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The new age of mobile gaming with Hatch Entertainment

Podcast episode 19

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The future of online gaming is 5G, and a high-profile stumble by competitor Google doesn’t concern the company behind Angry Birds. Rovio’s Hatch Entertainment thinks it’s got the secret to success, and VP Nick Thomas tells me that telecom companies and developers should work together to leverage the technology.

Below is a transcript of their conversation. Some parts have been condensed for clarity. 

Michael Hainsworth: The blue skies for cloud gaming darkened in 2019 after Google's Stadia stumbled out of the gate. Reports of lag over 4G networks tarnished the reputation of an industry set to explode thanks to 5G. Hatch Entertainment believes it's figured out the formula for mobile gaming in the cloud. And a combination of emerging technologies tied to 5G will only make the experience better. I had a chance to sit down with Vice President Nick Thomas to look into the future of pew, pew, pew on our glowing rectangles. We began by addressing the question, is the world ready for cloud gaming?

Nick Thomas: All right, yeah, we're just gonna cut right to it aren't we? Okay. I'm drinking the Kool-Aid, of course, because of the role that I'm in and the company that I work for. And yes, the answer to that question is yes. We've seen a clear evolution in nearly all other forms of digital entertainment. Video obviously has moved from the old days of cable TV or walking to Blockbuster.

CLIP: “Bonus Card Plus from Blockbuster video. Rent 11 videos, get the 12th video free. And enter to win a corvette convertible.”

NT: To at one point you had DVDs sent to you.

CLIP: “If you don't watch a lot of movies you may never learn certain valuable skills. - What are we gonna do with it?
Like how to dispose of a body. But, if you watched a lot of movies you'd know.
- What do we do now?
- Let's go eat.
- You gotta touch me every time you talk to me?
Netflix, all the DVDs you want, $20 a month, and no late fees.”

NT: And then finally the technology caught up to the point where you could just stream your content. And that is more and more the case, as we see cable TV dying off with different streaming services replacing them. And music had a somewhat similar evolution with all the streaming services that are in market.

Gaming has always lagged behind, and that has primarily been a technology issue. It's been attempted in the past. It's never really worked, although there's been a lot of interest and excitement and investment. It never really delivered the quality of experience and the features that are important to the gaming community.

We are at a time now, at this pivotal moment, where the technology has finally arrived, and the ecosystem is embracing this new movement toward streaming. So the long answer is yes, this is, I think, the moment we've been waiting for game streaming to really become mainstream.

MH: How does Hatch Premium and Sprint mobile 5G work?

NT: Hatch is not exclusive to Sprint 5G. It's not a Sprint product per se. We are a stand-alone streaming service that is live, globally. So in the U.S. Sprint is our launch partner, but it's good to understand that we're not limited to Sprint, we're also available in Europe, where we've partnered with Vodafone. We've launched in Korea with SKT, South Korea Telecom. And in Japan with Docomo. So we're operating a global service here.

And with Sprint, Hatch is a mobile game streaming client. So this is, for lack of better terminology, Netflix for games, but built and designed to be a natively mobile experience. So in that way, we're quite different from Stadia or what Microsoft has announced with xCloud and other services coming to market that are cross-platform, and for the most part, PC gaming replacements or console gaming replacements. That is not our angle at all. We're very focused on the mobile use case. And because mobile is our primary target device and user, we've built Hatch to be a 5G service. Now you don't need 5G for Hatch, but 5G provides the best user experience and really creates the optimal environment for game streaming.

 Gaming has always lagged behind, and that has primarily been a technology issue.

MH: So is it streaming the actual games? Is this Edge Cloud technology where all the heavy lifting for the rendering and for the “I shot you, no you shot me” type of thing, is that all taking place in the cloud, or because it's mobile and mobile-exclusive, are we downloading something that is doing the heavy lifting on our devices?

NT: Yeah, good question. So this is all in the cloud. This is true game streaming from the cloud. We have a distributed edge of data centers that are all around the world in the markets where we're active. And we are streaming the content from the data center, from the cloud to the end-user device. Now, the technology is interesting. You're don't downloading any games. None of the content is being downloaded to play on the device.

MH: Hence the Netflix for video games analogy.

NT: Yes.

MH: I'm not storing the movie on my phone.

