Razer’s head is in the cloud
Podcast episode 26
Gaming giant Razer has its head in the cloud.
While best known for its computer mice, keyboards, and headsets, the company’s relationship with Tencent reveals the future of gaming in the era of 5G: always available, and never laggy.
Razer President and Head of Mobile Gaming Jason Schwartz explains why high-speed wireless isn’t the only part of the picture for cloud gaming.
Michael Hainsworth: Hardcore video game fans all know Razer, but the company that got its start making high-end mice that glow and wireless headsets for smack-talking your buddies is taking aim at cloud gaming. While 5G will usher in an era where gameplay can take place anywhere at any time, thanks to its ultra low latency, a super-fast network connection means nothing if the hardware lags. And lag is something gamers will not abide. Futurithmic sat down with Razer's head of mobile gaming, Jason Schwartz, and question one was, why get into the cloud in the first place?
Jason Schwartz: Most of the people that are out there today and that started from within our core audience, back to the mice and keyboard, are people who played PC and console. That was the traditional method of people gaming. However, you know, you look at the people in those core, they have been playing this through high school, through college, into their early career and now they're starting to get busy with their work, getting deeper into their careers. They are having families, they have spouses, they have kids. So the time they had to play games was really shrinking down and they used to be able to go and play a four or five-hour gaming session. However, now if you try to go and tell your spouse, "Hey, why don't you go cook dinner and take care of the kids for me while I go play some Overwatch," that doesn't really go over very well. So there is this need now for people to be able to play when they want to play, wherever they are and for a shorter period of time because the pressures on them are too great. So, that was really where the beginning of trying to go to our core base and look at where they will be playing games in the future and try to develop something that enables them to bridge from where they are to where the industry is going.
MH: So does that suggest cloud gaming is largely a casual gaming experience? This is a demographics shift. We're getting older, we don't have as much time, and therefore, this is the future of gaming.
JS: No, actually what it is is, I mean, part of that will be there of course. Your casual gaming elements that are there, but, really what is happening is it's a transition from AAA, the core torque titles like the Fortnites, the PUBGs, Call of Duties, and having those transition into a mobile environment. So it enables you to take that same gameplay that you find within the console or PC world and starting that transition over to the mobile or the cloud gaming aspect of it.
MH: So with IHS market research believing that dedicated gaming hardware isn't going to die anytime soon, this must bode very well for your cloud-specific hardware you're working on.
JS: Yeah, absolutely. And what's interesting about this is we’re growing beyond just where our core base used to be. Because one of the things about cloud gaming is that the processing speed is done in the cloud. You don't necessarily have to have the latest iPhone, the latest Samsung device in order to play these titles. Cloud allows you to have any Android device or any iPhone device that's out there. So this is really opening up a whole new market, which is mostly second world countries where it's a mobile-first society, in which you have a population that really skipped the landline aspect and went straight to mobile devices. So a very large portion of them have some of the entry-level Android phones. And what this is gonna allow them to do is, as cloud gaming is coming to their regions, they're gonna be able to have the same titles that people do in the US or UK or Japan or wherever it might be. But have them access like a Netflix library of games, and they can go and play that just like you would on a console back home.
You don't necessarily have to have the latest iPhone, the latest Samsung device in order to play these titles.
MH: So then what does your hardware look like if the focus is on the iPhone or the Android-based device as the primary method of consuming gaming content?
JS: We have built up an infrastructure that really enables this ecosystem that's being developed. We have created a few different lines. One is our controllers. What we want to be able to do is take that console-type experience, with the input device being a controller and attach that to a device. We came out with the Razer Kishi, which we announced at CES, and actually won Best in Show for Gaming, along with a few other awards. And it's a universal adapter, we have two versions of it. One is an iOS, one is an Android version and they both work with any Android or iOS phone that's out there. So, you're able to buy this one controller, plug it into almost any Android device out there, and have a very similar console-type experience. So even if you've grown up in that environment, it replicates to a very large degree of what you're used to. And if you haven't had it before, it just really enhances your gameplay in general.
MH: So these are accessories that would be used in conjunction with an existing product. You're not building your own console as it were.
