Facebook and Amazon have paid their way into the $100 billion video-game industry. Here’s how things might change.
From 2009 to 2012, the U.S. video-game industry grew four times faster than the overall U.S. economy, according to a recently released report from the Entertainment Software Association. Video games are expected to continue to take over our TV, tablet, and smartphone screens (and maybe even a slew of new game-playing devices) in 2015, with worldwide game sales expected to reach $90 billion.
New York-based research firm SuperData specializes in tracking and analyzing digital sales of video games, an increasingly important task as more consumers shift away from purchasing video games at traditional brick-and-mortar stores to instantly downloading them from app and digital game stores. SuperData CEO Joost van Dreunen shared with Inc. the top trends that could most disrupt the video-game industry in the year to come.
1. Virtual Reality
Last year, Facebook acquired the company behind the Oculus Rift virtual reality device for $2 billion, and it’s hoping to turn it into a mainstream product, according to van Dreunen.
“For Facebook, virtual reality seems to encompass a wider range of experiences, like watching sports matches in VR for instance, which will be more attuned to a mainstream consumer,” he says. Furthermore, the Oculus Rift will give Facebook a next-gen platform to “blend compelling entertainment with highly tailored advertising.”
This year, Sony, considered a stalwart in the video game industry ever since the success of the PlayStation console, will also be toying with its own VR device, codenamed Project Morpheus.
“Sony has the funds and, more importantly, the experience to build high quality interactive experiences,” van Dreunen adds. Similar to Apple’s closed ecosystem of devices and software, “Morpheus will obviously be designed to seamlessly integrate with Sony’s other hardware and content.”
Facebook was not the only major tech player investing big bucks in the future of video games. Amazon paid $970 million to acquire Twitch, a video platform dedicated solely to live-streaming gameplay and competitions.
Considering Amazon is one of the biggest video-game retailers, “Twitch’s price tag makes sense, because connecting consumers with relevant content and products is a constant challenge,” van Dreunen says. With its latest acquisition, Amazon basically bought direct access to die-hard gamers and the millions of people who love watching them, the perfect audience for advertising and pushing video-game sales.
The buzz around Twitch was attributed in large part to the surging popularity of e-sports, or competitive video-game playing and tournaments. Multiplayer games like League of Legends, which has over 80 million players a month, are drawing in a massive number of active users, and not just in cyberspace. The most recent League of Legends World Championship tournament in Seoul, South Korea, boasted 40,000 attendees, and 32 million people watched online. That’s just as many viewers as for the Sochi Olympics Opening Ceremony. So do e-sports tournaments have the potential to launch a dedicated cable channel or become the next Super Bowl for advertisers?
“Absolutely. The audience is already there,” van Dreunen says. “What’s currently holding e-sports back is the incumbent generation of advertising and media executives, who seem to rationalize their old-fashioned approach by regarding it as a fad.”
Revenue from mobile games is set to surpass revenue from console games this year. With that in mind, van Dreunen expects a continuation of the trend of big publishers buying out talent and intellectual property from smaller but more innovative indie studios. Also in the forecast: early signs of saturation.
“The mobile-gaming industry is characterized by a crowded supply side, forcing developers to distinguish themselves with expensive marketing campaigns, high production values, and brand partnerships,” van Dreunen says, citing the recent success that games like Kim Kardashian: Hollywood and Candy Crush Saga had with out-of-home marketing and branded partnerships. “But not everyone has the capital or network to do that.”
5. Social Casinos
Social and mobile casino games offer the thrill and satisfaction of gambling. The one thing they don’t offer is real money payouts, hence they do not fall under traditional gambling regulations. But SuperData has discovered that these games do provide a unique and interesting marketing opportunity to land-based casino operators in Las Vegas and Atlantic City.
“We found that there was a strong correlation between people who play casino games on Facebook and the number of times they visit casinos,” van Dreunen says.
6. More Women in the Industry
Following GamerGate, van Dreunen expects the video-game industry to start taking female gamers seriously as an audience. According to a study released by the Entertainment Software Association last summer, women now make up 48 percent all U.S. video-game players, outnumbering even teenage boys. And there are a few indications that the video-game industry is adjusting to this recent shift in consumer demographics.
The number of women holding executive roles in video-game companies may be small, but they are slowly gaining visibility as they continue to push for diverse characters and storylines in the games they make. These women include Microsoft’s Bonnie Ross, Lucy Bradshaw at Electronic Arts, Sony’s Shannon Studstill, and Kiki Wolfkill, also at Microsoft.