The Business of Esports

Where can you find a highly engaged young audience? The answer is, not surprisingly, in gaming and esports. But the business of gaming and esports is more surprising as this content form is growing in acceptance and value for marketers. BIA sponsored a panel discussion, moderated by Zach Oscar, Consultant for Hocus Focus, on the State of Esports and Gaming in 2021.

Esports Landscape

In the Video Game ecosystem, there are Publishers who develop the game itself and the strategies to take the game to market. These companies include Tencent, Apple, and Sony Interactive. There are the Games themselves which is a $180billion worldwide revenue industry and growing. Currently 68% of all U.S. persons 2+ play video games. There are Game Franchises such as Mario and Game Streaming and Streamers who compose the participants and viewers and the overall bucket of esports within gaming which, according to Oscar, are organized live events and streamed digitally showcasing multiple teams and players that are akin to traditional sports, with Leagues, and have reached revenue levels of $1.1billion. For advertisers, these industries offer a rich opportunity to reach a highly engaged audience through sponsorships, native video and product placement.

Esports Audience

Nicole Pike, Global Sector Head of Esports and Gaming at YouGov, noted that, “most people are gamers,” today and that they constitute, “a broad group with lots of nuance.” From her perspective gamers represent the trends that indicate where media is heading. These gamers are, “super-passionate and traditional forms of media are not reaching them,” she added.

For David Tucker, Senior Vice President, Managing Director, US Strategy, MAGNA, gaming and esports is the place to, “reach a vital audience.” He explained that, “There has been a -54% decline in 18-49 in linear TV viewing. Look at the magnitude of figures. Amazon has seen a 73% growth in ad revenue from Twitch.” It is there, he added, where you can find a valuable audience. But advertisers are lagging, he admitted. “There is a big gap in what today’s advertisers think about (gaming) and the amount of spend,” they attach to it.

Covid’s Impact on Gaming & Esports

The pandemic, which has impacted and initially limited the amount of general sports content available to viewers, might have fueled this dramatic increase in gaming viewership. Pike believes that while there has been some impact because of Covid, especially on gaming use hours, growth would have happened anyway. “There will likely be a slowing speed of acceleration,” she explained, but added that this growth was part of an overall trend.  “Covid was the accelerant of a trend that was already in place,” which ramped up what might have been three years of growth into one year. She also believes that, “trends have stickiness,” inferring that the end of the pandemic may slow but not stop this growth.

Nick Barrionuevo, Gaming Partnerships Lead for Samsung Ads, saw a, “footprint spike at the beginning of the pandemic,” then the spike came down to a new plateau and incremental rise.

Gaming & Esports Business

For Barrionuevo, the audience shift to gaming is causing a business shift. Currently, he reported, there is more viewing on streaming than viewing to linear on Samsung TVs. “OTT content is the way to reach gamers,” he stated and added that he is working on ways to serve this audience and reach them where they are.

According to Dave Madden, Executive Vice President, Gaming and OTT, Simulmedia, “Brands have to figure out how to turn these (gaming) environments into marketing opportunities,” because Covid has created a new social structure for young consumers. To that end, he recommended co-marketing partnerships, more like major league sports.

Ultimately, for esports, gaming, and game streaming to fully compete with other media like TV, there have to be a common viewership metric that can be easily comparable. “What is the opportunity cost of moving money to gaming & esports. We need a comparative metric,” Pike stated.

For Oscar, the future of gaming and esports looks very bright. “As a young millennial myself, I can tell you that I have never owned a cable subscription and I don’t really plan on it. However, I can tell you I’ve banked hundreds if not thousands of hours online with my friends in some of my favorite games, watching some of my favorite streamers, and cheering for my favorite esports teams. For me and many others, gaming isn’t a solo activity - it’s how we stay in touch with our social networks. Marketers who are willing to put in the effort and not just stick to the status quo of advertising in traditional formats have an incredible opportunity to reach a great audience and build unique and exciting ways to connect with them,” he concluded.

This article first appeared in www.MediaVillage.com

 

Preteen Gamers Upend Traditional Media Consumption according to Carter Rogers, Principal Analyst at SuperData

Pre-teen Gamers are a new and burgeoning consumer group. But the ability of the media industry to understand their behaviors and motivations has been fairly limited until now. In what is being described as a first-of-its-kind, Nielsen has just released the results of its SuperData Preteen Gamer study which revealed how preteens discover, recommend, cross-play, engage with others, purchase and communicates through platforms in the gaming environment. 

Carter Rogers, Principal Analyst at SuperData, took me through the study and revealed the trends he saw and some surprises from the data. “SuperData is a market research company focused on digital games and related media,” he began, “and we joined Nielsen about a year ago to augment the research in the game space.” This study had two parts – an online survey of 1000 U.S. parents of preteen gamers and in-person focus groups with 100 preteens aged 7-12 years old in the New York City in area with an even gender skew. The focus groups in particular, “were really neat,” Rogers noted, “because many previous studies have interviewed the preteen’s parents instead of the kids. It may not give a clear picture of what the children are actually up to. So we went through a lot of effort to make sure this was a proper study on preteens.”

