story is more sobering. Our survey data suggests that ownership of VR headsets (Oculus’s Rift or HTC’s Vive for example) remained flat in 2018 at 5-10 per cent of households in Western Europe and 15 per cent in the US, suggesting devices have yet to break out of ‘techie’ territory. Costs, headset ergonomics and ease of interaction have proven difficult issues to overcome. Weak content libraries reflect very high production costs that few studios are willing to meet (even Netflix) given the dearth of formats that would be sufficiently enhanced by VR. Live sports and entertainment would be a notable exception but are further off given the need for partnerships and yet-to-be-worked-out monetisation settlements for broadcasters (or other rights holders), telcos and venue owners.
The gaming renaissance
Vendors and operators are showcasing 5G’s capabilities to accommodate gaming’s low-latency, high-speed requirements. Mobile and VR gaming require low latency, particularly on multiplayer modes. High speeds support the ability to stream a rich gaming environment. Announcements from Sprint and Deutsche Telekom illustrate telco efforts to support gaming as a beachhead 5G use case to validate and draw attention to the technology.
The concept of shifting gaming to the cloud has been around for nearly a decade. Much of the rationale is modelled on a Netflix-style subscription model where customers move to all-you-can-eat consumption on-demand, either via a PC or mobile.
But momentum is now building. The latest big name to enter the space is Chinese tech giant Tencent, which recently soft-launched its own cloud gaming platform called ‘Start’ to a limited number of users in China. Tencent is already a games developer in its own right, and gaming currently accounts for about a third of its revenue. It will compete with the likes of Google’s recently-launched ‘Stadia’ and Microsoft’s upcoming xCloud.
But there is a fundamental difference between cloud-based gaming and TV shows/movies. Games require real-time rendering, which requires far more computational resource than the static presentation of video content that Netflix, Amazon or Hulu offer. The bandwidth demands mean providers must rent extra GPUs along with core data centre space to avoid buffering or other irritations to the gameplay experience. OnLive was a pioneer in this space but ultimately closed under the weight of these economics. On the content front, publishers have remained reluctant to license rights without a clear willingness for customers to stop buying individual titles. The music industry’s plight is a reminder of the pitfalls.
Does 5G change this? There are an estimated 2 billion gamers worldwide, of which perhaps a third play through the latest generation consoles (e.g. Xbox One, PS4) or have a PC capable of high definition. This group would be the subset to upgrade to a streaming model were it to materialise. Amazon, Microsoft, Tencent and Alibaba are probably best placed to take advantage given their immense data centre scale, existing consumer product lines, and negotiating power with publishers. For their part, Telcos can use 5G to drive pricing leverage; AT&T recently discussed offering premium 5G plans for gaming. In some cases, operators may also try to expand into content aggregation – e.g. Verizon has been testing its game streaming service Verizon Gaming – though this is more difficult.
Consumers may need convincing that 5G will mark a new dawn for VR gaming. According to GSMA Intelligence’s recent Consumer Survey, only 25 per cent of respondents believed the advent of 5G will deliver a range of innovative new services. By contrast, consumers currently see 5G as the logical continuation of previous generations of mobile technology – doing the same thing, just better. Faster speeds were the top expectation across all 34 countries in the survey, with the exception of Japan, where it was a close second (to reductions in mobile service costs). Early marketing efforts will therefore focus on network speed as a key differentiator versus earlier generations and is likely to be the main driver of early 5G adoption.
The gaming community typically plots above average in monthly spend for home broadband so provide the basis for a tariff upsell. The success of such moves will, however, be dependent on non-connectivity factors, particularly better content libraries, more ergonomic form factors and reductions in gameplay dizziness. Telcos would do well to open up 5G network sandboxes to the developer community in an effort to address these challenges.
Tim Hatt, Head of Research, GSMA Intelligence
Image source: Shutterstock/Ahmet Misirligul