Video games are not what they used to be, your child who currently has his or her eyes glued to the screen for hours on end may be onto something. The industry is evolving, given the surge in access to smartphones, computers and the internet, video games are now a staple in the lives of over 1.6 billion people, and this number is only going up from there.
Why the Hype?
Video games have changed significantly, pixelated black & white mind-numbing games have now advanced into dynamic, high resolution, online games which bred a degree of competition and game-play that rivals major league sports. Games such as League of Legends and Fortnite have engrossed billions of gamers around the world. These games encompass various genres from shooters to strategy-based role-playing games and have made their way into the limelight because of their sheer entertainment value. Aside from default revenue that stems from the games themselves, add-ons and merchandise, there is a serious appetite for games on other platforms. The US video game industry alone gathered over $36bn in revenue throughout 2017, up 16% from 2016.
On platforms such as Youtube, Twitch and even Facebook, people have recorded and broadcast themselves playing various games and have gathered immense fanbases. Streamers such as “ninja” have accumulated over 2 million followers and 250 million views, and with these views come opportunities for advertising. With over $5bn estimated in ad revenue within the industry, it may be only the beginning of realising the true potential value of this market. In 2014, Amazon acquired Twitch.tv, the biggest streaming website for $970m. These streamers have attracted millions of people and income, be it through humour, skilled gameplay or the community-based infrastructure of streaming platforms.
Much like the Superbowl or the NBA, video games have fostered its own form of competitive gameplay called eSports. Millions tune into to see professionals go head-to-head in select online games. The League of Legends World Championships, for example, captured the attention of over 106m people at its peak in 2017, with an air time of 136 hours and a prize pool of over $4m. Valve’s Dota 2 hosts The International every year, and the 2017 edition had nearly 100m viewers, with a prize pool close to $25m. There is a serious demand for competitive gaming, and with expanding market demographics, competitive teams all around the world and games now being recognized as professional sports worthy of athlete visas – the potential is obvious. The eSports ecosystem is complex, over $900m in eSports revenue in 2018 stems from sponsorships, broadcasting rights, and ticket sales. Video games are making their way to the big screens and with that comes exposure and revenue.
More Than Just a Game
Like most things, with time and technology comes innovation, the gaming industry can further evolve with new software and potential in virtual reality and AI. There will be increased competition within the industry due to ease of access and reduced development costs which could pave the way for more M&A activity. As graphic processing capabilities increase, more platforms are now able to host games, from smartphones to new mobile gaming devices. One thing is for certain, the industry is rapidly expanding and is redefining how entertainment is consumed, and how profitable the industry is.
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