A Social Ecosystem

One of the big study takeaways was that preteen gamers are using the gaming environment as a social ecosystem. “Preteens really like socializing in games. They play online with friends but they don’t just jump on to a game, play for five minutes and then leave. They want to use these games as virtual hangout spaces.” The top three games for preteens at this time are Roblox (33%), Fortnite (26%) and Minecraft (24%), all of which are used by preteens as virtual hubs. “A lot of the younger players are using gaming as a social network to hang out with friends in games,” he stated.

Awkward Commerce

Another takeaway is the commerce aspect of gaming. “A lot of preteens ask their parents to spend on cosmetic items. In Fortnite these are called skins. We found that generally it is very difficult for preteens to spend in games,” Rogers noted, “It is really an under addressed audience.” His contention is that, in digital games, purchasing is conducted online only and is creating, “awkward systems where the preteens give their parents cash that the parents originally gave them in their allowance, the parents give the preteen their credit card and then the preteen uses the credit card to make a purchase in the game. It is confusing for parents and a hassle for preteens.”

Devices Matter

Multi-platform play is very important. In the past, the big games were predominantly played on a console, “but you couldn’t have some of these big games so world dominating and such phenomenal successes if all games were still on console.” Rogers explained. “We’ve found that mobile is a gateway device for these younger preteens. Fifty-five percent of 7-9 year olds are playing games on tablets compared to 27% of 10-12 year olds. Consoles are very, very popular among these older preteens. Seventy-six percent of those preteens play on a console, compared to 54% of 7-9 year olds.” The major three games are available on multiple devices so,” preteens with only access to a smartphone (which often belongs to their parent) can still play with their friends who might be playing on a Playstation 4 on a TV.”

Different Levels of Engagement

There are very distinct groups of preteens in gaming, according to Rogers. “The younger gamers tend to play on smartphones and tablets and aren’t really engaged in gaming in the way that some of the older players are.” Older preteens are very engaged and aware of specific happenings in the gaming industry such as any new titles. As so, as the study revealed, gaming habits tend to shift around ages 9 or 10, coinciding, interestingly, with greater migration to consoles that seem to offer a more immersive, engaging experience for the gamer. “Preteens go from playing casually on a phone to the much more dedicated gaming around age 10 and gaming more on a platform deck at that point.”

Perception of Popularity is Vital

Marketers should take note. The way preteens find out about games is online, such as via YouTube or Twitch or the Amazon streaming platform. “We found that among preteens, 78% of 10-12 year olds watch gaming video content as do 69% of 7-9 year olds.” They will definitely take game recommendations from people online. Rogers concluded that game developers should, “appeal to these tastemakers because if an influencer says that a game is not cool anymore, that really influences preteen attitudes. It is very important for a game to be perceived as ‘popular’ than it is for a game to develop a new concept to keep it fresh. Perception of popularity is very important.”

Looking Forward

In sum, while this is a new study, there are ways to ascertain trends for both game developers and marketers. For one, the lifecycle of games is getting longer which means that preteens may be playing these games well into their young adult years and that the games themselves, according to Rogers, “have a much longer revenue tail,” and are being built to “allow for user-made content. They can make their own environment and share it with a friend. This can impact the gaming industry for many years to come.”

For brands, the extended content life means this valuable audience has to be reached using a more holistic approach. The very nature of the content requires that brands appear in-program and via cross-promotion in games and not as traditional commercial spots. So the main takeaway from this seminal study is for Media and Brands to be nimble, creative and prepared because gaming content consumption is different from traditional video content consumption and this new way of viewing is establishing new behavioral norms in the consumers of tomorrow.

This article first appeared in www.MediaVillage.com

Once Disruptive, Video Games Are Being Disrupted

Disruptions in the media industry occur constantly. But now it seems that the speed of disruptions, even among disruptors themselves is accelerating. The ARF noted that according a recent study by Axios, video games, which has disrupted media consumption, are undergoing a major usage/business change as well and the change is occurring not just on the software/content but also on the hardware of consoles and controllers.

Packages Instead of Single Games
Economics are shifting in favor of the consumer. In the past, gamers had to purchase a game outright. Now they are able to subscribe to a more economical package of games. “In the past, you plunked down $60 at GameStop for a copy of Grand Theft Auto or Madden NFL and played it out — after which you could trade it in or let it gather dust,” the AP News reports. “Now, you’ll increasingly have the choice of subscribing to games, playing for free or possibly just streaming them over the internet to your phone or TV.” Gamers won’t have to buy individual games anymore. And presumably the cost of entry for gaming companies would be lower

Veering Away From Specialized Hardware
Subscriptions will not only move storage and software into the cloud, it will make access easier across any device and be cheaper since there will not be a requirement to buy any extra equipment, which is often expensive and may only work specifically for certain games.

