Melissa Zeloof is joined by Ric Cowley, Editor of PocketGamer.biz, and Shannon Liao, reporter at CNN Business, to discuss the key happenings and trends in the gaming industry and in the gametech ecosystem behind it. As journalists covering gaming, they have a special inside-outside view of the industry, which made this a fascinating discussion. We cover gaming’s role in the entertainment world, how it adapted so well to COVID-19, Apple vs Epic Games, the importance of gametech, and much more.
Listen to the full episode here, or read the transcript below.
Games as the dominant consumer entertainment medium
Shannon: Mediums like film and music are trying to learn from gaming. Gaming is very versatile, it can be interactive, social - a movie or a book you’re experiencing passively, but with a game you’re actually in there. It’s very tactile and experiential and a lot of storytelling can be done through games. When you see a Star Wars trailer or Travis Scott concert in Fortnite it's indicative of how the film and music industries are paying attention to games.
Bringing up Netflix is interesting. They’re not only covering more games in documentaries, but they’re adapting games into movies: Witcher, Cyber Punk, Resident Evil; plus choose your own adventures like Bandersnatch.
Ric: I think games can co-exist with film and TV; you can play a game while watching something else but you can’t watch a movie while watching another movie. Gaming can be an additive experience: I’ll happily watch TV on the sofa while playing on my Nintendo Switch. They’re not necessarily totally separate activities.
More than just games
Ric: Gaming is very social and a lot of games are incorporating social elements. Fortnite has its own island designed for hanging out with friends, watching films together; Roblox as well is being used even as a teaching platform now. Games are becoming more than just games at this point, they’re platforms that people go to hang out on.
Shannon: I wrote a story where I interviewed a math teacher who used Half Life Alyx to teach geometry to his pupils; we’ve seen social events like people throwing Animal Crossing weddings and firefighter graduation ceremonies inside APEX Legends.
Ric: In the last decade, a major milestone has been free-to-play. A decade ago, you’d never have imagined not paying for a game, downloading it for free and then investing unlimited revenue...it started on mobile and is moving across to the console world. We’ve reached the point where F2P is here for good, but as a society we still need to educate people about what it is, how it works, and how to avoid falling into traps of spending too much money.
Covid 19 x gaming:
Shannon: This is something I’ve thought a lot about since the pandemic first hit China in January and I realised gamers over there are going to be in lockdown and wondered whether this would lead to more time gaming. We started to get more revenue figures from Tencent and other Chinese gaming companies that showed their numbers were rising.
Even back in 2008, there were headlines saying gaming was “recession proof” and an industry that was doing well even during a financial crisis. So I was thinking that gaming would do well during the pandemic, but there were some people who were more skeptical, as gaming is an expense, and when you don’t have that extra money you might not buy a game. So opinion was divided as to how this situation would play out.
Talking to gamers in China in January, I understood that more people would turn to eSports as traditional sports were postponed, and even traditional broadcasters started to turn to eSports companies to try to fill the content vacuum.
With the release of Animal Crossing in March and its rise to becoming Nintendo’s second biggest game after Mario Kart 8, it’s clear that many games released during the pandemic experienced boosts from it. Some games still flopped of course, but the successful games were arguably more successful than they would have been without the pandemic.
Ric: It was surprising seeing just how successful some of the big releases were. What was especially interesting, location-based games like Pokemon Go, which are designed for users to go outside and meet other people, were completely revamped. Niantic made Pokemon Go a game that you can play at home without physically meeting people and the game is experiencing its second best year of revenue ever because of this. We spoke with other location-based developers and they said it’s hard having to rethink how to make these games work in a Covid world, but gamers are still turning to them.
Ric: From a business point of view it’s key to know all the different layers of gametech. Especially in the F2P space it is key to understand what tools are available for building the game, running ads, attribution, and so on.
Shannon: the part of gametech that we continually write about are the platforms, like Google Play, Nintendo Switch, Playstation. I think the rest of gametech, the more obscure parts that people outside of the industry won’t be familiar with.,
Epic vs. Apple: Goliath vs. larger Goliath
Shannon: Looking at Tim Sweeney’s emails with Apple, it's clear from the beginning that he was reaching out to ask if he could introduce another way for people to pay Epic without paying Apple's 30% cut. This was all a very planned and orchestrated way to challenge Apple and this is coming at a time when there is a lot of antitrust claims into Apple so it was an opportune time
Ric: I’m really curious to know what Epic’s end goal is. They’re making enough money through Fortnite to launch its own platform, the Epic Game Store, which only takes 12% commission from developers. If Fortnite never returned to ioS, I’m not sure it will make a huge dent to Epic’s revenues. I believe Fortnite has cleared over a billion dollars in revenue over the last two years on ioS alone, which obviously isn’t an insignificant amount of money. But with a $50bn valuation, this is basically pocket change - for Apple too.
Defensibility for gaming companies
Ric: For games companies to protect their positions in the market, a diverse strategy is key. For instance, hyper-casual publishers and advertisers rely a lot on ad tech. In the context of iOS 14, which could reduce ad spend and thus ad revenues, publishers could strengthen their positions by adding other ad formats into the game, such as real life brands advertising on in-game billboards. Having that diversity will make your company more defensible.
The Amazon of gaming - are there candidates?
Shannon: Having multiple value propositions is crucial. If we look at Epic, they have Unreal Engine, which is a key development tool for app developers, in addition to Fortnite and the Epic Game Store, a leading PC games store. It has so many different aspects of gametech which makes it really strong. As for Unity, their financials don’t make the company a real contender to become a gaming superpower at the moment.
Gametech fueling gaming
Ric: The ubiquity of Unity and Unreal has definitely helped the growth of the gaming industry, as have more niche engines like Buildbox. Unity’s message was about democratizing game development which has opened up the space to more developers. You can go online and Unity has all of its pro lessons available for free, so you can just learn Unity. Opening up the game development world to more people has certainly helped the industry’s growth.
The growth of backend cloud servers like AWS has also been a big contributor to gaming’s growth. Games like Fortnite and PUBG wouldn’t have been possible 5 years ago before we had these servers. This has also helped smaller teams make massively multiplayer games - Fall Guys is an example of this.
What lies ahead
Shannon: I think gaming will continue its momentum. I know many tech and traditional companies becoming more open to the idea of employees working from home. By freeing up time by removing commutes and so, people will have more time to spend gaming.
Ric: I don’t think hyper-casual games will die, I think the genre will evolve. Hybrid-casual is a buzzword I hear a lot...as people spend more time indoors and have more time on their hands to dedicate to gaming, hyper-casual developers are realising the potential to add depth and social elements to the familiar hyper-casual mechanics.
We need to see how IDFA plays out...I think it will allow alternative forms of advertising to take over, like non-intrusive offerwall ads and even audio ads which are very popular in Spotify right now.
The world’s changed massively, I think over the next year we’re going to see a lot of experimentation in gaming.