Video games are serious business. The global gaming market will grow from around $67 billion in 2012 to more than $80 billion in just a few years time. To put this in perspective, the Motion Picture Association of America announced worldwide total box office revenue of only $34.7 billion last year. We are also seeing the rapid growth of casual gaming, particularly on mobile devices. According to Flurry we now spend a third of our time on connected devices playing games. And that’s not even considering the increasing use of gamification in the way we work and go about our lives. So gaming is a large, high growth and pervasive force of nature.
With significant revenues at stake in a rapidly shifting market, 2013 has become the battleground year for the next generation of gaming consoles. The evolution of the gaming industry has wide reaching impacts, particularly for entertainment, digital economies, privacy and even the future of our bodies. And guess what? It is the network that is critical to delivering all of these changes.
There's been a lot of hype surrounding these next-gen consoles. So let me start with a brief overview. Sony revealed their hand first back in February when they announced the PlayStation 4, then in May Microsoft announced the Xbox One. For two roughly equivalent products the launch keynotes contrasted greatly in the direction that Sony and Microsoft set for their new boxes. Microsoft is clearly pushing to integrate gaming as one aspect of their central entertainment hub for the family, elevating sports and broadcast television as banner services. Sony, despite their music and motion picture businesses has so far kept to a tight message on core gaming experiences.
This divergence in strategy can partially be explained as both console makers attempt to correct mistakes of the past. For Sony, the PlayStation 4 will see the reintroduction of an x86 based system architecture after choosing the radical cell processor that greatly complicated the task of building games for PS3. Sony are keen to regain the favor of game developers and retake the throne of console gaming. For Microsoft, the XBox One delivers a digital hub for the living room, filling the gaps that lead to the open-source development of the widely popular XBMC (which started life as 'XBox Media Player' for chipped XBox consoles). Both console makers are also heavily promoting the use of motion capture camera systems (XBox Kinect and PlayStation Eye) to provide a more immersive gaming environment in an attempting to emulate the surprise success that Nintendo delivered with its Wii console.
While Sony's preference for x86 over custom silicon might sing to those following the Network Functions Virtualisation (NFV) efforts, it's worth pointing out that the PlayStation 4 remains a proprietary physical appliance with very little use of virtualisation. In contrast, Microsoft has implement a hypervisor within the XBox One to allow for concurrent use of gaming and entertainment services. These are interesting but are only incidental facts.
So how does this relate to networks? Well, a key aspect of both launch keynotes was the promotion of in-house online gaming networks as critical differentiators for console-based gaming. Microsoft announced that they were going to double the number of XBox Live servers from 150,000 to an incredible 300,000 servers. While Sony didn't provide specific numbers they emphasized that they will invest to ensure that the PlayStation Network (PSN) is the 'world's fastest gaming network' with zero lag time and instant play for downloadable content.
Gaming has indeed grown up and has moved out of the domain of Service Providers and onto its own global infrastructure. To me this represents the decline of another middle ground service that has shifted from traditional Service Providers to over-the-top (OTT) delivery. Sadly the days where network operators host their own gaming service as a value add for their subscribers have passed. Gaming, like video content, web hosting, email, DNS and even voice and messaging have been ceded to online service providers.
But the console builders don't have everything heading their way. There are significant costs associated with building global networks, and these costs must be recovered one way or another. One of the key business model changes for Sony is the introduction of a monthly subscription charge for playing games online with PlayStation 4. Sony Worldwide President Shuhei Yoshida explained it this way: 'The main pillar for the PS4 will be online play. We're developing many new ways to play and connect which requires a large investment of resources'. Sony should receive a strong recurring revenue stream if can convince its large install base, to upgrade. But with many blockbuster gaming titles such as Battlefield 4 will be made available on the existing PS3. The availability of roughly equivalent experiences, and only one of them for free, may create a significant disincentive for gamers to fork out for console upgrades later this year.
Microsoft has also faced strong resistance to some of the business model changes it proposed when announcing XBox One. Originally it had planned to use digital rights management (DRM) to enforce new rules for how games would be distributed. These new rules would disrupt a number of existing business models, particularly the resale and rental of gaming disks, prompting a significant backlash that forced Microsoft to abandon these changes which some have pointed out could have lead to cheaper prices and other benefits.
Worse yet, innovations like remote play and the new social sharing functions could see a huge amount of new data poured into networks from living rooms around the world. Both Microsoft and Sony have included a social strategy at the heart of their product offer. Sony however has added a share button directly on their console controller. During the keynote demonstration of the PlayStation 4 a short section of gameplay only 8 minutes long was uploaded directly to Facebook with a single press of this button. This video clip was almost 200MB in size. Sony also announced that each of their users would be enabled to live stream their games on UStream. Skype video calls were prominently featured in each of Microsoft’s demonstrations. So gaming is shifting from a low latency low bandwidth service to a low latency high bandwidth service. The costs and therefore the necessary revenue needed to support these growing network demands are only going to increase as Sony and Microsoft build towards a vertically integrated model.
Microsoft is also seeking out new revenue streams by embracing analytics and advertising in its content delivery solutions. Microsoft touted that all of the XBox Live users’ behaviors would be aggregated into their cloud hosted analytics to deliver trending recommendations. When you consider that the improved Kinect camera can also detect the individual faces of each person and their level of engagement with the displayed content you can see why legislators are moving quickly to introduce the 'We Are Watching You' Act. We're all getting used to watching content from the cloud. This is, as far as I know, the first time the cloud is watching each of us back.
'We Are Watching You' reminds us that we need to have an open discussion on how much technology-based intrusion we're willing to live with. We should remain hopefully that this discussion might lead the way to a common approach to the raw data and metadata about us. After all, there are some super useful ways that these digital tools could greatly improve our lives. The same Kinect camera that might tell advertisers that we are interested in buying a new car can also infer our heart rate and muscle activity. For Tele-health initiatives, this could one day provide a convenient tool for patient monitoring or even remote physiotherapy. In addition to home security systems, we might see medical systems that can connect to our Personal Area Networks (PAN i.e. IEEE 802.15) that alert emergency services when elderly or at risk individuals suffer medical complications.
In the same way that mobile networks have become an essential part of our every day lives. It might not be too far from now when gaming networks become an essential part of our homes. There are lots of challenges to navigate in this space, but the one certainty is that the network is the platform that makes it all possible. We sure can learn a lot from playing games.