JS: No, and what's interesting about cloud and 5G is that the need for console down the road, isn't there as much as it is today. So right now it's a cross-play in which, when Project xCloud comes out, for example, you're gonna be able to be in the middle of a session at home, the way you would today. Press pause, grab your phone, grab your keys, you walk out the door and then go ahead and attach your controller. Press play and continue where you were before, which is truly a revolutionary way of gaming compared to how you must be in a certain place in order to play wherever your console is set up.
MH: So then what's the secret sauce? Because that sounds very much like what Google Stadia attempted to accomplish back in 2019 when it launched but because of lag and things of that nature, it didn't get the critical, positive reception it was looking for. How do you avoid that?
JS: Yeah, it's actually really good question. I think that is what every cloud gaming platform is asking themselves today as well. And that third ingredient is 5G. What 5G enables you to do is really have the, have speeds up to 10 gbs per second, which is just absolutely mind-blowing. And it enables you to have very low latency, better speeds than what you have at home (broadband for most people out there). It enables that gameplay to be wherever it is, and the other aspect of it -- what we're developing is ultra-low latency input devices. So whether it's our Kishi controller, which is down to almost a zero latency, or we came out with a pair of true wireless earbuds that have a gaming mode that brings latency down to 60 milliseconds, which is by far the lowest out there in the market today. The next closest right now is about 120. And that's what I meant by, we're creating an infrastructure to enable this. Cloud gaming and mobile gaming is only as good as the latency that is adapted to it. So creating this environment enables it to drive latency down to near zero or as close to zero as you can, helps you get that same experience you have on PC and console at home.
MH: So that puts a lot of pressure on you as a hardware developer because to your point about latency, if the network infrastructure is so focused on squeezing every millisecond possible out of that network to get that data to the user as quickly as possible, the last thing that user needs is their hardware acting as the bottleneck during the Pew, Pew, Pew.
JS: Yes, and that's a great way to express it. I think for those who don't game, the easiest comparison is if you're watching a video and the lips are moving at a different rate in which you're hearing it. It's unbelievably annoying to watch a movie that way or, YouTube video or whatever it might be. But to play a game is even worse. Because that could be the end of the game where you get killed because you don't hear the action that's happening in time. So that is what our focus is on and really what we're going to market with, which is the first mobile gaming platform that's out there. If you go into any, you know, any carrier or any store today, you're not gonna find a mobile gaming section. That's what we're trying to create here. And the number one aspect of that is latency. If you just take most of the product that's out there in the market today and start playing a native mobile game or you play a cloud gaming section, you're going to have a lag that's gonna interfere and reduce the quality of gameplay compared to what your able to play at home.
When you innovate and there isn't a customer demand, you get the segway. It was a very innovative device, but consumer adoption rate just wasn't there.
MH: You know having said all this, your point that there's a tremendous growth opportunity in markets that skip the landline, those developing markets primarily. I suspect you're talking in the Middle East through into parts of Asia, down into Africa as well. What's the growth trajectory look like though? Because while those parts of the world did skip the landline world, they're still very much in a low cost, low-end smartphone, almost a dumb phone or feature phone type world. How long before they have the 5G infrastructure necessary to fully take advantage of a Call of Duty experience on a mobile device.
JS: Yeah, great question again. Well, I'll give you an example of how we tested a few of the products that are out there today at CES. So we were in a hotel room using the hotel WiFi.
MH: Oh, there's your first mistake.
JS: Yes, and you would think this is a recipe for disaster. I actually found out after the fact. I think I would have said don't do it. But one of my teammates was showing Project xCloud and streaming Stadia on the WiFi and it played beautifully. And on the show floor, we were streaming NVIDIA GeForce now live and it was playing flawlessly. So the developers have enabled it to work well on a regular WiFi, but obviously 5G is going to extend that well beyond.
And so, part of the plan for global expansion is to go into these Southeast Asian regions where mobile gaming is already big. You know, in a lot of these countries, people aren't gonna pay $400 for a console. They're not gonna go and build a $3,000 computer, buy a $2,000 gaming laptop. They just don't have the disposable income to spend on that, but they are big in mobile gaming.
