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Straight Talk Consumer and Entertainment Services

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The UK's EE and Vodafone joined American and Korean operators in launching 5G networks in May 2019, quietly heralding the beginning of the 5G era. The initial consumer experience of 5G will be a faster mobile data connection, probably on one of a small selection of handsets (not manufactured by Apple). Initial 5G consumer mobile subscriptions bundle access to streaming services such as Amazon Prime Video and BT Sport, music from Spotify, and even operator-collated VR catalogues. The Buck Rogers-tinged vision of a 5G future comprising autonomous drones, remote surgery, and holographic chatrooms will, presumably, be along some time soon.

The anticipated pace of 5G launches has underpinned our initial attempts to size and forecast revenue generated by 5G consumer and entertainment services. The greater part of our forecast in the early 2020s is attributable to spending on consumer and entertainment transferred from older networks: FWA, video, music and games transactions, and ad revenue; use cases which we would broadly classify as improved by 5G. We expect to see use cases which are broadly enabled by 5G (i.e., a use case which either wouldn't have been possible on an older network, or possible but with a degraded quality of experience) kicking in in the early to mid-2020s, and Figure 1 comprises revenue generated by AR, VR, and cloud gaming forecasted for this period until 2024.

 

Figure 1: 5G entertainment revenue will begin to scale in the early 2020s5G entertainment revenue will begin to scale in the early 2020s

Source: Ovum Forecaster

 

This low-key inception is partly down to the state of 5G networks: faster data speeds excepted, today's 5G networks have yet to develop the differentiated capabilities which have generated the most excitement around 5G such as edge computing, ultra-low latency, and network slicing. 5G subscriptions are being sold with no clear, transformational consumer use case with an impact comparable to that which, say, Uber or YouTube enjoyed. Consider also the increasingly incremental improvements between handset launches meaning less reason to upgrade, meaning the fillip provided by the relatively rapid pace of handset upgrades which helped drive 4G adoption has yet to emerge…leaving consumers with precious few reasons to get excited about 5G.

But that would miss the point that cellular network technologies take time to mature and develop, as was the case with 4G and LTE, and network operators are keen to start the process of network evolution in accordance with the latest 5G technical standards which are themselves still being released. Of equal importance is growing the ecosystem of 5G customers, devices, and apps: experimentation with use cases can move 5G out of the lab and into the real world to determine whether they resonate with users, completing the feedback loop which will enable the iteration of design and usability. While media commentary has focused on endgame use cases for 5G, the companies making 5G a reality must now manage heightened expectations while laying the foundations for the emergence of the transformative use cases and services which will, eventually, define 5G.

The 5G forecast and the potential of 5G for consumer and entertainment will be analyzed in greater detail in a forthcoming "opportunities and challenges" report.

Straight Talk is a weekly briefing from the desk of the Chief Research Officer. To receive this newsletter by email, please contact us.

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