MWC 2023: Metaverse, XR, AI, and Quality on Demand the key themes for games

Despite not being MWC’s main themes, gaming, metaverse, and extended reality (XR) made a significant impact. Speakers at the event explored how these emerging technologies could be integrated into telcos’ services and generate revenue. However, many of these discussions were speculative, with telcos eager to demonstrate their involvement without a clear understanding as yet of how their investment would translate into returns.

The metaverse has generated considerable excitement over the past two years, but now many companies are turning their attention towards AI as a more practical and immediately applicable technology. Nonetheless, AI is expected to play a crucial role in the development of the metaverse, and both technologies are likely to continue to influence each other as they evolve in the coming years.

A slew of augmented reality (AR), virtual reality (VR), and mixed reality (MR) headsets were featured extensively on MWC’s show floor. The sheer number of AR glasses from hardware manufacturers was particularly notable, as they attempted to put a stake in the ground ahead of Apple’s rumored entry in this space. VR’s presence was also notable, as Meta’s two leading challengers, HTC and Pico, demonstrated their latest headsets and content. Despite dominating the VR category, Meta is facing plenty of challenges, such as disappointing engagement rate on Quest headsets.

Cloud gaming was prominently utilized for Quality on Demand (QoD) API demos. QoD is one of eight APIs launched as part of GSMA’s Open Gateway initiative, which itself was one of the biggest stories at MWC. A gaming service provider or game developer could use this API to ensure a certain quality of experience (QoE) for its customer. However, there are many question marks around its monetization potential for telcos.

AI may appear to be displacing the metaverse, but the two will have a symbiotic relationship

At MWC, telcos yet again turned to the metaverse to demonstrate the critical role of networks in enabling this new form of immersive digital experiences. The metaverse is yet to be fully defined and although MWC’s program offered several metaverse-focused discussions, it remains unclear when or how it will be monetized.

The word ‘metaverse’ was used on the show floor very loosely, which included SK Telecom's air taxi VR ride, Orange’s digital twin experience utilizing a Microsoft HoloLens 2 and Xiaomi CyberDog, and Telefónica’s holographic telepresence experience. High-speed and low-latency networks are vital for such use cases, making them well-suited for telco demos, but there are growing discussions around if the metaverse will make a big enough impact on how we live and work in the near term, compared to the latest headline-grabbers: generative and general AI.

Many companies were quick to jump on the metaverse trend after Facebook rebranded as Meta in 2021, but an apathetic response from consumers has led to doubts creeping in about its viability. Meta’s Reality Labs (the division containing metaverse projects) recording a cumulative loss of nearly $24 billion over the past two years has raised further concerns. In February 2023, Meta CEO Mark Zuckerberg maintained that its “priorities haven't changed since last year,” and that “the two major technological waves driving our roadmap are AI today and over the longer term, the metaverse.’’ During the week of MWC, Zuckerberg also announced that Meta is “creating a new top-level product group at Meta focused on generative AI.”

With or without the metaverse hype, extended reality (XR) – a catch-all term for AR, VR, and MR – will become indispensable in many industries and consumer use cases, but there is increasing acknowledgement from major tech firms that this will take longer than initially anticipated. This has led to many leading tech companies such as Microsoft shifting their focus away from the metaverse and towards AI as a more practical and immediately applicable technology.

One reason for this shift is that AI has already proven to be an effective tool for solving real-world business problems across a wide range of industries. Companies are increasingly leveraging AI to improve their operations, automate tasks, and gain insights from large amounts of data. From chatbots and recommendation engines to predictive analytics and fraud detection, AI is being used to drive innovation and increase efficiency in many areas of business.

Compared to the metaverse, AI offers more immediate benefits and a faster return on investment. Cost savings, efficiency gains, and new revenue opportunities are easier to see, compared to the development of metaverse experiences which can be time-consuming and expensive, with a currently limited total addressable market.

Nevertheless, it is important to highlight that the metaverse and AI are not mutually exclusive, as the latter is likely to play a significant role in the development of the former. Game developers are already experimenting with existing open-source AI tools like Stable Diffusion and ChatGPT for generating artwork or dialogue, while more specialized tools aimed specifically at game developers are coming soon, though for now they're restricted to these kinds of low-level labor-saving tasks.

For the metaverse, AI can be used to create more realistic and intelligent virtual characters, automate certain aspects of metaverse experiences, and personalize the user experience based on data and preferences. This should alleviate companies’ hesitancy around investing in this area and reduce the barriers to exploring the world of immersive virtual experiences.

With a slew of AR, VR, and MR headsets, companies put a stake in the ground ahead of Apple’s rumored entry

More so than any previous years, augmented reality (AR), virtual reality (VR), and mixed reality (MR) headsets were featured extensively on MWC show floor. Anticipation for Apple finally launching an XR headset was palpable, as companies seemingly rushed to get ahead by launching their own devices. Chinese manufacturers Lenovo, Oppo, TCL, Xiaomi, and ZTE prominently demonstrated their respective AR glasses, but most were unclear on if or when they’ll be globally commercialized (see Figure 2). Many other specialized AR devices, such as those from Vuzix, were also at the show.

Although some of these AR glasses offered genuine innovations in terms of reduction in size and weight, as well as improved field of view and clarity of displays, overall, the pace of this innovation has been very slow and incremental. It’s undeniable that XR devices have seen increased adoption in enterprise, but the consumer AR glasses market remains virtually nonexistent.

In many ways, Qualcomm has been a flag-bearer for XR headsets, with its technology powering most of the notable XR headsets from the past five years. It is keen to establish a de facto leadership position in this space on both hardware (Snapdragon XR/AR chipsets and reference designs) and software (Snapdragon Spaces XR developer platform) fronts. In stark contrast, other semiconductor companies at MWC appeared to be taking more of a “wait and see” approach.

The great unknown is Apple, which has a proven track record of entering new product categories late and transforming them (i.e. iPod, iPhone, Apple Watch). Companies are tentative about placing big bets now, because depending on how Apple chooses to move into the XR space, it will have a major role defining the trajectory of the market.

VR looks to AR as it grapples with the issue of low end-user engagement

VR demos were featured extensively on many booths, but the two most notable VR exhibitors were HTC Vive and ByteDance-owned Pico (see Figure 3). HTC offered many consumer and enterprise-focused demos, ranging from a kayaking experience on a recently unveiled Vive Elite XR and a multiplayer location-based entertainment (LBE) demo using Vive Focus 3 headsets. As is the case every year, it was one of the most popular booths of the show, with a constant long line of curious attendees. Pico had a smaller, but notable presence that included demos for an upcoming Peaky Blinders VR game and several enterprise solutions – which included Pico’s upcoming legs-tracking devices, which add another dimension to the VR experience.

Coincidentally during the week of MWC, Meta shared details of its AR and VR roadmap. It revealed that its first pair of AR glasses will launch in 2025, with an enhanced version expected in 2027. Interestingly, it also provided an update on VR, stating that nearly 20 million Quest 2 headsets have been sold to date, in line with Omdia’s Consumer VR Headset and Content Revenue Forecast, which estimated 18.8 million cumulative sales at the end of 2022 (see Further Reading).

Unsurprisingly, it was revealed that Quest headsets are struggling to keep new users engaged and that Meta is now focused on driving retention and ‘resurrection’ of abandoned headsets. As predicted in Omdia’s 2022 Trends to Watch report two years ago, passthrough VR – a feature which lets the user see ‘through’ their headset via external cameras and augment real-world surroundings – is becoming a staple feature of new VR headsets, and Meta is reportedly planning on positioning the passthrough feature as its key selling point of the upcoming Quest 3.

Having surmounted core hardware issues, VR is now faced with the much bigger challenge of content. User engagement with headsets is patchy due to the limited flow of truly compelling VR experiences, hindering the vision for a self-sustaining VR ecosystem. The enduring popularity of free apps Rec Room and VRChat (considered as metaverses) underlines a demand for compelling virtual social experiences in VR, but it’s clear that most VR games today do not provide enough replay value or fresh content to drive high engagement.

Cloud gaming prominently utilized for QoD API demos, but monetization potential is nebulous

GSMA’s Open Gateway initiative was one of the biggest stories at MWC. It is a framework of common network application programmable interfaces (APIs) designed to provide universal access to operator networks for developers. Despite some industry skepticism about this initiative, Omdia believes that it has a greater chance of success than previous attempts (see in Further Reading: Have an open mind about the GSMA’s Open Gateway initiative).

Eight Open Gateway APIs were made available at launch and one eye-catching example was Quality on Demand (QoD): this API allows an application to request a level of quality (latency, jitter, throughput) for its traffic flow. A gaming service provider or game developer could use this to ensure a certain quality of experience (QoE) for its customers.

Orange, Telefónica, and Vodafone, in collaboration with Ericsson and Vonage, demonstrated how the end-user experience could be enhanced in cloud gaming and interactive high-density video applications thanks to the utilization of QoD API. Their showcases simulated the benefits of QoD for streaming a car racing game on Blacknut’s cloud gaming service (see Figure 4).

The ambition is that as more operators use the same QoD API, they will be able to leverage new ways to monetize 5G and quickly deliver new services on a global scale. Compared to the other seven Open Gateway APIs, Omdia expects QoD to have a limited impact. Although QoD aims to address some of the key issues faced in the past Quality of Service (QoS) attempts – namely, standardization between cellular operators – other challenges remain, including:

• Monetization models are unclear and there is a lack of consumer awareness for QoD benefits.
• Standardization efforts in the fixed network space differ to QoD; this is an issue as consumer services are usually used across both fixed and cellular networks.
• Operators’ limited control over the entire (complex) network infrastructure and costs associated with implementing QoD.
• Over-subscription of networks and inability to deliver promised performance is a possibility.
• Potential network neutrality considerations.

As outlined in 2022’s Telco opportunities in gaming report (see in Further Reading), Omdia consumer surveys indicate appetite for gaming traffic prioritization services. Specifically, 58% of existing gaming service subscribers said they would be interested in paying at least 3% extra on top of their monthly broadband bill for an online gaming service where gaming traffic is prioritized to offer best quality.

QoD demonstrators at MWC were pitching an idea that end users would pay this additional fee directly to a network operator or to an individual OTT service like cloud gaming – but in practice, it is highly unlikely that many telcos expect this to happen. Telcos instead hope that game developers and game services will themselves pay to deliver improved gaming experiences – echoing the perennial MWC debate around the “fair share” – but this is also fraught with challenges. More broadly, as more technical solutions such as prioritization become available to operators, there is a growing need for the network tariff innovation in order to match the ever-evolving consumer demands. The key will be communicating the benefits effectively and offering prioritization as part of a premium packages aimed at power users such as gamers.

Further reading

Have an open mind about the GSMA’s Open Gateway initiative (March 2023)

Consumer VR Headset and Content Revenue Forecast: 2022-27 (November 2022)

Consumer VR Headset and Content Revenue Forecast Report: 2022-27 (January 2023)

Telco Opportunities in Gaming (July 2022)