Considering the options mentioned above, it seems that the transport segment of the value chain could be the most lucrative area for providers. Within this segment, they could provide value and capture revenue through partnering with console makers to offer special deals on access network services and prioritize online gaming traffic to ensure quality of service.

There are already some examples of telecoms partnering with console makers to mutually benefit each other. Examples include T-Mobile’s partnership with Sony to provide wireless hot spot access for PSP users and Comcast’s partnership with Nintendo to give away a free Wii after signing up for a broadband subscription. However, given the fact that many newly released games incorporate online elements, fast broadband connections are becoming a required service for gamers and therefore open up new opportunities for console makers and internet service providers to work together. One example is Zeebo, which is a new console developed for emerging markets that depends on 3G connections to download games. Telecom providers can take advantage of this dependence by partnering with the manufacturer to sell subsidized Zeebo consoles with multi-year data contracts.

Another way that telecoms can provide value is to ensure quality of service. Since digital distribution of games tends to be bandwidth-intensive and usually involves the transfer of gigabytes of data, users would want some way to guarantee a fast download rate. To facilitate this, telecom providers can sell subscribers a service that prioritizes gaming traffic. Alternatively, services that stream games through the “cloud” rather than making users download them, such as OnLive, will also require an incredible amount of bandwidth to provide a compelling user experience. To address this need, carriers can bundle in OnLive service with high bandwidth subscriptions to drive ARPUs or they can offer packet prioritization services or hardware.         

Conclusion

As it stands, telecom providers can become an integral part of the gaming digital distribution value chain if they involve themselves in the most sensible segment. Our recommendations are below (Figure E).

The intersection of gaming and broadband has become an incredibly fortunate trend for the telecom industry. Internet providers and wireless carriers are already losing some control over their networks, but the advent of digital distribution in gaming presents them with many opportunities to stay relevant in the value chain. As long as carriers leverage their capabilities and strengths to position themselves in the most appropriate value chain segments, then they can undoubtedly become an active player in the gaming market.