I think it's gonna be a slower growth trajectory than we're gonna have here because obviously, in the US, we have the ability to get bandwidth very easily compared to others. However, this is good. This is a major focus and a great area of growth. And as for talking to our retailing and carrier partners in these regions, they're really excited about this because this is one of the first times that a gaming launch is going to have a focus in these areas versus when you know, Microsoft and Sony launch, a lot of these countries aren't at the top of mind when they're coming out with their consoles.
MH: I'd love to just go back for a moment to talk a bit about the hardware developments because I'm amused that one of the promoted features will be that the software will talk to your Chroma RGB lighting hardware that's built into your devices and accessories. So does that mean that when my character's life force starts to drain my Razer mouse will go from glowing green to glowing red? You know, how important are those little tricks like that to attracting that diehard gaming fan who now has a family and obligations?
JS: It depends on the gamer. A lot of people love the immersive experience. One of the things that we are working on for all of our cloud gaming initiatives as well, which was already there for PC and console, is to enable this into it. So, as you're having a gaming session, if you're lucky enough to be able to make a gaming room, fill it up with Razer peripherals, Phillips Hue light bulbs, and you can program this how you want, but as you're getting shot at from the right, the right side of everything lights up. As it's coming from behind, you get the red lights from behind. If you jump into the water, it turns blue. So we're trying to create a fully immersive gaming experience on whatever platform that you're playing on. My focus is getting this in cloud and mobile, but we've been doing this for a while within PC as well.
MH: You saw a 26 percent jump in hardware revenue, and I guess that makes up most of your bottom line, and software growth up 40 percent year-on-year. At least, those are the results that have been reported so far. But the real growth appears to be in services, up 111 percent. Is that the cloud gaming area that's going to see continued triple-digit growth rates?
JS: Not yet, that's referring more to our financial services and other areas. So, I believe you're gonna see a very big jump in that. But really we're just launching this year. So, CES was our coming-out party. That was the first time that really the world has seen the full portfolio. We had launched our Hammerhead True Wireless, our line of phone cooling cases towards the end of last year. But at CES was the first time people got to see our 5G Sila concept router, our controller or audio, our cases, really the whole ecosystem that exists. But we'll be seeing the second half where we're really starting to see the impact of this.
MH: So what's the metric for success for cloud gaming?
JS: I think it's adoption. If you look at most of the evolutions that you see in any industry. This is what we really ended up that attracted me to come here to do this. The evolution is the ability to have innovation that has demand behind it. Because when you innovate and there isn't a customer demand, you get the segway. You know, it was a very innovative device, but consumer adoption rate just wasn't there.
I think right now you have all the elements of the demand that was out there. You have the core gamer who doesn't have as much time and is looking to be able to have the flexibility to play wherever they are, in spite of their business. They wanna be able to play on the road well, which 5G will enable in a hotel room. You have the early Gen Z who is a mobile-first customer. They just grew up with it because people like myself, when my kid was upset, I'd give him my phone or my iPad and say go play and leave me alone.
You have the people in Southeast Asia and other places that are a mobile-first society. So all of this demand is out there. Before we even began on the journey of having gaming come to mobile, you saw that the demand existed. Then you have direct and mobile content. You have your Fortnite, your PUBG mobile, Call of Duty mobile, Free Fire and a whole host of new ones like League of Legends coming out this year that have taken a portion of that. Cloud gaming really is the tipping point. That's where you have a Netflix-type library available for almost any game that can be on any device.
So now you have an evolution and you have innovation, with existing demand that's out there. I think when you see that full adoption and people start looking at mobile as the first option for gaming versus I'll do it when I have nothing else to do. I'm waiting for something. I think that's when you see the success of it.
MH: When is full adoption because the cloud gaming market's expected to hit two and a half billion within the next three years. But even that is only 2 percent of the global gaming business and that's three years out or so. You know, where are we 10 years out? What is full adoption to you?
JS: I think the mixture of cloud gaming and 5G will make a console not really necessary. Why would you need a plastic box? You'll have the same titles that are gonna be available in the cloud. You'll be able to have the peripheral setup because companies like Razer will help build that out to enable you to have the input devices that you need. You'll be able to play the same games, at the same speed, with the same latency no matter where you are. I think it's when you people stop playing their core (PC or console) and just go to cloud or just go to mobile and just skip that whole middle part. I think that's when you see the evolution and the tipping point finalized.
