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The world of gaming is evolving quickly

May 31, 2022

Playing video games on smartphone.
Jonathan Bennett, Chief Commercial Officer

Jonathan Bennett

Chief Commercial Officer

US$116 billion of the US4170 billion transacted within the Google Play and Apple Appstore ecosystems last year went into gaming, according to data.ai[1] (formerly App Annie). And mobile gaming, as the most significant subset, has continued to surge since the pandemic. Gone are the days when gaming was considered a domain of the younger demographic. Games publishers now cater to the growing audience of older consumers. The average age of a consumer playing mobile games is now 34, with 37% of respondents to a GWI survey[2] reportedly playing games every day. 45% of this cohort is female busting previously-help conceptions that the gaming community is predominantly male.

Gaming has also become popular among those aged 55-64, especially important to grandparents with three or more grandchildren. The percentage of gamers aged 55-64 grew by 32% in two years, from 2019 to 2021.  Interestingly, the popularity of gaming has risen significantly in markets across Western Europe and the Middle East faster than in the traditional hotbed markets in Asia.

The GWI survey also breaks down the game into three distinct genres. The first genre, called “Immersion,” is all about the life-like experiences and simulations rendered by Unity or Unreal engines. Games such as Fortnite and Animal Crossing are perhaps the best examples of the genre. Immersion games are likely to undergo a sea change with augmented and virtual reality technology improvements. The second genre is called “Competition,” with a solid social or community aspect. Multiplayer games, now made possible with console-independent 5G-networked smartphones, are all about players engaging in competition.

Interestingly, Fortnite could be described as both an immersive and competitive game. Gaming experiences in the metaverse are likely to display both these attributes strongly. And the third primary genre is “Cognition,” again not mutually exclusive from immersion or competition. These games are characterized by problem-solving and reward mechanisms and more of a “lean-forward” experience. This genre is popular with gamers looking to go beyond “casual play.”        

The rise of subscription gaming

Today, online multiplayer is often part-and-parcel with subscription services, offering to pay gamers regular news updates, free games, or exclusive discounts via online marketplaces. Moreover, there are also cloud-gaming services, subscription services such as Xbox Game Pass or PSNow, that provide access to libraries of older games.

A closer look at current subscription service use reveals that interest in purchasing these services is rising. A decline in physical video game sales plays a significant role here – falling 13% among console gamers between Q1 and Q4 2020 – meaning digital is now the dominant medium, with 22% buying a game via a digital marketplace. This is significant for Sony and Microsoft, whose cloud-gaming services were central selling points ahead of the PS5 and Series X launched in 2020. With console supply still short of the demand, the subscription model has been working well, especially with the low latency provided by the mainstream rollouts of 5G networks worldwide. 48% of gamers now use subscription services, rising to 56% among those who play every day.

Both microtransactions and downloadable content (DLC) have emerged as prominent sources of revenue. Many free-to-play games, like League of Legends and Fortnite, have made their money through in-app purchases, which are often cosmetic items like new costumes for characters or level upgrades. To put it into context, Activision-Blizzard made $1.95 bn in revenue between July and September 2020 – a whopping $1.2 bn of which came solely from in-game microtransactions.

The majority of gamers across 14 markets say they spend less than the equivalent to $10/£10 per month on games/in-game purchases. However, around a third of gamers in 9 countries say they spend between $11-$50 per month, while 1 in 10 gamers in the U.S., Japan, and Mexico say they spend the equivalent of $50+. Those who spend more than the equivalent of $50 are more likely to be high-earning male millennials.

Play-to-earn and the advent of NFTs

Before eSports professionalized competitive video gaming, top players of the first generation of so-called “play-to-earn” games like Runescape and Diablo II earned big bucks by selling highly desirable in-game rewards for real money. The problem then was that gamers never truly owned in-game assets, thus making them vulnerable to an informal marketplace’s whims.[iii]

However, next-gen play-to-earn games like Axie Infinity enable a different model that formalizes digital goods ownership through blockchain technology.

Assets like weapons, characters, or clothes don’t just exist within a game but come in the form of NFTs.[iv] Tracked by blockchain’s open, digital ledger, NFTs are unique, non-interchangeable deeds to digital assets—like rare weapons or sought-after characters—that users can own, buy, and sell. In the case of Axie Infinity, gamers collect NFTs in the form of digital pets (“Axies”) that can be traded for real monetary value on open crypto markets.

Axie Infinity keeps its players engaged by allowing gamers to earn in-game tokens that can be used to “breed” more Axies (and thus more NFTs) for battle and daily quests. These tokens are also purchasable through an exchange, further introducing real-world money into a digital ecosystem for a singular, mixed-reality experience.[v]

Play-to-earn models herald the advent of the changing ways in which gamers (and society as a whole) engage with digital identity, currency, and socialization. Players in games like Axie Infinity find value in digital assets and identifiers, blending real-world money with in-game tokens. It’s not a significant stretch to suggest that digital assets like game characters could become more valuable than physical currency at some point in the future.[vi]

NFTs will likely become more ubiquitous in gaming as more developers begin exploring the potential for these crypto-based assets to monetize content and user engagement.

French game publisher Ubisoft—which developed popular titles like Assassin’s Creed and Ghost Recon—recently debuted its Quartz gaming platform to enable users to own in-game items (or “digits”) as NFTs. Other companies like Electronic Arts and GSC Game World are also looking into potentially integrating NFTs into their existing and future games.[vii] The president of Square Enix, Yosuke Matsuda, published a new year letter that suggested the company could potentially introduce its own cryptocurrencies to power future play-to-earn games.[viii]

Conclusion

Gaming merchants are already ahead of the curve in realizing the opportunities posed by 5G connections to create increasingly immersive and high-quality experiences for viewers. They will continue expanding their reach into daily life through mobile and cloud services thanks to developers’ determination to explore different models for engaging users in gameplay, whether through innovative gaming mechanics or compelling narratives.

Straddling all this are the emergent forces of VR/AR technologies that will serve as our gateway into a future of mixed realities and cryptocurrencies. NFTs and in-game currency could transform what we think of as “ownership” and “assets, and perhaps usher us into a new reality where our identities are a blend of the digital and physical worlds. Maybe we will go so far and truly see the first hints of the “metaverse” and how it will transform how we connect. Partnerships with mobile carriers will help drive the flywheel effect to engage with new users and communities.

 


[i] https://www.data.ai/en/insights/market-data/state-of-mobile-2022/

[ii] https://www.gwi.com/reports/the-gaming-playbook

[iii] https://www.weforum.org/agenda/2021/11/what-play-to-earn-games-mean-for-the-economy-and-metaverse/

[iv] https://www.weforum.org/agenda/2021/11/what-play-to-earn-games-mean-for-the-economy-and-metaverse/

[v] https://www.decentralised.co/the-economics-behind-axie-infinity/

[vi] https://www.weforum.org/agenda/2021/11/what-play-to-earn-games-mean-for-the-economy-and-metaverse/

[vii] https://www.cnbc.com/2021/12/20/cash-grab-or-innovation-the-video-game-world-is-divided-over-nfts.html

[viii] https://www.videogameschronicle.com/news/square-enix-says-it-hopes-nfts-and-blockchain-become-a-major-trend-in-games/

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