NT: That's correct. You're not storing it on your phone, you're not downloading it onto your phone. You're purely streaming. But the way that we handle the streaming is unique. What everyone has done in the past, and what our competitors continue to do is a video-based streaming approach, which is what you alluded to in your question, where you're running the game using the CPU in the cloud, and then you're rendering and encoding in the cloud and sending a compressed stream to the device, and then decoding on the other side. And that's a very latency-prone way to approach streaming because of the encoding and decoding and heavy video stream that is involved in that process.

MH: Sorry, just to put you on pause for a second, it sounds like there's a horse walking around in the background.

NT: You know it's funny, it's my dog drinking. She doesn't drink all day, and then when she drinks, she drinks the entire bowl of water.

MH: Well, we can wait.

NT: I think she's done.

MH: Okay.

NT: Sorry about that.

MH: That's okay. So you were talking about the latency.

NT: Yes, so that's a video-based approach. What Hatch is doing is quite unique and proprietary. And we are not sending a video stream to the device, we're actually sending rendering commands. So this is called command streaming, and what that means is that we're running the game on the cloud using the CPU to do all the processing of the game data and all the heavy lifting on the compute side. And we're streaming the rendering commands and using the GPU on the phone to do the rendering, and rendering in real-time.

So another way to think of this is that we take your phone, and we take the CPU and the GPU, and we separate those two things and put the internet in between. And this provides a ton of interesting benefits for mobile streaming. The primary benefit is that you don't have this video issue to contend with in terms of the bandwidth, in terms of the encode and the decode and the compression protocol, and the bandwidth requirements.

MH: You don't have to worry about sending a 4K video file down the line and then the latency that comes with it. “I aimed at your head, I shot, but by the time the bullet made it to you, you were gone.”

NT: That's right, yes. All of that is resolved. And so what you're really dealing with from a latency perspective is just effectively the speed of light end-to-end latency of delivering that rendering command. Those relatively lightweight simple commands of moving pixels around on your phone and that's a much lower latency approach. Of course, there is latency. You have to get the speed of light from the data center to the end-user device, and there's a lot of magic and wizardry that we do to optimize that routing in the core network, and that's a big part of our edge strategy when it comes to data centers is to bring the compute as close to the user as possible.

To get back to your earlier question regarding Sprint, this is one of the reasons why we chose to launch with Sprint in the U.S. Everyone is launching 5G networks and we've been speaking to all of the carriers and telcos, and doing our due diligence and investigating the pros and cons. And we chose Sprint because they have this dedicated approach to their 5G rollout, and have done a lot of work with us actually to optimize their network, to ensure that streaming will provide this high-quality experience for the user. And that all these problems that have plagued game streaming in the past are attended to within the network conditions that the user is streaming on.

So it's been a great partnership because it's been very bidirectional, where it's not just our tech on their network, it's been worked between the two of us to actually optimize those two to provide the best possible experience for the user.

The latency benefits that have been promised in the 5G evolution are, I would say equal portions hyperbole and reality.

MH: So I guess as far as the benefits of using 5G are concerned, there are a whole bunch of different use cases for 5G. It's a very low-latency, very high-speed connection, and very low power. And I can imagine a low power thing works well for industry 4.0. The high speed works very well for video streaming and things like that, autonomous vehicles or Netflix. But I guess for you, it's that ultra-low latency of going from 100 to 120 milliseconds down to one to two milliseconds that really is the power of 5G for you.

NT: Yeah, let's unpack that a little bit because the latency benefits that have been promised in the 5G evolution are, I would say equal portions hyperbole and reality. The promise of one to two to five milliseconds of latency is true in that it's a promise and that the potential for that does exist, but today's 5G is what I kind of think of as 5G 1.0, which effectively means that it's a 5G antenna or small cell, and a ton more data being pushed through the network, but it's using the same LTE infrastructure that's already been servicing 4G for the last 10 years or so. So the benefits of 5G latency are not here today. This is something that the industry is working on and it will require its own dedicated, separate network infrastructure, which is something that's being built but is not yet deployed.

Hatch, today, is running effectively on LTE on steroids, meaning that the latency of the network is still under the profile of an LTE network, but there's a ton more throughput. Now, for us, because we don't have this video burden, we're able to actually stream quite well on the existing latency within the LTE network. And from this point, it only gets better. It only gets tighter and improves. When it comes to the latency profile today, what we're seeing is actually less, you know you mentioned 100 to 150 milliseconds for LTE, what we see is actually much closer to 40 to 60, so that's a typical environment.

