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Today’s Featured Topic Video Games: The Future of Gaming Promises High-Speed, Low-Latency, and Quantum Clouds Summary: Video Games have become the most popular form of entertainment on Earth with a dedicated userbase of between 300 and 400 million worldwide, and with casual gamers are included, the total consumer base is in the billions. As a result, the industry has become woven into the destiny of the most transformative technologies on the planet from 5G, to the Cloud, Quantum computing, and beyond. Here, MRP evaluates Video Gaming’s role in the future of such advancements. Cloud Computing MRP has previously covered cloud computing applications in video games. It would not be a stretch to say that the cloud is the launchpad that most other technological advancements in the video game industry are reliant on. Sony’s Playstation currently offers a PlayStation Now streaming service for a monthly subscription fee, and Nvidia has followed suit with GeForce NOW, a free to use streaming service because the company is still testing the service. Microsoft has also recently announced their latest streaming drive, Xbox All Access, a new plan that includes subscriptions to Xbox Live Gold and Xbox Game Pass, bundled with Xbox One hardware, for a discounted monthly fee. However, some reports suggest the company is building an even more advanced cloud-based game console with enough local computing power for “specific tasks like controller input, image processing, and importantly, collision detection.” Effectively, the console would render part of the game on its own, and the rest in the cloud, thereby reducing latency, the time between a digital command and response, while still costing far less than a traditional Xbox. Parsec is one of a handful of smaller companies trying to make real cloud gaming happen and likely setting a roadmap for larger companies to follow by providing a low-latency, 60 frames per second interactive game streaming service that allows PC gamers to play their games remotely on multiple devices. The Parsec cloud gaming service is similar in some ways to Shadow, which allows gamers to rent access to a more powerful computer via the PCs they own. Although, whereas Shadow has built its own data center infrastructure, Parsec operates on Amazon Web Services. Like Shadow, Parsec Nvidia’s GPUs to deliver compelling graphics albeit those GPUs are offered via AWS. Jeffries predicts that, by 2020, 75% of new console games will be downloaded, versus under 40% today. That will push margins even higher—an estimated three percentage points of gross-margin increase for each 10 percentage points of added download penetration. It is also worthy of note that this is not the cloud’s first go at gaming. A service called OnLive promised to free gamers from pricey hardware back in 2010, but it failed to reach escape velocity. But plenty has changed since then. Huge cloud vendors have pushed computing costs lower, brick-and-mortar videogame stores have fallen into decline, and stream-based companies like Netflix and Spotify Technology have demonstrated the appeal of monthly subscription services for media. Meanwhile game makers have developed a fondness for digital revenue from things like in-game purchases to smooth out lulls between big game launches. OnLive was an insurgent taking on powerful incumbents, whereas Electronic Arts is an industry heavyweight. 5G, Low-Latency Analysts expect EA to introduce a subscription-based cloud service for playing AAA games within two to three years. That will correspond with the rise of fifth-generation cellular service, or 5G, which will begin rolling out later this year as fixed broadband connections and next year as mobile broadband. It will not only increase data speeds, but also reduce latency, including on mobile devices. Because every command from your controller or keyboard must travel to the internet, and every frame of video must travel back in the opposite direction, there’s always a small but noticeable delay between hitting a button and seeing the result on the screen when gaming on the cloud. Reducing latency, therefore, is hugely important for video games that will operate on the cloud, as everything from button presses to environmental and non-player character (NPC) responses all have to happen instantaneously. However, in the 5G future, we could see this obstacle evaporate. In June, Verizon and Nokia took a huge step toward this by transmitting interactive VR sessions and simultaneous 4K streaming video on the network’s 28 GHz millimeter wave spectrum with latencies of just 1.5 milliseconds. For context, this is nearly seven times faster than 4G’s latency (10 milliseconds), the current standard. Telecom companies across the board are racing to reach the sub 1 millisecond holy grail of low-latency. 5G is also likely to make virtual reality less cost-prohibitive. When complex computing can be rerouted to the cloud (thanks to faster connections), it takes that stress of home devices, thereby making them more widely available at lower price points. 