In October of last year, I wrote about the absurdity of the fact that Big Media content companies and distributors were spending unprecedented sums to increase their exposure to a segment of the media industry with declining value (video), even as another (video games) was growing 15-25% per year. While I remain surprised by the differential between investment and growth potential, it’s worth considering why the future of gaming is so immense.
This includes (1) what gaming competes against; (2) how it’s (now) being packaged; (3) why it’s such a uniquely scalable medium; (4) why people play today and will play more in the future; (5) why it’s such an engaging medium overall; (6) the unique growth potential in the medium; and (7) why it’s the modern comicbook.
#1 – The Dominant Attention Medium, Television, Has Peaked and its Time is Being Redistributed
In the 19th century, the idea of “leisure” versus “work” emerged. To economists, we could do only two things with our time: “generate” income by working, or give up potential income and/or “spend” our income on leisure (either literally or via opportunity cost). This latter classification included everything from going to a play, reading a book, spending time with your partner, or sleeping. For the most part, these different leisure activities didn’t actually compete that much – before electricity, you could only read so late, there weren’t many local theaters, the solar cycle defined when you needed to wake up, etc. More broadly, there were few real alternatives in entertainment. For example, you had (1) newspapers, which refreshed only once a day and needed to be either delivered or picked up; (2) books, which took lots of effort to consume and were text only; (3) radio, which was audio and live only; and (4) socializing, which required planning, wasn’t for everyone, and had high, logistical costs and limitation.
And so, by the time TV arrived – which offered an abundance of content to choose from, and, uniquely, moving video plus dynamic audio – it dominated. By 2010, more than nine in ten American households were paying $50+ per month for Pay-TV, making it the most accessed and highest revenue-generating entertainment category. What’s more, 280MM Americans were spending an average of 5+ hours per day on the medium.
TV isn’t going away. But regardless of how effectively the major TV companies transition to digital, it’s hard to imagine it will maintain current levels (at least until autonomous vehicles free up another two hours per day). It’s not new that human attention is finite, but the “attention economy” is so talked about today because there’s finally competition for leisure time. That doesn’t mean video time will ever fall below three hours per day, but the historical 5+ level is likely inflated by the fact real substitutes didn’t exist. Now there’s TikTok, Snapchat and Fortnite. And they continue to take generational share away from the category with the most to give.
This is why I once tweeted that Fortnite was Netflix’s most threatening competitor (which CEO Reed Hastings said in his investor letter a month later). This is most plainly understood as the idea that everyone is competing for finite attention and there are more applications for this attention than ever before. But the real challenge for Hollywood is that for decades, whenever “leisure” won over “work”, TV was the primary beneficiary. In recent years, the leisure decision has changed or “moved up” a level. It used to be “what to watch” and now it’s “whether to watch” – and the answer is increasingly “no, I’m going to play a game”. Neither Netflix nor Hollywood has a good solution for this problem. And no one chooses not to game because there’s a branching narrative available instead.
#2 – Gaming is Replicating the TV Package
At the same time, the degree of TV’s success isn’t just due to the scarcity of leisure competition. It boasted many characteristics that ensured its mass appeal, drove its penetration, and maximized its usage. Yes, it was flawed and over time, its value perverted – but Pay-TV was still an incredible package, one that bundled together and offered:
An abundance of content (in both volume and variety)
Ease of access (TV was everywhere, its content universally accessible and immediately viewable; you could go to your friend’s house, a bar, or another state, and immediately resume your “regularly scheduled programming”)
Frictionless content discovery and sampling (aside from basically three channels, all content was immediately accessible; indeed, much of it was found by accident or while simply “channel surfing” during commercials
A wide range of different use cases and functions (some content was designed to inform, others to entertain, babysit, teach, or tap into local tribalism, etc.)
A range of different engagement levels (viewers could lean in and be totally immersed, lean back and just watch, or turn the TV on in the background for even more passive distraction as they tended to cook, do laundry, or run on the treadmill, etc.)
… In addition, TV benefited from…
Achieving a cultural tipping point. Because “enough” people watched TV, it became a watercooler discussion and dominated pop culture – forcing many to watch TV simply to participate in society, similar to “social smokers” who only smoke when with smokers who are smoking
Incredible competition that continually drove more value and format diversity/innovation
When atomized, it’s clear that essentially every single element of this TV experience is now being replicated by the gaming ecosystem:
Access: Cloud gaming means you will be able to take your game “everywhere” and avoid dreaded 20-minute updates before you can start playing. In addition, new consoles will allow players to auto-resume several games (versus just one), claim to reduce game loading times to less than two seconds, and will expand the ability to log into your “save” files from other players’ consoles. No longer are we stuck to a single device in a single location.
Discovery/Sampling: Historically, the number of games played and the amount of total play time have been limited by the high barriers to finding and trying a new game – namely a $40-60 price tag plus the need to spend a half-hour downloading a game, or more time literally picking up or receiving a physical copy. All-you-can-eat subscriptions like Microsoft’s Xbox Game Pass, Apple Arcade, and Sony’s PlayStation Now are bundling together both the most valued titles with a large catalogue of other titles that many enjoy but wouldn’t have known about or sought out as a standalone title. To point, Microsoft claims Game Pass subscribers increase their overall playtime by 40% — proof that this content bundle doesn’t cannibalize engagement among a larger content offering, it grows it.
Competition: After nearly 20 years of a Nintendo-Sony-Microsoft triumvirate, several new platform giants have emerged. Apple and Google are already the fourth- and fifth-largest gaming platforms outside China via mobile, with Google now entering AAA “console” gaming via Stadia. Amazon is expected to enter the space soon, too.
