An article is authored by Salone Sehgal, General Partner at Lumikai
We are living through unprecedented times. The world as we know has been profoundly altered. Some sectors have been hit hard (hospitality, retail, aviation etc) and some have been indirect beneficiaries (remote working tools, digital media, mobile gaming). As we go through this turbulence, I do a deep dive to see the impact on the gaming industry.
Global Gaming is a $149 billion industry, with mobile gaming accounting for 46 per cent of revenues i.e. $68 billion (growing at nearly 9 per cent), expected to achieve $180 billion by 2021. 2.2 billion gamers across the world mean that the business of fun is serious business.
Typically, gaming as a sector is more resilient than other tech sectors in down cycles. In 2008, a Nielsen study revealed that players devoted 1-2 hours of additional gameplay, corresponding with a secular rise in average minutes/month played in 2008 continuing through Q1 2009. When console sales declined, gamers migrated to mobile, web-based or second-hand games. Real annual economic growth among game makers topped 10 per cent between 2005-2009 even as economies contracted.
In times of stress and forced solitude, the immersive and social nature of games can bring people together like no other medium can. Last week, Verizon reported that videogame usage in the US was up 75 per cent in comparison to video streaming which increased by 12 per cent (while overall web traffic was up nearly 20 per cent and social media usage remained largely flat). A week back, Steam hit its all-time concurrent user peak of 20 million users. In China, average weekly downloads of apps/games during the first two weeks of February jumped 40 per cent compared with the average for the whole of 2019. Revenues followed a similar trajectory. Daily usage of games increased by 40 per cent to 159 minutes. Report says Honor of Kings achieved a new record of 150M DAUs; other titles like Peacekeeper Elite achieved 100M DAU’s. Certain genres i.e. card games, board games, female-focused content also did particularly well.
Given that games deliver a higher value to price proposition there is an increasing desire to get more value out of games often at the cost of costlier forms of entertainment. As discretionary expenditure on vacations/dining out/events etc wanes those freed up consumer dollars divert to gaming. However, as the inevitable unemployment events take place, certain demographics of gamers will cut back on playing and spending. The substitution effect above will tend to offset any direct demand destruction.
On the e-sports side, conspicuous lack of sports competitions will drive enthusiasts to virtual sporting events. ESL Pro League reported a 27 per cent year over year increase in online viewership with its Counter-Strike: Global Offensive March 16 event. However, actual e-sports tournaments/ticket sales will take a hit with cancellations.
In India, gaming is witnessing a similar boost. Time spent and mobile game downloads both increased by 20-30 per cent, over a time span of a week across the board for companies like Adda52, WinZO, Games 24*7, Gametion and many others. However, fantasy games will be impacted due to the eventual cancellation of IPL/sports matches and have to experiment with content, resort to daily rewards and other give-aways to retain users. As anxiety, stress, boredom and desire for stimulation all trigger, it will result in an increase in wagering/lottery style real money games. Cost of user acquisition will go down as ad inventory frees but conversely ad-based business models will be impacted as brands pull back. Games streaming and influencers will see a surge in popularity. In a milestone event, two home-grown streamers, CarryMinati and Mortal attracted 200,000 concurrent users on a live stream last week.
On the flip side, global supply chain disruptions will impact console sales/peripherals given that China is a major supplier. Expect wider disruption in manufacturing and sales of smartphones particularly as factory units shut down. Delays in the release of next-generation consoles will adversely impact console studios in the mid-term. AAA updates and new game releases will be pushed back. Live operations for mobile games due to remote working could be a challenge if the current period of lock-down extends further. Cancellation of GDC/E3 events will hurt small indies hoping for product launches.
While an extended period of social distancing could result in lost productivity games companies are far better prepared than other entertainment industries (TV studios/content producers etc) on building products with remote teams. Glu Mobile recently launched Disney Sorcerers Arena in the midst of remote working without disruption.
There is no doubt that Covid-19 will have far-reaching consequences. However, as we seek to soothe frayed nerves, a little escapism, frivolity and seeking alternate realities where you have some control won’t be a bad thing.
(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)
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