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Why telecom carriers should care about video games
February 9, 2023•5 min
Today’s Telecom Industry
Fueled by the 2020 pandemic’s home shopping wave, telecommunications systems have stepped in to replace many critical face-to-face interactions. Telecommunications companies deftly accommodated the rapid shift in working arrangements, helped businesses continue operating, and connected communities enduring unprecedented conditions. As the number of mobile cellular subscriptions worldwide multiplies, the adoption of smartphones also increases. Statistica reports that, in the United States, subscription numbers rose from nearly 185 million in 2004 to just over 440 million in 2019. Telecom industry powerhouse Ericsson predicts that by late 2028 5G subscriptions will climb to almost five billion (55% of the worldwide total) and will dominate mobile access technology.
Number of 5G subscriptions worldwide from 2019 to 2027. Source: Statistica 2023.
While the telcos struggle to expand their market, the video games industry is on a fierce growth trajectory. Its evolution reveals one of the biggest markets in the world, prompting behemoths in entertainment, technology, and social media to embrace the opportunity and generate massive revenue streams.
Revenue from Gaming (USD B) has overtaken the global entertainment industries. Source: Nagarro
While video game demand explodes, telecommunications analysts call out their industry’s projected usage and revenue as disappointing. Too many operators suffer from shrinking profits due to inertia. Their income is stagnating as more aggressive players move in to capture their audience.
However, there is a bright spot on the horizon: Many telcos are looking to adjacent markets to fuel their global growth. Network operators see the spending patterns and technical malleability of mobile gamers as an excellent opportunity to regain their share of the entertainment segment lost years ago to more progressive players like Apple, Spotify, Netflix, and Google.
Now is the perfect time for telecommunication businesses to tap into the gaming market, diversify their traditional offerings with progressive products, and reach a broader market of tech-savvy, loyal gamers worldwide.
Benefits for Carriers
To some, it may seem that gaming is outside the comfort zone of telecommunication businesses. On the contrary: Telecommunications is a complimentary service with a business model well-suited to embrace gaming, augment income, and boost brand gravitas. Carriers’ infrastructure, broad customer base, and complimentary services make gaming a natural service addition. Adding well-known mobile gaming brands to their current catalog of offerings makes the overall perception of telcos more attractive - particularly to today’s younger, digitally adept gamers. The benefits are fundamental to operators’ future expansion. Mobile is Major and Branding is Everything According to Global Market Insights, the mobile wallet market will rise from USD 220 billion in 2021 to USD 125 billion by 2030.
Mobile currently leads all gaming categories in value and average revenue per user. At the same time, telecommunications operators struggle to satisfy their subscribers’ increasing demand for more interesting mobile offerings.
Partnering with game developers allows telco leaders to offer exclusive releases and in-game perks. Many telcos already capitalize on the exploding 5G trend and are in a sweet spot (as cloud gaming, virtual reality, and metaverse popularity skyrocket) to see how they and their subscribers can benefit from game content.
ARPU Goes UP. Churn Goes DOWN.
Gamers are highly competitive. They spend a lot of time and money improving their performance and overall gaming experience. 5G’s improved connectivity, is the technology telcos can best monetize to breed subscriber loyalty and repeat purchases with value-added gaming services and higher-end plans.
Adding exclusive video game services and products to an existing telecom services marketplace allows operators to enable direct carrier billing (DCB) and mobile wallets to make paying for gaming perks more convenient.
When players use 5G for games via their telecommunications provider, their behavior is trackable. Games and in-game content help gather customer data to help telcos drive ongoing engagement, increase loyalty, and mitigate subscription loss.
Gamers Use Data. A LOT of Data.
One way for telecom providers to successfully capitalize on the gaming value chain is to offer extended services that take advantage of microtransactions.
According to Statista, in-game consumer spending accounts for the most significant share of the gaming market. In 2020, global gaming audiences spent approximately USD 54 billion on additional in-game content, with in-game purchases accounting for about 74% of the revenue earned across all gaming platforms. Experts project that in-game purchases' market value will surpass USD 74.4 billion by 2025.
Consumer spending on in-game purchases (worldwide) from 2020 to 2025 (USD M.) Source: Statistica 2022
By shifting to a business model that appeals to gamers – with in-game virtual items like cosmetics, skins, tools, and virtual currency – telecom businesses make it easy for players to personalize their experience. The result is that subscribers spend more time and data leveling up their gameplay, which generates more opportunities for telcos to upsell and cross-sell.
Examples of Success
Today, there is less speculation about and more evidence of the potential for telcos worldwide to boost business via the gaming industry. One successful case study is Zain, a Kuwaiti mobile telecommunications company founded in 1983 and grown to a commercial presence in seven countries across the Middle East, with more than 52 million active customers. Their subscriber count exploded in 2020 when the company realized that gaming services accounted for their network’s highest data traffic. In response, they launched Zain Esports and soon after reached millions of millennials and gen-z gamers in one of the world’s fastest-growing gaming regions. Since embracing esports as a value-added revenue stream, Zain has enjoyed a 300% growth in game-related data usage. The symbiotic relationship between games and telecommunications isn’t new. Partnerships between companies in both industries began more than a decade ago. Within a few years, the joint effort showed great promise - and profitability for everyone involved. In 2013, Telkomsel – a leading telecom in Indonesia – sensed the gaming market’s huge potential. They turned a portion of their service into a gaming hub called Dunia Games, and made the leap to let customers download games and have the charges go directly to their phone bill. Fast forward to 2019. Telkomsel developed its own MOBA game, collaborated with notable game brands like PUBG, and steadily gained a 22% market share of the region’s gaming industry.Getting Started in Gaming
The popularity of gaming is undeniable. The synergy with Telcos is obvious. Carriers have a wide window of opportunity to leverage their existing capabilities, tap into the growing global video game market, and successfully diversify their business for more revenue and fatter profits. What if you could partner with a video game commerce expert to help you capitalize on the trend? What if you had access to a solution to ease your leap into gaming’s lucrative value chain? Digital Distribution Hub is an Xsolla solution that enables the distribution of self-published games to third-party marketplaces, platforms, and ecosystems such as super-apps, bank apps, ISP carriers, web portals, telecommunication platforms, and other vendors. All providers are available through one solution, with one easy integration. When you enter into a partnership with Xsolla and implement Digital Distribution Hub, your existing network becomes a valued gaming hub. Current subscribers and new customers with a taste for video games access exclusive content directly from your marketplace and are conveniently charged directly on their phone bill. The future of gaming is indeed exciting, and your telecom business can be a vital part of its future! Find out more about creating a gaming hub or expanding your existing marketplace to include exclusive gaming titles and other virtual content:- Check out Xsolla’s Digital Distribution Hub for carriers
- Contact one of Xsolla’s distribution experts about how you can boost your profit potential.
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