The Gaming Industry — What Now and What Next…
A look at the gaming industry and its various stakeholders, how they’ve fared under the pandemic and what to look out for in the future.
I’m no gamer, no not at all! I’m blissfully oblivious to the entire gaming universe. My tryst with gaming was limited to the AddictingGames and Miniclip websites, where I would spend hours (note, two hours tops a day) playing Fireboy & Watergirl, Anagram Magic and Plants vs Zombies. That was seven years ago, and I haven’t played anything since. But I’ve not been incognizant of the prodigious growth of the gaming industry. Related secondary industries have also been witnessing significant gains. Fortnite, PUBG, COD, DOTA, CS: GO and League of Legends are some prominent names in the (gaming) world.
The pandemic has further propelled the industry into a supercharged growth phase, with the number of users skyrocketing. Gaming as a profession is now official, with streamers live-streaming their games for hours every day, interacting with viewers and gamers primarily getting paid to participate in major esports leagues. Albeit, the two roles do have numerous overlaps. The enormity of this struck me while watching popular talk shows featuring Tyler ‘Ninja’ Blevins, one of the biggest names in the game streaming world.
Esports, which refers to organised multiplayer video-game competitions, is rapidly gaining traction and gaming leagues are now major worldwide events. Last year, 16-year-old Kyle ‘Bugha’ Giersdorf became the first Fortnite World Cup champion, pocketing a $3mn prize cheque.
These developments surely offer multiple opportunities to the various stakeholders involved in the gaming industry.
Game Development Companies and Developers
The current environment is highly conducive to the industry and game development companies can surely cash in on the gains. With more players actively using their games since the lockdown, these companies can see an uptick in revenues and sales.
Monthly Number of Peak Concurrent CG: GO Players on Steam, Worldwide
The game development software market is projected to grow by $53.53mn during 2020–2024, progressing at a CAGR of over 4% during the forecast period according to Technavio. However, the market is fragmented with several names commanding sizeable gamer followings. Audiokinetic, Autodesk, Epic Games (which offers Fortnite), Microsoft, NVIDIA, Playtech, Scirra, The Game Creators, Unity Technologies, and ZeniMax Media are some of the major players in the game development industry, and each one must innovate consistently to retain and grow their chunk of the burgeoning gaming pie.
The gaming industry has evolved quite a bit from its initial days and business models have changed. In the past, up-front payment for the purchase of games dominated the revenue stream. Now, users purchase fewer games than before and spend more time with each one. Numerous games are free to purchase and in-game purchases and upgrades comprise the dominant recurring revenue stream. Game developers and companies are hence increasingly focused on user interaction, delivering constant upgrades and ensuring high retention rates among players. The future would see technologies like cloud, 5G, AR and VR powering games, enhancing user experience and augmenting existing features. Game developers, multi-media designers, product analysts and game technologists are in high demand.
However, there is a dark side to this need for constant innovation, the necessity to consistently monitor and respond to the shifting pulse of gamers. The looming pressure to keep games relevant has eventuated in a toxic, crunch environment for game developers. Multiple employees have also called out sexist work atmospheres and the persistent ‘Bro culture’. Patriot Act’s ‘The Dark Side of the Video Game Industry’ discusses this topic in great detail.
Companies should focus on making their environments more conducive to all sections of developers and improve diversity. They must ensure a healthier work environment for their employees while pursuing innovation and growth. Also, with mobile gaming seeing growth, developers can look into smartphone-compatible games. With PUBG coming under the scanner in India, there is scope for Indian developers to capture market share here.
Gamers and Streamers
For those looking to go professional with gaming or seeking to enter the streaming world, the environment couldn’t be more promotive. Professional gaming has been making its way into the mainstream for quite some time now. A lot of professional gamers and streamers are raking in cash via sponsorships from big brands like Red Bull, Alienware and Intel, donations from fans, massive social media followings, streaming subscribers and esports tournament wins.
Covid-19 has accelerated the trend. The number of new gamers and streamers has risen and viewership has grown. There has also been a surge in the number of female gamers and streamers. The female video gaming community grew by 19% last year in key markets like China, Japan and India, according to Google.
