5G is a Game Changer in Cloud Gaming War

Google Stadia, a cloud gaming service that promises access to top quality games via any device that supports Google Chrome, will launch in November 2019. Its announcement throws down the gauntlet to Microsoft’s Xcloud, Sony’s Playstation and others in this dynamic sector. Stadia spearheads the next generation of gaming communities, with a special button on the controller to stream your game straight to your YouTube followers and a direct link from a YouTube stream to the game on Stadia. It will also support multiplayer experiences, including split-screen co-op games. Techies wonder whether it will be the “Netflix” of gaming1, but it is not a pure subscription service; players buy the games and the key innovation is in the streaming, with the flexibility, access and quality this facilitates.

Cloud Gaming may disrupt the traditional console-dependent, purchased-games model.2 By streaming content via the cloud, it supports highly sophisticated games on very basic machines by utilizing the power of the server located in a nearby data center (of which Google has 7,500). The idea is to free players from their home PCs or consoles and potentially enable thousands of simultaneous players across Google’s internal network.

Stadia’s “Pro” package promises 4K high resolution at 60 frames per second, provided you have 35 megabits per second of bandwidth. And this is where the 5G rollout becomes crucial,3 with some tech analysts even suggesting that while Google claims its servers can deliver on Stadia, it is actually counting on 5G infrastructure to ensure its success.4A high quality online gaming experience relies on minimizing lag and latency, which can be provided by Google’s data centers if you happen to be in good geographical proximity to one, but would be more widely guaranteed by 5G’s network of small cell and massive multiple-in multiple-out (MIMO) antennae and sophisticated technology to allow signals to travel in two directions on the same frequency.5

Image of a circuit board

5G infrastructure and coverage not only has the potential to facilitate cloud gaming; it also may level the playing field by reducing the automatic advantage for companies like Amazon, which has more established infrastructure than some of its competitors. Amazon has already been highly successful in leveraging streaming and gaming influencers with Twitch, and is apparently exploring the possibility of launching a game streaming service.6 In the context of the 5G rollout, some believe that the combination of Google Stadia and Youtube premium could rival Amazon Prime if it enters cloud gaming terrain. Elsewhere in the market Sony and Microsoft are moving beyond their Xbox-PlayStation rivalry and will now cooperate in developing streaming capabilities and new games.7 Smaller players such as Shadow, which is exploiting powerful PC hardware to let players stream games, and even Verizon, are experimenting with streaming8. All market players are recognizing the future of streamed content and 5G will likely be crucial to expansion and success in this direction.

The synergy of cloud gaming and 5G may create a robust value and supply chain. The gaming market had an estimated worth of over $19,000m in the US alone in 2018.9 Some commentators predict that by 2022, up to half of all of the 5G data traffic could come from cloud gaming10, and one report has projected that by 2021, entertainment (including gaming) could be 6% of 5G revenue from consumers.11 It is not yet clear exactly which companies will dominate and what the potential sector ramifications could be (how necessary is the latest cell phone model if most of your hardcore processing is done in the cloud?), which is why targeted yet diversified 5G and Gaming ETFs can help investors make the most of these exciting disruptive times.

Fund holdings and sector allocations are subject to change at any time and should not be considered recommendations to buy or sell any security.

1“Google Stadia Doesn’t Look Like the Netflix of Gaming Just Yet,” David Marino-Nachison, Barron’s, June 6, 2019. https://www.barrons.com/articles/google-stadia-doesnt-look-like-netflix-gaming-51559849107

2 Apple is also breaking out of this model with its September 19 launch of Arcade, a game subscription service. But games are downloaded from Arcade and not played via the cloud.

3 Cloud gaming faces challenges as Google prepares launch, David Courbet And Erwan Lucas, TechXplore, August 24, 2019. https://techxplore.com/news/2019-08-cloud-gaming-google.html. “‘We have a small doubt on the development of cloud gaming,’ says Wandrille Pruvot, CEO of Xtra Life, a cloud-based apps manager for Apple. ‘The challenge will notably be technical as the better the resolution the greater the need for a quality internet network.’”

4 5G Tech Might Save Google Stadia From Total Disaster But It Still Won’t Succeed?, Sikandar Mahmood, Segment Next, July 31, 2019. https://segmentnext.com/2019/07/31/5g-tech-might-save-google-stadia-from-total-disaster-but-it-still-wont-succeed/


5 See https://news.defianceetfs.com/investment-cases/investment-case-for-fivg-the-defiance-next-gen-connectivity-etf for more details on 5G’s technological components.

6 Here’s the evidence Amazon is building a cloud gaming service, Sean Hollister, The Verge, January 10, 2019. https://www.theverge.com/2019/1/10/18177253/amazon-cloud-gaming-service-rumor-job-posting

7 Microsoft and Sony are teaming up for the future of gaming, Tom Warren, The Verge, May 20, 2019. https://www.theverge.com/2019/5/20/18632374/microsoft-sony-cloud-gaming-partnership-amazon-google

8 Exclusive: Verizon is quietly testing its own Netflix-style cloud gaming service, Chris Welch, The Verge, January 11, 2019. https://www.theverge.com/2019/1/11/18179048/verizon-gaming-video-game-streaming-service-vzg-nvidia-shield-android

9 “Value of the video game market in the United States from 2011 to 2020 (in million U.S. dollars),” Statista, 2019. Available at https://www.statista.com/statistics/246892/value-of-the-video-game-market-in-the-us/

10 Google Stadia 5G Game Streaming: The Disruptive Effects of Cloud Gaming, Share STADIA Community, April 17, 2019. https://sharestadia.com/google-stadia-5g-game-streaming/

11 Google’s streaming game platform Stadia has implications for 5G, Linda Hardesty, FierceWireless, March 25, 2019. https://www.fiercewireless.com/wireless/google-s-new-streaming-game-stadia-has-implications-for-5g

The possible applications of 5G technologies are only in the exploration stages, and the possibility of returns is uncertain and may not be realized in the near future.

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