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Writer's pictureDelian Partners

From the Console to the Cloud: The Disruption of the Gaming Industry

With restrictions on travel and social interactions, people have started spending even more time in front of screens, seeking alternative forms of entertainment: A clear beneficiary is the Video Gaming Industry which reached $159.3 Billion during 2020, increasing by 9.3% from 2019 - Video Game Statistics.


This unprecedented boom in the Gaming industry was supported mainly by Cloud Gaming technology, a kind of "Netflix for gaming" which allows users to play a wide range of games which would usually require specific high-powered hardware. Thanks to the Cloud, users can play games remotely just by subscribing to the service, avoiding the need to download files into their devices or purchasing expensive consoles. This new business model is called Game-as-a-Service (GaaS) and it is completely changing how video games are consumed.

Video game company Activision Blizzard is one of the first major pioneers of this model. Its great success came from the blockbuster “Call of Duty” franchise: Whether the user is playing on a PS5, Xbox, PC, or smartphone, he can access the entire video game saga and engage with other players from any device just by subscribing to it. 2020 was a record year for Call of Duty, with more than 100 million monthly active players engaging with its free-to-play experience.


Another successful example is Epic Games and its popular video game Fortnite. Fortnite is a multi-platform and no-cost game whose first source of monetization comes from micro-transactions. Everyone can access the basic game experience, and monetization happens when gamers decided to buy additional features such as new costumes, weapons, and even special missions.


GaaS has been around for several years, but the growth and the engagement of users has been accelerated in recent years by the live streaming. Amazon-owned platform Twitch is a game streaming platform where people can truly live the social side of gaming. Through Twitch, top video game players can make money broadcasting games and monetizing fans’ views: In March 2018, Fortnite reached about 630,000 viewers, while in 2019 another event hosted by Fortnite attracted more than 7 million viewers. In 2020, Twitch had about 26.5 million daily users and 6.9 million streamers creators each month, and these numbers are continuously rising – Twitch Traker.


In 2020 Google has entered a media partnership with Activision to show the online format of The Call of Duty League through its own video-platform YouTube. The online event was the most watched CoD e-sports match in the game’s history: The Call of Duty League reached 1.1 million subscribers on YouTube, with a peak of 331,000 viewers - Forbes.


The GaaS business model is disrupting the game industry as never before: The main difference from traditional forms of gaming is that through the Cloud, games are streamed and not sold at once. Instead to purchasing a product, users must pay for a subscription service, and that is why game developers cannot stop updating their services: By introducing exclusive new content, users become more willing to spend money to enhance their gaming experience, generating a potentially unlimited stream of revenues. To maintain a competitive edge, Game developers must communicate and cooperate with users to generate a virtuous cycle of revenues and achieve a win-win situation.


As reported by Statista, the Video Games industry will reach more than $150 billion in 2021, attracting companies outside the gaming sector: The evolution of Cloud services, combined with advancements in 5G network globally, allow big technology companies such as Amazon, Google, and Tencent, to heavily invest in network infrastructures and technology innovation to be part of the future expansion of the industry.



 

The information in this article should not be regarded as a description of services provided by Delian Partners SA. The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. The views reflected in this article are subject to change at any time without notice.

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