Increased competition isn’t just happening at the platform level, either. The growth in the number of gaming platforms has led to a “super-funding” of the developer ecosystem, which has in turn grown the total number of games made, as well as their diversity. The aforementioned rise of all-you-can-eat bundle subscriptions is also allowing game developers to take increasingly large creative risks with their content. Historically, a developer needed to convince a gamer to buy their $20-60 game, rather than continuing to play one they already had or buying a competing title. This is hard ask generally, but especially for unproven formats/styles that lack franchise IP. As part of a bundle, however, a developer can instead focus on just earning a share of (or growing) gamer playtime – no extra fee involved. The ability to de-risk content experimentation and innovation is obviously great for current gamers. But crucially, it also produces the best opportunity for developers to build the sort of non-traditional games that might appeal to non-gamers, too. A bigger and better “Call of Duty” is unlikely to expand the industry pie.
Functions: Gaming used to have a singular function – immersive entertainment. Not only has the degree of immersion diversified, so too has the purpose. Many games, such as Fortnite, have become about participating in culture conversation, spending time with friends, and accessing shared live experiences (be it Fortnite’s concerts or live movie tie-in events).
Engagement Requirements: Gaming historically has been limited by its burdensome requirements. To play a game, you needed your “full” attention; multi-tasking wasn’t possible. What’s more, it took many hours to become “good” at a game, and even then, you might not be good enough to enjoy playing competitively with your friends or to enjoy complicated set pieces in single-player games. Through esports, you can now enjoy professional- grade play at any time, offering as much or as little attention and investment and time as you like. Similarly, live streamers allow you to “play” an entire game without ever picking up a controller (earlier this year, Polygon reported on the rise of this behavior, with many “gamers” watching streamers during their lunch breaks, buses home, etc). For what it’s worth, the most popular video site in the world is YouTube – and it’s most watched content is recorded video game clips.
Furthermore, the major game streaming platforms are now building experiences that will allow these viewers to affect this live gameplay by sending in items or health to help or impede the player. Genvid (a portfolio company) is designing a slate of brand new “games” specifically for this. In addition, cloud services such as Stadia are building the capability for viewers to “jump” into a video or live stream to play a game at that specific point; rather than playing a 40-hour game, you can play the hour you want (perhaps just to try something a streamer did or challenges her audience to do). We’ve also seen the emergence of news shows, highlights and clipshows, in-game comedy, and more. You no longer need to sit down and play for hours to enjoy gaming content.
(Notably, one could say this is really just “video”, not gaming content. There’s a truth here, but that’s similar to saying “sports” is like scripted television; it’s entirely unhelpful. Furthermore, it ignores the unique virtuous cycle in gaming — football fans don’t watch football to get better at playing, nor do they watch highlights of their friends’ “best ofs”, nor play football for hours each day.)
Cultural Tipping Point: While gaming has not substantially grown its penetration among older generations, it is flooding the younger runs of the pyramid. 90% of Americans watch television and listen to music. With time, the reach of the category should be just as great – and thus just as talked about and just as socially important – as any other.
#3 – Gaming Has Unprecedented Content Leverage
Most media categories are confined by three challenges. First is their finite length. At a certain point, you reach the last page of a book, last episode of a TV show, or end of a podcast. A consumer can re-read/watch/listen to them, but few do – and even then, most will do so only once. Second, elongating requires more investment – another book or episode or podcast needs to be made (which requires equivalent investment to the first book, episode, or podcast, thus solving no real problem). We also know that elongating content for the sake of additional engagement, rather than narrative needs, often erodes the overall quality of the experience (see Netflix’s Marvel series).
Third is the fact that while traditional content can seed consumers imaginations, it can’t really participate in it, let alone leverage it. Star Wars, for example, spawned billions of hours of imaginary stories that were locked in the minds of children and acted out only in a family basement or yard. A franchise could facilitate this story creation, but only via making rich films/TV/books/comics and selling toys that were fun to use — but they couldn’t access it, nor could these independent “imagineers” really share it with their friends (especially those who didn’t live nearby).
None of this is true in gaming.
Most superficially, games are often designed around ancillary content that exists outside the core story – badges, side missions, and so on. While this requires additional programming, it typically achieves significant leverage over prior investment (e.g. characters, items, stories, programming). The fact that it’s optional also means that it’s only completed by those who desire more playtime, and thus doesn’t dilute the experience in the same way a 7-hour TV series over 13 hours might. As a single-player game, Red Dead Redemption 2 can be 47 hours long (main game), or 76 (main + core extras) or 161 hours (to complete everything).
More broadly, games are increasingly driven by social experiences. A gamer isn’t playing to “complete” a story, they’re playing because they love competitive play – especially play with their friends. And given no multiplayer experience is the same, there’s always a “new story” that can be played. Red Dead Redemption 2’s online experience only ends when your friends all bore of it.
On top of this, many games leverage audience obsessiveness to generate more content. Sometimes this is little more than UGC “maps” or “mods” (such as placing Iron Man in Grand Theft Auto), but it has come to mean much more. For example, the “Multiplayer Online Battle Arena” genre (of which League of Legends is the most famous title) was essentially created by a user mod of Warcraft III, a real-time strategy game.
In addition, a whole sub-economy on Fortnite has emerged where “players” can build (and monetize) their own games and worlds, while Roblox and Minecraft are entirely based on this model. This not only grows the amount of time audiences can spend with a game, but it increases the breadth of the experiences available to consumers in this game. In 2019, Roblox says it will have paid out more than $100MM to its game creators around the world (a group that ranges from single “developers” to studios of “10 or 20 people”). The company also notes that it doesn’t even pay these developers directly — unlike the iOS app store — they receive direct payment from users. And in the fall of 2019, Roblox launched its “Developer Marketplace”, which allows developers to monetize not just their games, but also the assets, plug-ins, vehicles, 3D models, terrains, and other items they produce for these games.