I think the mixture of cloud gaming and 5G will make a console not really necessary. Why would you need a plastic box?
MH: How long before we see a day where gaming is platform agnostic and Edge Cloud-driven.
JS: We're a few years away from that still. We're still at the very top of the funnel. People just need to be aware. Part of what we're working with retailers and carriers now is just the education of, what is cloud gaming and mobile gaming? Most people think of it as Candy Crush or Solitaire. They don't understand the true availability of great content that is really gonna be enabled through different devices that are out there. I think the platform-agnostic is, I would say at least three years away. I don’t think Sony and Microsoft would be launching their new set of the console this year if they didn't feel they had at least a five to six-year runway. So I think we're looking at the tail end of the useful life of the new consoles that are launching this year. Probably about five years down the road I would assume.
MH: Tencent isn't really known as a cloud gaming company. Why team up with them?
JS: They are not a cloud gaming company. However, they make a tremendous amount of the titles that are out there and they are also working on a cloud gaming infrastructure in the background. So we're working with them on helping build out basically what is the best cloud gaming platform and what is the best way to bring it to the customer base. We're doing that in conjunction with the 5G cloud gaming trial.
We're doing it in Singapore as well, testing out different materials and different methods of getting 5G technology to permeate better through plastic, through walls. You've had some podcasts on in the past that talk about the difficulty of millimeter-wave and how it is to make it as a widely used technology just due to some of the limitations on how the bandwidth travels through different products. We're trying to do this all together so that as we're developing our peripherals, we have a great understanding of what the great aspects and the limitations are of 5G and how do we make a product that's gonna help enable that as well as enable the cloud gaming platforms as well.
MH: Hang on, back up. Are you telling me that you need to be concerned about the thickness of the plastic in your peripherals when it comes to 5G millimeter wave transmissions?
JS: For things like our router, yes.
JS: The 5G router that we showed the concept of at CES, and we're currently working on it in conjunction with the Singaporean government, through their grant. The thickness of it, the type of plastic all impacts, and actually even the case you've put on your 5G phone for example, what that plastic is made of will determine how well your signal is received. It's a very finicky process right now.
MH: So tell me more about some of the early lessons that you're learning through 5G cloud gaming and this test you've got in Singapore.
JS: Tthe number one lesson is it's not easy. Even thicknesses of a few millimeters, we're seeing a very drastic decrease in signal strength. So we've actually found the optimal thickness, through just trying a whole slew of different materials, and also the thickness of those. But we just found it's not as easy as one would think. A lot of people think hey, you just grab a phone, plug in, or take a router or plug it in and you got this 10 gbs per second speed. That's really not the case. There are two bands that are with a sub-6, which is an easier one to do when you can get very good speed on it. And there's the one that everybody is out there and putting commercials out, which is millimeter-wave which has that theoretical maximum of 10 gigs per second. That is very hard to harness. It's very, it's easy to do in an enclosed environment, but once you're trying to do it within a building or within your home where there are walls blocking it, it becomes much more difficult. So I think it's, you know, we're still a little bit, a little ways off of perfecting it right now.
MH: What made Singapore the testbed for this?
JS: We're co-headquartered there. One of our headquarters is in Singapore, the other is in Irvine, California. So the government would like Singapore to be one of the first adopters of cloud gaming and really pushing 5G, so they look to different partners that are in the region to help. So Singtel, which is the largest carrier there and ourselves have received this grant to work together on it.
MH: How necessary is government involvement in promoting 5G through I suppose either through grants or tax incentives, things of that nature. How important is it to have the government involved in the rollout of 5G generally?
JS: I think it depends on which government it is and where they are or is this from a smaller country. So I think it would be difficult for any of the existing carriers to be able to fully fund it on their own 'cause it is a very expensive process to go through.
In the US, we have three very large carriers with plenty of cash to be able to do it. So I think, within certain regions if they want to go to market early, early adoption is more expensive. You wait until things have been matured and lessons learned have been done already. You can take what was already done and replicate it. But if you wanna be one of the first to market with an initiative, you need to have a lot of cash to be able to do it. And, a government like Singapore wants to have the country be at the forefront of this evolution. So they're gonna do, they need to support it in some way, shape or form.
