Online gaming has come of age. Driven by the surging popularity of mobile-based gaming, the sector is on track to become a $200 billion industry by 2023, making it larger than both the film and music industries.
The demographics are changing too. The image of the gamer as an adolescent male in his bedroom is now an outdated stereotype. It is estimated that 2.7 billion people worldwide are now playing online games, drawn from all ages and genders, and from all walks of life. Many turned to online gaming during COVID-19, seeking a respite from the boredom of lockdown.
This rapidly growing customer base is great news for the publishers of major online games such as Fortnite, League of Legends and Call of Duty. These companies are competing to deliver unique, fresh gaming experiences to grow their share of thumbs and eyeballs locked onto their particular game. But they are also facing multiple challenges in meeting the expectations of a new generation of customers demanding a flawless gaming experience.
The challenge of lag
The biggest challenges concern the need for fast connectivity, which means resilient networks. Consider, for example, lag (or latency): the annoying delay between a player’s move and the game’s reaction. It is often seen as the number-one problem faced in online games, especially those involving multiple players across different continents.
The seconds lost to lag can equate to them millions in lost revenue – and can ruin the gaming experience for the user. Both gamers and developers are therefore looking at ways to create an ‘upgraded internet’, which could provide an optimised ‘fast lane’ for their gaming customers.
Innovative new start-ups are addressing this challenge. An example in the Telstra Ventures investment portfolio is Subspace, which dramatically improves latency times and local network performance via a globally deployed infrastructure. Another example in our portfolio is NS1, which is changing the way infrastructure is deployed and then optimised.
The 6G factor
Networks are, of course, evolving all the time. On the mobile side, 5G is now live in more than 60 markets worldwide and is on track to account for about a fifth of global mobile connections by 2025. This rollout of state-of-the-art networks – alongside the increasing adoption of gaming devices (such as headsets) – is contributing to better gaming experiences. However, the conversation is already shifting to what ‘6G’ might look like and how it will be delivered. For example, another of our portfolio companies, Cohere, is today working with mobile operators to increase spectral efficiency by mathematically mapping mobile networks – which will be part of the emerging 6G conversation.
This is just one example of how the requirements of online gaming is driving technological advancement on the infrastructure side.
The ‘gamification’ of the tech industry
In fact, gaming’s influence reaches much further. We are seeing plenty of innovations developed in the gaming industry – in areas such as user acquisition and user engagement – replicated across many different sectors, including retail and financial services. This is driving the ‘gamification’ of many industries and across the enterprise.
As a VC, we’re seeing the investment potential of a new era of start-ups focused on gaming infrastructures such as network tech, AI/ML, security, and payments. But we’re also seeing innovative start-ups across many vertical sectors – from personal finance to online fitness – that are adopting gaming techniques and approaches.
Meanwhile, the challenge of creating super-fast gaming networks continues. Ultimately, gamers want to be judged on a level playing field based on their gaming skills, not the speed of their internet connection or their proximity to a server.