Gaming in the era of COVID-19

by on May 22, 2020

COVID-19 lockdowns have led to unprecedented user engagement in video games and esports. Revenues for many platforms and gaming companies have reached an all-time high in this pandemic. Here’s how the pandemic is accelerating existing trends within the gaming industry:

As you may have heard or read, while the rest of the world and economy is reeling under the effects of the lockdowns and shelter-in-place orders, the global gaming industry is thriving. 

The concept of social distancing has resulted in reduced consumer and business activity to a minimum and gaming provides an engaging distraction for people at home looking for a means to connect with the outside world. 

Data shows that there is a huge growth in playing time and sales since the beginning of lockdown.

The gaming business model

According to one estimate, the global video game market is expected to be worth $150 billion in 2020. This is approximately four times the value of box office revenues. Surprisingly, the biggest market by revenue share is the Asia Pacific region with almost 50% of the games market by value.  

The gaming business model is thriving in part due to improvements in gaming hardware, bandwidth and mobile internet. These factors have made high-quality games much more accessible across devices and platforms. In fact nearly half the revenue now comes from mobile gaming.

Impact of COVID-19 on video games 

While there is much positive impact in the gaming industry in terms of engagement with video games, there are still concerns about the pace of hardware and software development.

Like several other sectors, gaming is supporting community efforts to alleviate the effects of COVID-19. The industry has set up charitable pledges amounting to millions of dollars and the donated surplus computational power to help researchers understand the coronavirus. There are also solidarity funds to help medical workers, children at risk or employees whose jobs have been impacted.

Reports show that one of the outcomes of COVID-19 on gaming is the massive growth of the audience available to publishers.  

For instance, Asian gaming companies Nintendo and Tencent both saw sales increase in the first quarter. Nintendo, in fact, sold almost half its games digitally. This record helped the profits increase by 41%. While Tencent’s online games revenue has risen by 31% year-on-year. 

Reports show that sales across 50 primary markets have increased by 63%, Games that have been released during the pandemic are also faring well. 

But simply the downloads and sales in isolation don’t reveal the big picture. Verizon reports show an increase in gaming traffic during peak hours of 75% which is monumental compared to the increase of 12% in digital video and 20% in web traffic. 

Data also shows that platforms such as Facebook Gaming, YouTube Gaming and Twitch have seen a huge spike in growth. 

The great thing about gaming is that it has both interactive and linear consumption business models. The activity of watching game streams on video and video on demand are almost as big as gaming.

The COVID-19 era has increased this activity dramatically because of the amount of time available to people and their need for distraction. 

Impact on eSports

esports is another segment that’s come into prominence as a direct impact of COVID-19. Sports leagues across the world have turned to eSports and find innovative ways to engage with the audience. Many esports events are broadcast on live TV in the absence of scheduled sports content that was cancelled due to the pandemic. 

However, one thing that the coronavirus has impacted negatively is the production of hardware and software. As factories across the world are grappling with supply chain interruptions, there is temporary delay in production. Gamers are also preparing for a loss in productivity and delay n release as developers work remotely.

Some gaming companies have officially released a statement that prolonged remote working will impact its processes. Yet many other companies such as Epic Games continue to be agile and release regular updates and patches.

The future and long term transformation

Gaming startups thinking about the possibility of investing in gaming must strike now when the time is right. If they are capital-strapped, then it is a good idea to get a cash loan right now as the rates are attractive. 

The recent spike in gaming activity has shed light on the future transformations. Current trends indicate a shift towards cloud-based platforms and mobile. Some of the blockbuster titles are now available on mobile devices. Cloud-based platforms allow gamers to play streamed games across devices without the need for high-end hardware. 

This distribution model is clearly something that shows the future roadmap. 

Subscription and free-to-play models are yet another trend that are here to stay. Services like Arcade and Game Pass offer gamers a vast library of games, often without the need to download advanced hardware. 

Free-to-play games help developers to monetize without customers having to make up-front payments. These models have in-game opportunities to upsell like expansion packs and upgrades.

Last but not least, coronavirus has reminded media and entertainment brands that there is a potential market of highly engaged customers and will inch esports closer to mainstream.

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