MH: With that said and done, particularly in light of our discussion about how there are parts of the world that skipped the landline and jumped straight to mobile and that those are developing economies and some of them are emerging economies. Where do you see 5G truly taking hold first? Is it a Western world phenomenon or an Eastern world thing first?
JS: I think it's Western first. I mean, you look at who was the furthest ahead, it's mostly US-based carriers, the Verizons the T-Mobiles, the AT&Ts of the world. Mostly in Western Europe as well, and you have Japan which is pushing on. But it will be everywhere, it's just taking a little bit more time. Most countries that are in the second tier from a GDP standpoint, you're looking at early next year where they'll start pushing forward versus the Western side, where they’re really pushing forth towards the second half of this year.
MH: And what do you make of the concerns that consumers have when they hear about 10 gigabit per second speeds? The first comment I always get is wow, there goes my data cap. Is this a hurdle as you see it within the video game consumer when it comes to 5G? Are they going to be looking at their data limits and going, " oh, well I guess I'm not playing Call of Duty "on my way into work."
JS: That's actually a great question to ask. I can't tell the carriers what to do, but 5G plans are going to have to come with either an extremely high cap or unlimited data because you're gonna be able to download so much more, so much faster that it's gonna be very hard to control it. We're working with quite a few carriers globally and we're looking at doing different bundles together with 5G. You know, our devices are partnering with different cloud gaming companies and a lot of, and what we've been discussing, a lot of these don't have a cap on it because if you look at who's the early adopter of 5G, it's gonna be gamers, that's the number one That's the #1 consumer that they're all trying to target because they realize who else needs this speed.
You know, you don't necessarily need to go to your favorite news site and pull up an article faster than you are today. However, if you do wanna play Fortnite or PUBG or Call of Duty mobile and you do need that to be fast, but in order to do that and in order to make the adoption really happen, you can't make it punitive. If they're playing a lot of games, so you want to enable long gameplay. So to do that, the data plan's gonna have to go along with it.
MH: That's a fascinating point. Big picture, this for me then, 'cause it would suggest that you know, to your point that you know, how much faster and how much better is Facebook really going to be on 5G? What's the killer app? If the killer app is gaming, what does that adoption rate look like to you? Because I know I can't convince my wife to adopt a 5G gaming platform because she's only interested in Angry Birds.
JS: Yeah, that's true. I think you're gonna see early adoption and for gamers, happen fast and there are a lot more gamers than people realize. You're looking at over 2 billion people consider themselves gamers. Now part of those are the Angry Birds, the Candy Crush. But there is a very large and growing population of people who are core and mid-core gamers who would be willing to do this.
As long as the enticement to get them to change over into a 5G structure is there, both in their mobile device and at home, I think you're going to be able to get that early adoption rate, which enables them to keep building it. And then it's gonna drop like with anything. It's gonna drop to a price point that would start pulling over others who just wanna be able to stream Netflix or Hulu a little bit faster on their phone when they're on the go. But I don't think that's going to pull the initial crowd in I do think it's the gaming crowd that is gonna start off.
MH: So while you have this relationship with Tencent, and a lot of that has to do with the fact that they've got the gaming library already, why not go it alone? If 5G supports network slicing to create high speed, low latency private networks that help with things like customer retention and benefits like that. Why not just start up Razer mobile and start your own online gaming service? With your own dedicated branding to that and pull in the extra revenue? And I can imagine the profit that comes with a high margin business like that.
JS: You know, Michael, that's not a terrible idea. but really we wanna focus on our core. Our core is enabling and enhancing the gameplay of others and being a platform-agnostic company. People like Tencent do it better than we do. Sure, we could, we could even go off and buy a developer, however, we prefer them to do what they're good at and work with the carriers: the Verizons, the T-Mobiles, AT&Ts of the world, EEs all those guys, you know, and let them focus on what they're good at. And for us to be in the middle and to be able to work together with all of them.
We see ourselves at the center and being able to make what they do better, and helping enable it. So we partner with all of them. We could go on and make a cloud gaming system, but you know, Google, NVIDIA, Microsoft, they're doing a heck of a lot better than we could ever do. But what we can do, is create peripherals and input devices and different aspects of it that will help build up an ecosystem that makes what they've already done, even better. And that's what our core is.