With certain carriers and in other countries, you'll see closer to 30 milliseconds of round trip latency. And for us, anywhere in that range, we're flying pretty smooth. We're getting close to 60 frames a second and we're really actually cruising quite well. As you drop down to sub 20 milliseconds, that's where you have this sort of fully unlimited experience. And that means that the quality of the interaction with the game is entirely native feeling, as though there's absolutely no noticeable latency at all. It also allows us to run higher graphically more intense games through the service. Because of our technology, the benefit is that we get this amazing low latency, low bandwidth streaming relationship between the CPU and the GPU.

One of the challenges is that as you get into really graphically-intense games where there's tons of particles, lots of shaders and a lot of data being pushed to that GPU to render, that connection and the requirement for low latency and high throughput becomes more demanding. Now mobile games don't tend to actually fall into that category very often. Mobile games tend to be different from PC console experiences, where actually a lot of the load is pushed to the GPU. PC brigs, computers, have these big beefy GPUs to handle a ton of compute.

MH: You don't need to tell the guy who just dropped $1,400 on an RTX2080TI.

NT: Right, there you go. The PC world is quite different from the mobile world. And this again is a very important discrepancy between mobile streaming, mobile games and what we're doing versus the Stadias and xClouds and other solutions that are coming to market.

MH: Well then let's talk about that. Why did you choose to go mobile-exclusive when you could have targeted all of the platforms, not just the little glowing rectangle I've got in my pocket.

NT: Yeah, well that's a great question. So one answer is just our heritage. So Hatch is a spin-out of Rovio. Rovio is the Angry Birds company. And so our core DNA is from the mobile game world. We know mobile games really well. We've built some of the biggest brands in the space, and so it's part of our DNA.

The other reason is that we see the mobile market as the biggest market and the fastest-growing market. 2019, according to Newzoo reporting, gaming as an industry hit $150+ billion in terms of revenue. 54% of that was attributed to mobile games. And the percentage we're seeing in year-over-year growth, that's substantial, you know 11, 12, 15% growth year-over-year in terms of revenue and number of players and excitement in gaming. And we're seeing 20% or more growth year over year in the mobile space. So the industry at large is growing, but mobile is growing faster than any other segment. And it's also the largest in terms of user base.

We've got, in this country alone, there are over 100 million monthly active users. 65% of American adults play games and that's just looking at 18+ data. So if you factor in kids, you're looking at 75- maybe 80% of Americans as one market being mobile gamers, or being gamers rather. And of that large demographic 60% choose their smartphone as the primary device to play games. So it's a combination of our background and just the market opportunity that we see as being most interesting, from the business point of view, in the mobile space.

Professional gamer MissHarvey believes that the future of gaming will be more diverse because more people now have access to mobile games through their smartphones.

MH: So then knowing that your infrastructure, as well as your entire approach to 5G-based game streaming, is different from Google's offering, what lessons did you learn from Google Stadia's stumble out of the gate?

NT: I've been with Hatch for three and a half years. I think officially the company began maybe six months prior to that and was in an R&D effort even before. So we've been at this for, I don't know, five years or so. And our core philosophy and approach has been fairly consistent from the beginning. We have been, in many ways, the leaders in this space. Now we're a smaller brand than Google and Stadia, but we've been the visionaries and pioneers of this for a long time.

What we've seen with Google, and this was something that didn't entirely surprise us, and something that we're doing differently is that you need to do more than just stream content. Just streaming alone, and for Stadia as an example, there's not a lot of reason to buy a Stadia setup. You know you can play all the same games on consoles that most people already have. Getting new content is not that hard. I mean you do have to download it, which is a bit of a pain point, but in the console world you're not downloading new games every day, you're downloading a new game once a week or maybe just once a month, depending on how active of a gamer you are.

We're seeing that customers really want more than streaming. What they want are new experiences. They want new ways to play. And that could mean new content, original games, games that you can't get anywhere else. It could be new ways to interact with people, so social features, ways that you can play with your friends, communicate with your friends, community features. It could be a combination of those, which is multiplayer or leaderboard or competitive experiences that haven't been available before. So our focus is not just streaming. I mean, streaming is an important piece. It comes with other benefits like the notion of subscription and not having to pay for individual game titles, but having a catalog approach, just like Netflix or Hulu or Spotify. It comes with curation so that the content within that service is already filtered to remove poor quality titles. So everything that you're getting is good.