Examples of games moving into the cloud include Google’s Stadia platform that, “will store a game-playing session in the cloud and let players jump across phones, laptops and browsers with Google’s software,” per the AP. Apple Arcade “subscribers will get to play more than 100 games … on the Apple-made iPhone, iPad, Mac and Apple TV.” Snap Games will allow users to play real-time, multiplayer games with their friends, with new ad experience in games so all that “our (developer) partners can see monetization from day one.” And with Fortnight, a free-to-play game, “a key aspect of the game is being able to play it on anything from your phone to a decked-out gaming PC.”

It remains to be seen how quickly this transformation will occur. There is still the need for technology companies to broker deals with game developers to distribute their games. But, as with other media, the consumer is increasingly setting the pace and voting with their wallets.  “We’re in an environment where people want content and media when they want it, how they want it,” CFRA analyst Scott Kessler said. “You can play a great video game with a console or on a computer or with a mobile device and you might not have to pay anything. That’s a dramatic departure from even a few years ago.”

This article first appeared in Cynopsis.

The Business of Games. Q&A with Michael Gluck

Michael Gluck, Founder of VG Market, always wanted to be in the video game industry and has been preparing for this career for many years.  Gluck started his own research-oriented company to serve the video game industry by recruiting gamers to give first hand feedback for new and established games. In this fascinating interview, Gluck talks about the gaming industry, what makes the perfect game, how his company measures game satisfaction and success, game monetization, landscape and global implications. He also looks ahead to predict how the media landscape will look in the gaming sector in the next few years.

There are six  videos in this interview:

Subject                                                 Length (in minutes)

Background and VG Market                        (5:13)

Start Up and Gaming Market                      (6:48)

Game Truisms and Platforms                      (5:10)

Demos and the Perfect game                     (4:34)

Monetization and Global Gaming             (6:28)

Predictions and Connected TV                   (3:33)

Charlene Weisler interviews Michael Gluck who talks about his background and VG Market in this 5:13 minute video:

CW: How have you seen the gaming market evolve since you first started?

MG: I started my company in 2007 and at that point in time, 90% of my business was console gaming. There was Playstation, Xbox or a computer. So we tested box products. Moving into 2008, we started to test on the mobile phone for the first time. We were one of the first research companies to start in on that. It was a new field and we were in the position as a video game research company to start the testing for mobile phone games. And at that point in time, the mobile phone games we were testing were all pay for download. You would go to the app store, you would pay $4.99 or $7.99 or $9.99 and you would get your game and play it until it was over. The sequel would come out and you would buy the sequel. So what started as console gaming only, moved into console and pay-by-app phone game. And then the following year, we started to get into Facebook game and more mobile game testing. Then we started to see a new free-to-play model. In fact, we were in the room doing the research on one of the first free-to-play games in app purchases and people were terrified. They were thinking – we just made this game, we are not going to charge for it, we are going to give it away and hope that people buy it? We were in the room having these conversations when these executives were talking about- is this something we really want to try? What if no one buys anything in the game? We just spent all this money building it and giving it away for free. There was a lot of fear around that. But then we dipped a toe in and it was successful and then over the next year or two everything started to go that way and I saw my business change from console to pre-paid app and then free app with in-app purchases and then Facebook gaming and then mobile gaming. Everything became free to play and today, more than half of my business is mobile gaming.

VG Market's Michael Gluck tells Charlene Weisler about his company's back story. He also gives an excellent overview of today's Game Market in this 6:48 minute video:

CW: Games probably differ by platform but are there any truisms for gaming success across any platform?

MG: Fun game play is important regardless of the platform. The game has to be fun. The graphics don’t necessarily have to be great depending on the platform. You can have a lower graphics quality game or even a menu text based game that can do quite well depending on the country, depending on the target audience.  It can make more money than a game that took years to produce with the highest level of graphics – just a simple game on your phone with lower graphics. So graphics is certainly not a truism. But fun game play is. So a hook that grabs you and makes you want to come back. Something that has a mechanic in it that compels you to play again and again. That is true regardless of the platform.

Replay-ability is also important. So once I have gone through the experience, is it fun to come back and repeat the process? Is it new, fun and different each time I come back? Does it have a life span? User interface is also something that is important regardless of the platform. If it is not intuitive to play on your phone, if it is not intuitive to play on your play station or your computer, chances are someone is going to drop out early.

Audio is something that depends on the platform. You can have a simple loop on a phone game that isn’t much to listen to in the background but it can still be successful versus on a higher production game, they are looking for audio recorded by full orchestra and it has to be published on a soundtrack – a whole different level of audio.

What are game truisms and how do games vary by platforms? Michael Gluck shares his perspective with Charlene Weisler in this 5:10 minute video:

Charlene Weisler interviews Michael Gluck who talks about game monetization and global gaming in this 6:28 minute video:

Different games attract different demos. Michael Gluck talks about demographics and what makes the "perfect game" in this 4:34 minute video:

In this final video, Charlene Weisler interviews Michael Gluck who offers some thought on the future of the media landscape and also the imapct of connected TVs in gaming in this 3:33 minute video: