The Covid-19 lockdown has boosted user engagement with video games and e-sports, with increased revenues for several gaming companies and platforms during the pandemic.
By Matthew Hall, product director of Rectron
The global gaming profits far outstrip other entertainment sectors, with its 2020 forecast worth around four times that of box office revenues and almost three times music industry revenues.
Close on half of the industry’s returns now comes from mobile gaming. Gaming revenues are almost entirely driven by consumer spending, but user behaviour has evolved significantly in recent years.
Consumers today buy fewer games than previous decades, but spend more time with those games, shifting income from single-unit purchases to recurring revenue generated from a base of active users.
As a result, the industry is laser-focused on increasing engagement per user. Aside from making video games as compelling as possible, in-game monetisation and downloadable content have become prevalent.
Improvements to gaming hardware, bandwidth and mobile internet have made high-quality games more accessible across devices and platforms. As VR becomes more dominant and triple-A games are ever-more demanding, many people are starting to consider PC gaming as the ideal way to be prepared for all the best games coming out.
First person shooters, strategic storylines and countless titles all benefit from being played on a machine equipped with the power to take on any modern game.
Whether that means buying a pre-built gaming PC or building it, the machine must have the power to take on any modern game without compromise. Must-have specs for a competitive machine in 2020 include the highest graphical capabilities, paired with other high-end components and peripherals.
Where Covid-19 has boosted engagement with video games, it has complicated hardware and software development somewhat. The wider gaming industry has experienced temporary delays in the production of gaming hardware as factories around the world face supply chain interruptions.
Furthermore, some game developers are preparing for a loss in efficiency as more employees work remotely, with a situation of prolonged remote working predicted to impact processes. Others appear to have adapted quickly, still providing regular updates and patches to games.
The borderless nature of gaming is allowing esports to thrive during Covid-19, a sector forecasted to grow to just over $1-billion in 2020.
A separate part of gaming, esports refers to organised, multiplayer video game competitions, with the majority of revenue coming from advertising and broadcasting.
The pandemic has fuelled interest in competitive video games and esports has helped fill the void left by the absence of mainstream sporting events. The growing popularity of esports has been instrumental in driving the growth of the gaming market.
Although relatively small in comparison with the overall gaming market, the activity of watching gaming video streams and video on-demand has become nearly as big as gaming itself.
This said, esports is not immune to Covid-19, with its reliance on live events and has been one of the first parts of the gaming industry to be affected. eSports has been able to continue while traditional sport has not because the playing field is virtual and can be replicated online; however, nothing can truly replace the social richness of the live experience.
Trends for 2021
Looking past the lockdown, there are several takeaways from the recent spike in gaming that indicate future transformations in the industry:
- The greater interest in gaming will accelerate a shift towards the delivery of games via mobile and cloud-based platforms. Increasingly, even blockbuster titles are available on mobile devices. Cloud gaming, meanwhile, enables consumers to play streamed games across devices, often without the need for expensive hardware. Challenges – particularly to bandwidth – remain, but there is great promise.
- There will be a widening of monetisation avenues through subscription and free-to-play models. Subscriptions provide a reliable path to monetisation for smaller, quality games that otherwise lack the marketing to break into the mainstream. Meanwhile, free-to-play games allow developers to monetise without needing to convince consumers to make up-front purchases. Instead, they offer in-game upsell opportunities such as upgrades and expansion packs. Such buffet models may even encourage consumption. With evidence showing that cheaper entertainment tends to prosper during recessions, these low-cost, high-value offerings are a serious way for the gaming industry to expand.
- We will see the gaming industry increase its partnerships with other entertainment sectors. Some video games become so popular that they spill over into cultural discourse, extending its brand to the music, sports, movie, and television industries. Going forward, there will be more partnerships with the wider entertainment industry, as media companies seek to take advantage of the momentum gaming has produced. Big names in the business will create revenue streams by building immersive media teams to work at this intersection of industries, in turn creating opportunities for supporting industries, such as technology companies that supply the infrastructure for such experiences.
- Finally, the pandemic will lead to the normalisation of esports, being popularised and legitimised in an unpredictable and profound way, thanks to its unprecedented (and accidental) adoption by broadcasters, leagues and athletes seeking to engage fans. Among younger demographic groups, a prolonged shutdown for traditional sports leagues will drive more fans to esports on a regular basis – which globally will represent tens of millions of new consumers for the industry.
At the very least, Covid-19 has reminded media companies and brands that an addressable market of highly engaged consumers remains accessible. Market vendors must make the most of these opportunities, by focusing on the growth prospects in the fast-growing segments, while maintaining their positions in the slow-growing segments.
Matthew Hall is the product director at Rectron