But then it also comes with these additional experiences. And we take that very seriously. We're very focused on the social elements of gaming, how you can interact with your friends, how you can connect with people, how you can compete against them. We run something called the Hatch League, which is a casual esports tournament within the Hatch platform so you can play against others, you can challenge your friends, and you can win prizes, and that's all very important to our approach. And we also develop original content, so we've got a number of games that are only available on Hatch. We've got what we call, Hatch exclusives, which are modified or enhanced versions of games that leverage the benefits of a cloud so you can play these games in new ways, for example, multiplayer.

One of the interesting benefits of cloud gaming from our approach, but I think this could be more generalized, is that because we're streaming from the data center to the end-user and we're just passing these rendering commands, it's just as easy for us to send that output to one device as it is to, say, four devices. And all four devices are actually using the same instance on the cloud. It's the same CPU that's actually powering the game for all four of those players, which means you have a 100% fully synchronous multiplayer game.

The way multiplayer is approached today is that you've got an instance running on your phone, but then you have another instance in the cloud. And sometimes multiple instances in the cloud. And so your phone instances are all communicating with the cloud instances, and then those are all trying to communicate with one another as well, which creates this inter-player latency between what's happening for player A and what's happening for player B.

Now the game is in sync on your phone, but the way that you're actually experiencing the other players can be out of sync. And at Hatch, we removed that problem because it's literally the same exact game powering all four players. It's just like you were sitting on a couch together and you're playing a game and the TV cuts the screen up into four quadrants, and each of you are playing--

MH: It's like the old Nintendo Game Cube model.

NT: Exactly. Think of playing Mario Kart with your buddies and all four of you have a little mini-screen that's powered by one console. This is the same approach, where you've got that same “console” in the cloud, but all four of those screens are now pushed to a separate device. So we're all playing together in that very real-time cohesive way, but we don't have to be sitting next to each other. We don't even have to be in the same city, and that opens up a ton of possibilities when it comes to multiplayer, real-time gaming, competitive gaming, esports, all of these things where multiplayer is essential, and having a fair, balanced experience is really important as well.

MH: Hulu, Netflix, Disney+, Apple Music, Spotify, my doorbell security monitoring service! $8 a month for Hatch Premium. As an industry player, are you concerned about subscription fatigue?

NT: Hmm, you know, I am but I think people will pick and choose the right service for them based on the type of content that they enjoy. I saw an interesting statistic that 74% of Americans have a video-based streaming subscription. And 69%, so just 5% fewer, have two or more. So that means most people have not just Netflix but also HBO or Hulu or something else that compliments their video service.

Music's a little different because pretty much all these music services package the entire recorded music catalog in the universe into the service, and it's just kind of a UI and how you like to pay type of variation. So Spotify versus Apple Music are basically the same in terms of content, but it's a different way to interact. Hatch is the mobile streaming solution, and we see a world where

Hatch and Stadia or something like Stadia exist in parallel for the same user, and people play Hatch when they're out in the world, and then they come home and they wanna play console games and they would play Stadia or some other equivalent.

MH: So no pressure to advance that technology to consoles like the PlayStation, like the Xbox, that sort of thing?

NT: I think we see an opportunity there, but we're really focused on mobile. It's a different ecosystem, it's different content, there are different technical challenges there. And it's a different world, in a way, so we're really focused on the casual mobile space.

MH: Okay, so if all of your eggs are in that casual mobile space basket, let me sort of extend that metaphor, technically are we in a chicken and egg scenario? People won't use 5G until their devices support it. Few devices currently do. And until more mobile devices are 5G-capable developers won't develop for the platform. Which comes first and ultimately drives adoption? The 5G chicken or the 5G smartphone egg?

NT: I would say it's the egg in that breakdown. From the content perspective, we don't really need "special content." I mean we can take existing games right off Google Play, wrap them and stream them within Hatch in a matter of an hour.

MH: Wow.

