There has been huge growth in the gaming industry in recent years as well as consistent disruption, even before COVID-19; from growth in digital sales of games and esports to free to play revenue model adoption, live streaming, and cloud gaming platforms.
While gaming has historically been viewed as a niche category for hardcore enthusiasts and adolescents, gaming participation is now at mainstream levels, with over half of the U.K adult population playing games last year.
Together with OC&C Strategy Consultants, we conducted research looking at the gaming industry as a whole, drawing parallels with other media and entertainment along the way and identified key marketing implications.
1. Growing adoption of digital distribution
With the growing adoption of digital sales and distribution of games, physical game sales are in decline. Improved internet speeds, larger hardware storage capacities, and lower footfall to retail stores are driving even stronger digital sales growth. Smartphones, fast wifi, and faster networks have changed consumer attitudes on accessing and owning music, film, and now games from physical to digital. As digital sales and distribution of games continues to grow, publishers need to prioritise digital distribution when setting their marketing strategy.
2. Evolving business models
Game revenue models are evolving, impacting the lifecycle of games as well as the actual gameplay mechanics. Revenue models, such as the free to play model, continue to gain traction with the adoption of microtransactions across multiple franchises on all platforms. Mobile gaming continues to lead the way, with AAA titles (big budget games developed by a large studio) on console and PC starting to adapt in order to drive maximum value as a result of the changes in consumer behaviour and the acceptance of recurring revenue models. Marketers should understand what gamer behaviour indicators they’re measuring to then augment that data into their marketing efforts, which in turn will help them reach the audiences who are likely to spend.
3. The rise of gaming as a social forum
The rise in the use of games as a means to socialise has been accelerated during the COVID-19 lockdown measures. Virtual spaces within large player base games are also being used as gathering points where players socialise and experience a live event. We will continue to see the development in online multiplayer services for immersive experiences. Virtual live concerts have had viewership numbers in the tens of millions, highlighting the successful relationship between video games and music. We expect to see more game developers create opportunities to access this space.
The rise in the use of games as a means to socialise has been accelerated during the COVID-19 lockdown measures.
4. Popularity of content creators and live streaming
Video game watching is growing across a broadening number of demographics with COVID-19 accelerating the growth in new streamers and content creators. The variety of video game content being watched is also broadening. Viewers are telling us they are emotionally invested in streamers who build communities authentically1. Esports presents an additional monetisation channel for publishers, and a means for brands to access hard-to-reach audiences.
The single largest shift in the last decade is the relevance of streaming and its effect.
5. Data and customer insights
As the gaming industry shifts more towards digital, it will become easier to build closed-loop marketing strategies with easier access to more granular data. It will be important for developers to garner customer insight on the areas of the game being utilised more heavily, identifying retention issues or signals and also establish where additional monetisation elements could help to improve profitability. It’s a journey game marketers are all on as we move closer towards closed-loop marketing. The leading marketers are focused on upskilling their teams with the technical capabilities and processes to help them use data to deliver against their marketing objectives.
6. Cloud delivery is the next big disruptor
Cloud gaming platforms threaten to disrupt the traditional routes to market for publishers with the promise of Netflix-style access to libraries of instant games. The cloud gaming platform landscape is shaping up to be highly competitive, and differentiation will be key. Marketers need to understand which platforms are best placed to acquire gamers and keep them engaged. They’ll also need to determine what their platform strategy will be, and to what extent they will be platform-neutral versus seeking closer partnerships and possibly an exclusivity agreement.
All marketers are trying to get to a place where they can accurately map the consumer journey for different audience types. Marketers need to understand the impact of all the touch points where a potential player is shown and hears about the game. They also need to understand the impact of each of those touch points on acquiring the user. This enables businesses to decide how much to spend on each of those touch points based on the predicted or sometimes known lifetime value of the player. And finally, where and how much should they spend on keeping the player engaged.
Games marketers have a huge opportunity to efficiently grow their audiences by adopting closed loop marketing strategies as the industry becomes entirely digital, aligning technology, people and processes. There are also big implications for advertisers outside of the gaming industry. Our next report looks at how they can reach these large audiences and tailor their messaging in line with the authenticity the gaming community values.