10 March 2022 ISSUE 6354
A study has revealed that gaming subscriptions are 167x more valuable than video subscriptions, and 42x more valuable than social media, on a per-GB basis. The revelation, by network traffic analytics company Canopus, has profound implications for telcos’ profitability because their networks are currently tuned for speed, which benefits low-value applications like downloads, rather than high-value applications like gaming.
Co-founder and CEO Vijay Sivaraman, who will be delivering the key findings at CommsDay Melbourne Congress at 2.30pm next Tuesday, said broadband profitability is under threat as household traffic increases 26% year-on-year, while average revenue remains stagnant. “Telcos can begin to increase their profits immediately. But to do so, they need to de-emphasise speed, which benefits low-value applications [like] downloads and instead tune their networks to maximise user experience on high-value applications like gaming that demand low latency, jitter, and loss.
The company, quantified the “value per GB” of five key types of network traffic, by combining per-application traffic volumes it measures across 100,000 Australian households with publicly available data on industry revenues across the 9.84 million households in the country.
“Though video is culpable for putting the highest volumetric stress on the network, it is worth noting that consumers pay telcos almost as much in carriage ($0.14) as they pay OTTs for subscription content ($0.21) per GB,” he said. “With gaming though, telcos are recouping only a very small fraction (0.4%) of what a GB is worth to the industry.”
The report details why the value is not the same for all network bytes. For example, OTT subscription video generates on average $44 per month per Australian household, while comprising 184.88GB (37.7%) of monthly average household broadband traffic. Meanwhile Canopus measures average monthly household consumption of free video, from the likes of YouTube and Twitch, in Australia to be 64.18GB (13.1%). The company extrapolates Youtube’s revenue at $4.77 per Australian household per month and Twitch at $0.48 per household per month.
Canopus measures social media to account for 28.71GB (5.9%) of broadband data consumption per household per month, while advertising revenues, dominated by Meta, translate to $27.10 per month per Australian household. Conferencing platforms like Zoom, Teams, Google Meet, and Webex have boomed and Canopus estimates conferencing generates around $9.46 annually per household, though it is largely paid for by employers with corporate licences, equating to $0.79 per month. Conferencing traffic constitutes 11.19GB (2.3%) of household traffic per month.
In contrast, PwC estimates that Australian interactive games and eSports revenues in 2020 reached $3.41 billion, much of it from in-game micro-transactions, and it is expected to grow at 7.5% CAGR over the next five years. “This yields an average monthly spend of $28.87 per household on gaming. Canopus measures gameplay traffic to account for a meagre 0.73GB (0.15%) per month per household on average,” said Sivaraman.
TELCOS NEED TO ACT: As a result, he said the market was ripe for creating paid premium services for gaming, cloud gaming, and the emerging Metaverse. “Telcos have an opportunity to partner with content providers of high-value gigabytes on new business models to unlock revenue aligned with value, not volume,” he said. “Beyond 50 Mbps, an increase in broadband speed benefit low-value applications, like downloads, with no perceptible benefits for well-behaved high-value applications like video, gaming and conferencing. Network engineering [like] routing, buffering [and so on] needs to focus on optimising metrics like latency, jitter, and loss that directly impact high-value applications.”
“Telcos that can demonstrate superior network tuning to avoid poor user experience events on high-value applications, and engage with users to pinpoint and rectify experience issues, will be able to increase their brand value, customer retention, and revenues,” he added.