NT: Yeah, I should say this carefully, there are some developer requirements to be part of Hatch but they are very minor. We don't have SDKs to integrate. We don't have other proprietary requirements. For the most part, the games that are built to download and play natively, we can take and stream with little or no effort. So from the developer's point of view, Hatch is great because we opened a whole new revenue stream opportunity and customer base with very little work required on their side.

Now, you can optimize for Hatch. You can go further and you can actually do some things to really make it purr as much as possible. But it's not required. It's not anything that is burdensome to the developer. Now when it comes to the 5G ecosystem, 2019 was effectively a soft launch for 5G. It was standing up these networks, making sure they actually worked on the carrier side. On the device side, it was more or less the equivalent where you're shipping phones, making sure that they actually work, that they connect to the cell tower, and that they do what you expected them to do. We're now past that soft launch stage.

In 2020, nearly all devices are moving to 5G. From what we have seen, and this is all public information, but what we've seen from the news that we track, is that pretty much all the flagship Android devices are moving to 5G in 2020. And even Apple is rumored to be coming out with a 5G phone at the end of this year. We'll see if that's really gonna happen, but the device problem, or limitations, will be solved this year if things go according to our expectations.

The networks will be catching up to the devices to a certain extent. And each carrier has their own solution. There's the kind of, low-band solution that AT&T and T-mobile are rolling out to provide greater coverage, but lower bandwidth. Then you've got Verizon on the other side of the spectrum with the millimeter wavelength, which is super high bandwidth, but much lower propagation value, so you need more infrastructure in order to deliver that.

And then you have Sprint, and why we partnered with Sprint to launch was that they have this really sweet real estate in the 5G spectrum, which is a 2.5 gigahertz wavelength. And they've got a lot of it. It's actually wavelength they acquired from Nextel when they acquired Nextel years ago. And it was the wavelength that those old walkie talkie phones used to communicate on. It just so happens that that same spectrum is the ideal spectrum for 5G because you get the best of both worlds. You get good distance, good propagation, so the signal can pass through walls and it can sort of blanket an area in a way that you would expect for a cell service. And it provides the same, or relatively similar benefit when it comes to throughput.

Now, again the latency factor is not quite there yet because these separate networks need to be flipped on and actually provide that additional latency benefit, but from the 5G throughput point of view, we think Sprint really has the right recipe for today. Now everyone's gonna evolve their networks and things are gonna change, and they're gonna get better, and they're gonna come up with their own additional solutions to provide more coverage. But 2020 will be a big year for 5G, and I think we're really well-positioned to ride that wave.

MH: Based on your experience with SK Telecom in South Korea, Sprint in the U.S. And others, what's your device to a developer looking to work with a telecom on building any kind of 5G based product?

NT: That's a really green pasture to pursue. These Telcos are really interested in experiences and technologies that help them show the value of 5G.

MH: Right, they're trying to avoid that dumb pipe moniker.

NT: Exactly, yeah. And 5G has very interesting business enterprise or industrial uses for everything you mentioned. Automotive or autonomous vehicles. There are all kinds of industrial applications, and drones that need to communicate with each other to deliver packages, and who knows what else is gonna be powered by 5G.

Verizon was talking about some really interesting technology for firefighters where they can put a heads up display in the mask of a firefighter that communicates with a data center and allows them to see through smoke in order to navigate a burning building. It's really cool pioneering work that leverages 5G. And that's great for the world, but for the average person walking down the street who now has a 5G phone, what's in it for them? What are they getting from this? Because Netflix is basically gonna feel the same, and Facebook won't be any different with 5G. And you can stream music just fine on your current LTE network.

So the telcos are really hungry for, what can we do to show the benefits of 5G? And that's why Hatch is so exciting for them is that it really is a great use case and something that customers can use and feel the benefits.

Now, independent developers and publishers for that matter can take advantage of that too. I'd say the easiest is to work with a platform like Hatch where we've already done the heavy lifting and you just can bring us the content and be a part of this exciting new market that's emerging. But you also could develop your own native mobile streaming game. You don't need a platform like Hatch. It's much more work, and you sort of have to go through more of the R&D to create your own streaming solution, but that's possible. And it's definitely worth exploring because if you can find ways that you can stream content to the end device and show the benefits of 5G, then I think there's a lot of opportunity to partner with carriers to bring that to the masses.

MH: Nick Thomas is a cloud gaming pioneer and a vice president at Rovio spin-off Hatch Entertainment. He joined us from Oakland, California.

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