April 9, 2020

How COVID-19 is Impacting Video Game Play and the Games Industry

As shelter-in-place becomes the new normal, people around the world are turning to video games as a way to stay entertained and engaged. This may be driving a short-term windfall for the video game industry, but the longer-term trends are less certain.

The sudden burst in video game activity made headlines around the world, demonstrating this emergent form of entertainment’s shift to the mainstream. Examples include heavy play of Fortnite being blamed for straining Italy’s internet infrastructure, and ESPN resorting to broadcasting video-game versions of NBA matches and others to replace traditional sports programming.

Impact on Players and Viewers
Hard data on video game usage can be difficult to confirm since many of the major players in the space are privately-held companies, but the available statistics all point to major growth in both the numbers and hours of video games being played.

Steam, the leading platform for buying and playing PC games has hit historic highs in both daily and concurrent player numbers.

Viewership has also spiked on Twitch, the dominant platform for live-streaming games (and non-gaming activity, as well). In the first few days of April, Twitch has delivered peak concurrent viewership of 3.8 million and average concurrent viewership of 2.1 million. This is a significant rise from only two months earlier in February, which recorded 2.7 million peak and 1.4 million average concurrency (all sources from Twitchtracker.com). Viewers are turning to Twitch both to replace traditional television content and to learn and follow their favorite video games.


(Source: Twitchtracker.com)

Impact on the Gaming Industry
The short-term impact on most game companies has been positive, as the number of users and length of engagement grow. Another windfall is occurring in the mobile game industry. As other advertisers drop out of digital ad exchanges, there is less competition bidding for ad placement. The games industry podcast, Deconstructor of Fun, notes that user acquisition costs for mobile games has dropped 20% in recent weeks, adding to both the profitably and growth potential for mobile game companies, who usually depend on paid-user acquisition to drive new user downloads.

The longer-term picture, however, is more uncertain. Mobile games are dominated by free-to-play content, and even users who play long hours of mobile games may reduce their spending on in-game purchases as their personal incomes fall. AAA games, with larger production values and big development budgets, often retail for as much as $60. While the hours of play with each purchase represent a good entertainment value, even this price may be prohibitive for young players without employment. On top of these challenges, the value-conscious gamer’s option of buying a second-hand game at GameStop is also out of the question, with retail stores closed across the country.

The supply side of the games industry has its own challenges. Smaller game development teams have been building products with remote workers for years, but the challenges grow with larger-scale teams. Sony has already announced the delays of two upcoming games, Last of Us II and Marvel’s Iron Man VR  with the explanation, “Logistically, the global crisis is preventing us from providing the launch experience our players deserve.” Games that launched just before the pandemic face an open runway with less competition, but games in development will confront a waterfall of delays.

Fall 2020 is also the planned release date of new consoles from both Sony and Microsoft. So far, no product delays have been announced, and Microsoft executive Phil Spencer has said that the next-generation Xbox is still on schedule for release. The problem is that any new console launch will depend on a day-one offering of new games, and this may be a weaker link than the hardware supply chain.

Conclusion
Games will continue to see a surge in players, engagement, and revenue for the short term. But even a recession-resistant industry like games will not be able to prosper in a prolonged economic slump. At the same time, there may be a permanent shift in media consumption patterns as more people discover games as both a great form of entertainment as well as a way to stay in touch with friends and family. The impact of games as a new form of social interaction may be the long-lasting legacy of this pandemic for the industry.

For Further Reading
I highly recommend this analysis by Yoshio Osaki of IDG Consulting Group published in The Wrap.

 
 
 

Mike Fischer is a veteran of the video and gaming industries, having held executive positions at Microsoft, Amazon, Epic Games, and Square Enix. He is also a member of the faculty at the University of Southern California.

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