6 Gaming Industry Trends That Will Shape the 2020s
Anyone who attended Ernst & Young's Growth Summit earlier this month heard one lesson loud and clear: In the 2020s, the biggest opportunities will lie in some of the smallest industries.
As I headed home from the event, I started to wonder: What about video gaming? I played more than my share of World of Warcraft as a teenager, and I've been approached by more than a few esports executives in need of an outsourced CMO.
At the event, I met with Scott Porter, EY's Partner of US Americas Media & Entertainment. He was able to go over EY's recent study on the subject. More than a few loot boxes lie ahead for game developers who get it right, EY predicts, but they'll have to win some key battles along the way. Although 70% of the 236 video game executives EY surveyed say the next five years will be more challenging than the last five, they also expect industry revenues to grow by a third between now and 2022.
Just as they do in good video games, greater challenges will bring greater rewards. Look a little deeper into EY's study, and you'll see six industry trends driving that dynamic:
1. Game development costs will grow.Developing a video game from scratch is a massive investment. Storytellers, visual artists, sound engineers, developers, and more must be hired by the dozens. Years of iterations are required to root out bugs, sometimes for a payoff that doesn't pan out.
As games become richer and competition increases, those expenses will only grow. Of the executives EY surveyed, 72% see overall development costs increasing, while 79% say the cost of creating a great game experience is on the rise.
Other factors are also pushing up costs for game developers. Nearly three-quarters of surveyed executives expect cybersecurity costs to increase, while fully two-thirds say regulatory compliance will become more costly.
To offset those growing costs, game developers will welcome new players. EY's study points out that gaming is now considered a mainstream activity: In the past month, 86% of people who used the internet booted up a game on at least one device. Among the 16-to-24-year-old demographic, that percentage rises to 92%.
Although fan favorites like League of Legends and Fortnite will remain popular among serious gamers, expect new titles appropriate for all ages to pop up. Family-oriented games, perhaps similar to the late-2000s hit Little Big Planet, will command more shelf space. Games that get older players moving, such as the Wii Sports series, will also grow in popularity.
For developers, the growing breadth of gamers is great news. Not only do casual gamers generally have lower expectations than daily players, but they also make exploration of new topics and styles a sound business decision.
The days of buying games on boxed discs and playing them solo are all but over. As software-as-a-service models take over the business world, gaming companies are embracing gaming-as-a-service.
According to the study, for some gaming companies, GaaS already represents 40% of total revenues. Within five years, expect that proportion to rise to two-thirds or more.
GaaS games are popular because they allow companies to develop extended multiplayer content. They're regularly updated with new features, creating a "stickier" experience for gamers and bringing in recurring revenue.
Although GaaS games bring in recurring revenue, they're not the only place game developers will look for growth. As growth in new gamers slows, 68% of executives predict the industry will find alternative ways to raise revenues.
Two ways stand out: in-game advertising and microtransactions. It won't just be billboards in racing games that advertise real-world products, either. Branded apparel, ads on interstitial screens, and more will get gamers' attention. Increasingly, in-game transactions will be used to unlock new levels, characters, and accessories.
Like no other content area in the gaming realm, esports is poised for growth. More than a third of surveyed executives told EY that esports will contribute up to 10% of industry revenue in the coming years; even more, at 43%, predict it will add more than 10% to total revenue.
Although football, basketball, and soccer video games have existed for years, expect esports to expand into new areas. Especially as AR and VR become staples of home gaming, sports like rugby, swimming, tennis, and shuffleboard will start to show up in games.
As the gaming sector matures, mergers and acquisitions will become more common. Two-thirds of the executives EY surveyed indicated that M&A activity will increase. Incumbents will buy up smaller players, and major tech companies may try to enter the space through acquisitions as well.
The most common reasons cited for the M&A growth? Acquiring technical talent, gaining access to new markets, developing new marketing and distribution channels, and adding popular titles to a brand's lineup, in that order.
For game developers, the 2020s will be serious business. And as long as companies keep an eye on trends, listen to their customers, and invest wisely, they'll be glory days for gamers as well.
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