Exclusives : Guest Post: The Future of the Video Game Industry & What it Will Cost

Guest Post: The Future of the Video Game Industry & What it Will Cost

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Mathieu Duperré, CEO, Edgegap

At the start of this year, Microsoft announced its plans to spend $67.8 billion on its largest acquisition yet. No, not a major rival or a technology software provider, but a video game company by the name of Activision Blizzard. Not only is this three times the amount Microsoft paid for its next-largest acquisition of LinkedIn back in 2016 ($26.2 billion) but it’s also the largest acquisition ever made in the video game industry.

Just to put those numbers into scale, Disney spent $8bn on getting two of the biggest names in film and TV when it acquired Marvel Entertainment and Lucasfilm. So why was Microsoft willing to spend so much on Activision Blizzard? And what can this investment – as well as the string of video game investments from other companies that have followed – tell us about the direction the video game industry is heading?

The future of gaming requires innovative solutions

Quite a few things, actually, and they all involve mobile phones, subscription models, Cloud gaming and the biggest buzzword in video games and tech right now: the metaverse.

In the press release announcing the Activision deal, Microsoft said the acquisition will “accelerate the growth in Microsoft’s gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse.” In addition, Microsoft’s CEO Satya Nadella pointed to gaming’s “key role in the development of metaverse platforms,” while Microsoft Gaming’s CEO, Phil Spencer, highlighted the fact that 95% of all gamers play on mobile devices. “Together we will build a future where people can play the games they want, virtually anywhere they want,” he said.

Microsoft’s mobile play makes sense. Mobile games made up 57% of the global gaming industry’s $157.8 billion last year, and one of Activision’s most lucrative IPs, CandyCrush, is a mobile game. While Microsoft has experimented by releasing some of its IP onto mobile (such as Spartan Strike and Spartan Assault for its Halo franchise), its some way behind Nintendo’s mobile strategy, which has earned the company almost $1.8 billion in six years.

But going mobile is about more than just creating new mobile games, and Microsoft’s focus on the mobile market is illustrative of where the wider gaming industry is heading, and why the telecommunications industry is going to need significant investment to get it there.

Microsoft isn’t the only company with a dream to let people play wherever they want. Video game companies now realise that time is the most valuable commodity out there. If game companies can expand their products, games and services onto mobile devices so players don’t have to sit in front of a TV or PC to play the latest games, that’s a win-win for both them and gamers.

The growing size of video games – some of which can easily surpass 100GB – means the most viable (and sometimes only) way of doing this is through Cloud gaming. But building the infrastructure required for Cloud gaming isn’t cheap, and Cloud gaming has some very particular challenges and demands relating to bandwidth.

Anyone playing competitive video games such as the latest Call of Duty, Fortnite or any modern shooter for that matter might encounter issues if their latency (ping) climbs above 30ms. Go much higher than that, say above the 60ms point, and these issues become more noticeable. You might notice your inputs are delayed, your character isn’t moving the way you want, or you somehow keep dying despite your swearing that you “fired first.”

Latency has become less of an issue thanks to the nationwide rollout of fibre broadband, you can imagine the challenges that present themselves when you’re relying on the strength of your mobile connection. Unfortunately, 5G and even 6G connections aren’t a silver bullet and when we get there won’t fix this entirely.

Both network providers and gaming companies will need to develop their infrastructure and build more servers in more countries to minimise the connection distance between gamers and the servers they’re using. Edge computing can negate this by placing the endpoint far closer to the gamer, rather than to a distant centralised server and back again. Simply put, it means data doesn’t have to travel as far, giving gamers lower latency and a smoother experience. Edge computing also means companies can reduce costs associated with running centralised infrastructure.  

The challenges and costs of building the metaverse 

Ask 100 game developers, software providers or thought-leaders about what the metaverse is and you’re going to get 100 different answers. Facebook (sorry, Meta) envisions a future in the metaverse where we’re strapped in with (their) VR headsets, interacting in real-time as our avatars.

Unfortunately, the metaverse and VR platforms introduce some unique connectivity and infrastructure challenges, which is why companies such as Meta, Google and Nvidia and many more are all investing millions into private equity funds for metaverse-related projects. If you thought the bandwidth strain of getting 150 gamers into an immersive, real-time virtual environment was difficult, try doing that in virtual reality with the additional strain of loading in real-time animations for everyone’s hyper-realistic characters, all of which will act and dress differently.

This is the same reason why live virtual concerts in video games and the metaverse aren’t a thing yet. Yes, all of the concerts that you’ve watched so far, whether they’re in Fortnite or Roblox, are pre-recorded performances played into the game. Sure, this mitigates any issues surrounding hiccups with live sound, but it’s mainly due to the fact the infrastructure to create these concerts in real-time with no bandwidth from streaming audio into so many devices simply doesn’t exist yet.

If you think the current appearance of metaverse platforms seems somewhat dated, that’s because many of them sacrifice graphical sheen in favour of delivering a robust playing experience. Delivering hyper-realistic graphics in a real-time, pre-loaded environment with hundreds or even thousands of players is a pipe dream with the infrastructure that’s available today.

Both game studios, software providers and network developers will need many years of investment and work to solve these challenges. If the metaverse is going to be as grandiose as many are hoping for, would-be metaverse creators need to look to techniques like Edge computing to manage game data more efficiently to provide a smoother, lag-free experience for players.

What’s next for the video game industry?

Games are getting more expensive to make. There’s a reason why we’re seeing fewer single-player campaigns on the market in favour of developing and slowly expanding multiplayer components. It’s much more cost-efficient for studios to add content to an existing title than develop for a new game altogether.

And whether you’re a metaverse sceptic or not, there’s no doubt that bigger and more interconnected worlds will eventually become the future of video games, even if some fine-tuning will be needed to get us there. There’s a reason why the video game industry has seen an explosion in M&A activity recently and much of it is related to the metaverse.

Andreseen Horowitz recently raised a $600 million fund to invest in games, telling VentureBeat that “today the most successful games are online services, social networks, creator economies and virtual worlds.” As the focus on all of these elements continues to grow, rapid change and evolution in the infrastructure underpinning it will be needed.

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