However, one lingering doubt pertains to whether this overall growth trajectory is here to stay, given the eventual removal of lockdown and the return to usual work schedules. But with a massive entry of first-time gamers into the foray, the overall gaming hours and gamer base seems solid.
Professional gamers can tap into the increasing interest from novices and look at coaching them, offer tips and recommend appropriate gaming devices. There are numerous revenue opportunities in this area.
Streaming Channels
Well, naturally, with gamers spending a lot of time playing and watching gaming live-streams, the streaming market is also set for growth. Game streaming is a relatively new concept but is being adopted rapidly. Twitch, Youtube Gaming and Facebook Gaming are standard avenues streamers turn to and they have witnessed a spike in viewership and streaming hours. However, Mixer, Microsoft’s streaming platform, is shutting down due to its inability to scale up enough to compete with bigger players. Its existing user base would be transferred to Facebook Gaming.
Indian streaming channels like RheoTV, Rooter and Loco are also seeing an increased user rate, buoyed by the lockdowns and the shift towards Indian apps and platforms.
While there is huge scope to ramp up advertising revenue, caution is needed to prevent disruption of user experience. Increasing focus on debutante streamers, enhancing the user interface and adding more incentives to remain on their channel can aid in increasing market share.
Gaming Hardware Market Players
A lot of gamers would be looking to upgrade their existing products while new gamers would seek to build up their hardware kit. Accordingly, purchase intent for Nintendo, Sony and Xbox consoles shot up incredibly under lockdown.
Market players are developing devices that would further enhance the gaming experience. Sony’s Playstation 5 and Microsoft’s X-Box Series X is slated to launch this year, Apple is working on an AR/VR headset that can support gaming, PC makers are bringing out gaming PCs (HP is looking to add more products to its OMEN and Pavilion gaming laptop series) and accessory manufacturers are adding to their product suite (Logitech recently launched its G502 wireless gaming mouse). Nowadays, high-quality gaming is easily accessible across a range of devices, including mobile phones. Akshat Rathee, founder and managing director of the Gurugram-based esports company NODWIN Gaming, describes the spectrum of options concisely. ‘Think of PC gaming as Test match cricket, it had a certain set of people who played it and watched it. Then came One Day cricket — console gaming. Mobile gaming is pretty much like Twenty20.’
Demand is also up for ancillary devices like studio-quality microphones, headphones and cameras to facilitate live streaming. Usually a staple for high-end gamers and streamers, they are now making their way into the mass gaming market.
While long-term growth does seem probable considering overall industry growth and the increasing awareness about professional gaming, one again needs to consider factors like removal of lockdown and the growing smartphone gaming culture which can potentially check the current demand uptick for consoles and gaming PCs amongst casual gamers. Nevertheless, John Peddie Research has forecasted growth over five years for the PC gaming hardware market, which is set to witness a sequential increase in sales by 10.3% in 2020 from last year.
More compact and user-friendly devices, smartphones better suited for gaming, lower-priced gaming products for beginners, accessories with high-speed response are all potential areas of focus.
Esports
One cannot discuss the gaming industry without considering esports. Generating massive revenues from ticket sales, advertising and endorsements, live and remote viewership and merchandise sales, an esports league is fundamentally not too different from an IPL. Esports was also introduced as a demonstration event in the 2018 Asian Games and as a medal-event in the South East Asian Games 2019. Global esports revenue for 2020 is expected to reach $1.05bn according to Newzoo. Currently, due to the pandemic, major leagues including CS: GO Pro League and League of Legends Championship Series are being conducted in an online mode, resulting in some revenue declines. However, online viewership has increased, with people having more free time to watch. This rising awareness and addition of new fans will be beneficial in the long term. A lot of innovative means of monitoring remote matches for fair play have also been introduced.
The Future
With esports leagues and gaming careers entering the mainstream, future opportunities abound. A future where parents drop their kids off to esports coaching centres and where gaming is included in major world sports events like the Olympics is highly plausible. Given the current environment around gaming and the possible structural changes the pandemic would eventuate, such a future doesn’t seem too far-fetched.
