Updated: Nov 29, 2019
Recently, I had the opportunity to be in Finland to attend Nokia’s Global Analyst Forum. For those interested, my reflections on that event can be viewed here. As it turns out, the analyst event was being held in Helsinki the same week as the Slush conference. For those not yet in the know, Slush is one of the hottest events for tech start-ups, with over 20,000 attendees in 2018. This year’s event was slated to be even bigger but sadly, I could not attend. Instead, with the benefit of having a half-day before my return flight home, I trudged happily around chilly, windswept Helsinki to meet two Finnish companies, Hatch and Varjo, that are making a big mark in their respective areas. These companies are just two examples of what is rapidly shaping up to be an impressive tech ecosystem in Finland. A good number of these companies have roots in and linkages back to Nokia’s heady days as the leading global phone manufacturer. The demise of that avatar of Nokia led to many new start-ups being created from the flotsam and jetsam that accompanied its end, boosting an already burgeoning tech ecosystem.
In this note, I will attempt to unpack what I learned about Hatch. Varjo will be covered in a follow-up piece. That said, it is important to give some context first. For those familiar with the inner workings of the analyst community, we are all too often associated with our coverage areas. The expectation is for the analyst to have deep expertise in the stated coverage area and in theory, a coverage area can work both as a shield and a platform. However, there are occasions when it can be constraining. The pace of technological innovation is accelerating, lines are getting blurred, companies getting constantly disrupted and new business models are the norm, not the exception. Ideally, the analyst can not only stay on top of developments in their respective coverage areas but also keep abreast of developments in adjacent segments with a view to connecting the dots. In my case, I was in search of how the fast-accelerating deployment of 5G would benefit from emerging technologies like AR/VR, cloud gaming and other areas. Put another way, I was on the hunt for viable use cases for 5G, both for the consumer and enterprise segments.
I had the opportunity to catch up with Vesa Jutila, Chief Commercial Officer and one of the company’s co-founders in Helsinki. Hatch was spun out from Rovio, the Finnish gaming powerhouse best known as the creators of the Angry Birds franchise, in 2016. The vision was to launch a subscription-based service with games being “streamed” down to the user’s device as opposed to the default app store download model that is still the norm today for most mobile gamers. The “Netflix” or “Spotify” of cloud gaming! While cloud gaming received a big boost and mindshare after Google’s launch of its Stadia service, it is worthwhile noting that the original proponent of this model was Hatch. Has the first-mover advantage afforded it serious advantages relative to the emerging competition? More on that later.
The Hatch Offering
Hatch is available on your smartphone as an app, currently from the Google Play app store. The freemium model has a base level offering that is ad-supported and a premium subscription level that offers significant benefits in the form of over 100 premium games, the ability to cast to TV, the Hatch Kids app and more. Most importantly, the premium level is ad-free. Hatch has over 150 games already live on the platform, with that number potentially rising to 350 plus with content deals already closed with developers and studios. Hatch offers leaderboards, multiplayer gaming and enables several social features to keep users engaged and build a community. Hatch is also enabling eSports with the launch of multiplayer Hatch League gaming.
One of the most impressive elements of the Hatch proposition is the rapid traction that the platform has already received from game developers and studios. But they have gone well beyond in their efforts to grow an ecosystem with go to market deals with channel partners. These channel partners include device manufacturers as well as communication service providers (CSPs).
CSPs — Hatch has signed agreements with major CSPs like NTT DoCoMo, Vodafone and Sprint and others that are not yet public. Vodafone has launched Hatch in Italy, UK, Germany, and Spain.
Device Manufacturers — Hatch also has partnered with device manufacturers like Samsung and OnePlus. With Samsung, the Hatch app is pre-loaded on the Galaxy S10 devices. The Hatch partnership with Samsung is quite deep with pop-up stalls for Hatch services in more than 4000 stores in Korea. The collaboration has now been expanded to stores in Europe as well.
Developers and studios — Hatch offers games from several major game studios including Rovio, Sega, GungHo and others as well as several original games like Arkanoid. With the launch of the Hatch Kids app, the company also boasts games of the caliber of Toca Kitchen amongst others.
The secret sauce
Cloud gaming is not unique to Hatch. In the PC gaming world, PlayStation Now has been around for nearly seven years and there are other offerings like Steam and the more recently launched Stadia. So, what then is the secret sauce for Hatch? Well, unlike their PC gaming counterparts, Hatch has been developed for the mobile device with a proprietary technology that is optimized for streaming over the mobile network. In effect, the game is processed in the cloud but with a key difference. The game logic and rendering commands are processed on the Hatch stack in the cloud but the actual rendering happens on the user’s device where it is processed by the on-device GPU. Any smartphone with a capable GPU can process the graphics and renders locally on the device. The more premium the device, the better the quality of the graphics. The big advantage of this approach is that it greatly reduces the bandwidth requirements for streaming over the network as well as the latency over the network. On average, the Hatch app consumes only about 1.5 Mbps in the stream and boasts a latency of well below 50 milliseconds over LTE.
This approach stands differentiated against the PC gaming players who are essentially “streaming” a video feed of a game being played in the cloud. The challenge with that approach is that it consumes a lot of bandwidth. Google’s Stadia, for example, required a minimum of 30 Mbps for a quality gaming experience. This is challenging, as most broadband users around the world do not have an average throughput of 30 Mbps, regardless of the advertised peak speeds. Even in scenarios where bandwidth has not been an issue, the Stadia service has faced several challenges that have been well documented at launch.
The other major difference stems from the hardware approach. With services like Stadia and PlayStation Now, the device, whether it’s a PC, tablet or game controller hooked up to a TV, will need to connect to the public cloud that the game is being played on. In the case of Stadia, this would be the Google Cloud Platform, or in the case of PlayStation Now, it would be Microsoft Azure (post a recent deal). Hatch, on the other hand, uses bare metal servers with datacenter partners like Packet.Net or AWS in some cases where they are given access to bare metal servers. As a result, Hatch can avoid the added cost of specialized gaming hardware in the cloud. Finally, Hatch can deliver games to the user’s device with very low latency unlike services like Stadia which will need to create an entire workflow for coding and decoding the video streams and would also need a CDN.
How does this relate to the world of Telcos?
Hopefully, this was a good overview of Hatch and what they have been up to. But what was the key takeaway for me as a telecoms analyst? Simply, cloud gaming is a critical use case for telcos, especially those deploying or planning to deploy 5G networks. Technically speaking, Hatch works just fine with currently deployed 4G LTE networks as well. However, 5G will greatly boost the latency and introduce real-time responsiveness to the gamer. While all of Hatch’s current crop of CSP partners are mobile network operators, Hatch can also have a play in the home broadband space. Several 5G providers have either launched or are planning to launch broadband to the home using a Fixed Wireless Access (FWA) CPE instead of fiber. FWA brings several advantages, notably cost but also in terms of latency. I came away from the meeting thinking of a few options for a CSP that could drive new revenues and enhance the proposition.
One, offering Hatch should be positioned as a premium service.
Two, bundling FWA with cloud gaming services like Hatch would potentially be a big draw for the consumer segment.
Lastly, in markets without robust transport networks, Hatch datacenters can be deployed in a country to match up to a particular CSP’s coverage areas and the CSP can route the traffic through their own network as opposed to having the traffic traverse the public Internet. Effectively, become a CDN in order to reduce latency for the service.