5G will also change how immersive augmented reality experiences can be, making AR creatures within games smarter and better able to interact with the gamer’s real-time environment—all with zero lag time. Quantum/Artificial Intelligence While the current state of video games on quantum computers is little more than random number generation, quantum’s potential in video games will likely be realized as an accessory, applied via the cloud, and could be realized much sooner than expected. Even many decades from now, classical computers would likely still perform a video game’s grunt work, like the sound, dialogue, graphics, controls, etc. However, they would connect with a quantum processor that could introduce new game mechanics or improve the physics engine. But the most hyped quantum computing goal is better machine learning and artificial intelligence. Microsoft has said Quantum machine learning “will give game developers an opportunity to create experiences that adapt to human input over time. In massively multiplayer scenarios, quantum-powered machine learning will be able to analyze the behaviors of legions of gamers, and create experiences that challenge us better collectively, while adapting to each player’s unique style of play… In a world where truly random behaviors can be informed by quantum processes, we can create environments, and scores of enemies, that feel natural in their behaviors even over infinite periods of play.” Further, breakthroughs in quantum applications will continue becoming easier as companies like Google and IBM continue to allow classical computers access to their quantum units via the cloud. Rigetti Computing, the holder of the world’s most powerful quantum processor, for example, has just taken the wraps off their new Quantum Cloud Service (QCS). The firm says that over the next few months, quantum algorithms will run 20 to 50 times faster on its QCS than on its current cloud setup, and significantly faster beyond that. While this kind of technology is primarily used for research now, similar offerings will likely become available to game developers in the near future seeking to optimize the realism and difficulty of their products.
We’ve also summarized the following articles related to this topic in the Technology section of today’s report.
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Chart: Video Games (GAMR) vs Telecoms (IYZ) vs Cloud Computing (SKYY) |
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Other Disruptive Change
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Joe Mac’s Market Viewpoint |
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The U.S. capital markets had a challenging time in the first half of 2018. While the brouhaha about trade wars has been cited by experts as the cause of this year’s rise in volatility, MRP believes otherwise. Extended valuations, investor sentiment, portfolio leverage, an ageing bull market, inflation, and a Fed tightening cycle are all headwinds. In short, several large forces are at play and they will continue to pressure both equity and bond prices in the second half of this year. Joe Mac’s Market Viewpoint: U.S. Markets at Midyear →
Other Viewpoint Reports Joe Mac’s Market Viewpoint: CAPEX Booms! → Joe Mac’s Market Viewpoint: The Inflation Complication → |
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Current MRP Themes |
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Major Data Points |
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US Consumer Credit Beats Expectations Consumer credit in the United States went up by USD 16.6 billion in July 2018, following a downwardly revised USD 8.5 billion gain in the previous month and above market expectations of a USD 13.0 billion rise. Revolving credit including credit card borrowing edged up USD 1.2 billion, compared with a USD 1.2 billion decline in June. Meantime, nonrevolving credit including loans for education and automobiles climbed by USD 15.4 billion, after rising by USD 9.6 billion in the prior month. TE |
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UK GDP Growth Highest Since August 2017 The UK economy expanded on average by 0.6 percent during the three months to July of 2018, following a 0.4 percent growth in the April to June period. It was the highest growth rate since the three months to August of 2017. Both retail sales and construction grew strongly, boosted by warm weather and the World Cup. On the other hand, manufacturing continued to contract and energy generation and supply fell due to reduced demand. TE |
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Pound Climbs to Highest in Over a Month The British pound jumped 0.9% to $1.304 around 2:25 PM London time on Monday, its highest level since August 1st, after EU’s chief negotiator Michel Barnier said a Brexit deal with the UK is “realistic” within six to eight weeks. TE |
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Other Disruptive Change |
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