Written by Roy Lahood
The recession caused by the COVID-19 pandemic has taken its toll on world economies, but some sectors are booming in a market environment where others are struggling. The gaming industry has seen tremendous growth since March, when millions of people started quarantining. With so many people unable to go out and socialize with their friends and families in traditional ways, consumers have been playing and watching video games more than ever before. Gains in revenues, consumer base size, and viewership have come in droves to the gaming industry. While some experts like Jason Lake, the CEO of Complexity, say that these gains will recede once people get back to the old normal, the gains that esports and gaming have seen will have long lasting effects in the forms of consumer acquisition and cultural change (Smith, 2020).
The first shift in consumer’s view of video games follows the World Health Organization’s decision to encourage online gaming as a way to socialize and cope with stress during the pandemic (Kriz, 2020). This change came with the #PlayApartTogether movement, which over 50 industry leading game companies and the WHO launched to promote social distancing, wearing masks, and hygiene (Kriz, 2020). This is a development in the perspective of video games because just last year, the WHO listed video game addiction as an official mental health disorder (Snider, 2020). The attitude that video games are a useful tool for people of all kinds to socialize with each other online is becoming increasingly prevalent. In times where meeting some friends at your apartment to play a board game is not an option, meeting friends online to play a party game has become the new norm.
The increase in viewership of esports and video game playing have been substituting for not just extra time from not working or not going to bars and friends’ houses, but time spent watching traditional sports too; traditional sports’ ratings have taken a hit during the pandemic that has given new prime time coverage of esports (Smith, 2020). ESPN has streamed Overwatch and League of Legends matches in the past, but all sorts of sports networks are now streaming sports video games since in person games are not taking place (Smith, 2020). Even if esports’ TV network ratings go down following the pandemic, streaming services like Twitch have shown that the infrastructure of esports programming can and will be able to support the new boost in viewership that esports has gotten since the start of the pandemic (Smith, 2020).
Even with this unprecedented growth, game companies have had their own challenges along the way. The demand for esports and the number of esports organizations has definitely not gone down, but some parts of the supply chain for the gaming industry are struggling to keep up (Rietkerk, 2020). International competitive events are being canceled and postponed because those events necessitate being in person to avoid problems with players’ long-distance internet connections (Rietkerk, 2020). Players and spectators see bad internet connections as something that is detrimental to the competitive integrity of those events, so esports organizations have had to adapt (Rietkerk, 2020). The kind of event where competitors from Asia meet North American and European opponents are not feasible during the pandemic because of international travel restrictions (Rietkerk, 2020). Esports companies are focusing more on regional events to avoid this problem (Rietkerk, 2020). Along with the cancellation of in person events has come the suspension of important processes that are needed for developers to update their games. COVID-19 is delaying some games and updates because things that require games studios and expensive equipment, like voice acting and motion capture, are unable to make progress (Smith, 2020). These challenges, thankfully for game industry executives, will go away after the pandemic when production studios are allowed to be in person again.
The gains these industries have made are unprecedented. People are not just watching more streamed television, data from Deloitte’s 2020 digital media trends survey shows that about a third of all U.S. consumers surveyed have subscribed to a video game or cloud gaming service or watched esports or virtual sporting events for the first time during quarantine (Arkenberg, 2020). Steam broke its record for the peak concurrent users at over 20 million people in March (Smith, 2020). As for revenues, games and esports have had varying levels of growth. The games market is set to see revenue growth of 9.3%, putting up similar numbers to 2019 despite the COVID-19 pandemic (Newzoo Global Games Market Report, 2020). Esports year-over-year revenues are projected to be +1.7%, compared to 23.3% revenue growth in 2019 (Rietkerk, 2020). This curbed revenue growth is mainly due to the growth in areas like sponsorship and streaming met with large losses in merchandise sales, ticketing, and publisher fees caused by in person events having to be canceled (Rietkerk, 2020). The audience for esports is supposed to grow 11.7%, up to 495 million people in 2020 (Newzoo Global Esports Market Report, 2020). This year is supposed to be the best year ever for video game makers and esports.
These new subscribers and viewers are not expected to disappear after the pandemic. Before the pandemic, there was a consistent pattern of when people would play games during the week, with spikes on the weekend. Now, playtime is not as structured, with Steam showing no differences in playtime between the weekend and weekdays (Glassman, 2020). The gains caused by the pandemic have changed the behavior of consumers to play regardless of the day of the week. It is not unreasonable to assume that once the COVID-19 pandemic is over, consumer behavior will go back to normal as consumers will be able to do things they spent time doing before the pandemic. Michael Pachter, a well respected video game research analyst for Wedbush Securities, said that even if sales are high now and fall once quarantine ends, they won’t fall by that much. The COVID-19 crisis has not only given people more time to game, but it’s made more people game. Consumer acquisition from this growth is expected to last beyond the end of the COVID-19 crisis (Smith, 2020). The degree of which, however, no one can say until public health restrictions are lifted.
References
Arkenberg, C. (2020, July 8). Will gaming keep growing when the lockdowns end? Deloitte. https://www2.deloitte.com/us/en/insights/industry/technology/video-game-industrytrends.html.
Glassman, M. (2020, August 27). Video Game Numbers Show an Industry’s All-out Growth. Bloomberg. https://www.bloomberg.com/news/articles/2020-08-27/this-is-the-videogame-industry-s-coronavirus-pandemic-boom-in-charts.
Kriz, W. C. (2020). Gaming in the Time of COVID-19. Simulation & Gaming, 51(Newzoo Global Esports Market Report, 2020), 403–410. https://doi.org/10.1177/1046878120931602.
May, E. (2020, July 1). Streamlabs & Stream Hatchet Q2 2020 Live Streaming Industry Report. Streamlabs. https://blog.streamlabs.com/streamlabs-stream-hatchet-q2-2020-livestreaming-industry-report-44298e0d15bc.
Newzoo (2020). Newzoo Global Esports Market Report 2020 | Light Version. Newzoo. https://newzoo.com/insights/trend-reports/newzoo-global-esports-market-report-2020-lightversion/.
Newzoo (2020). Newzoo Global Games Market Report 2020 | Light Version. Newzoo. https://newzoo.com/insights/trend-reports/newzoo-global-games-market-report-2020-lightversion/.
Rietkerk, R. (2020, July 9). Newzoo Adjusts Esports Forecast Further in Wake of the Ongoing COVID-19 Pandemic. Newzoo. https://newzoo.com/insights/articles/esports-marketrevenues-2020-2021-impact-of-COVID-19-media-rights-sponsorships-tickets/.
Smith, N. (2020, May 12). The giants of the video game industry have thrived in the pandemic. Can the success continue? The Washington Post. https://www.washingtonpost.com/video-games/2020/05/12/video-game-industry-coronavirus/.
Snider, M. (2020, March 28). Video games can be a healthy social pastime during coronavirus pandemic. USA Today. https://www.usatoday.com/story/tech/gaming/2020/03/28/video-games-whos-prescriptionsolace-during-coronavirus-pandemic/2932976001/.