Could the media industry be facing its next big disruption?
In 2017, Netflix CEO Reed Hastings revealed that they "compete with (and lose to) 'Fortnite' more than HBO." The global gaming market was estimated to be valued at $174.9 billion in 2020, representing a 19.6 percent YoY growth. While gaming faces broader opposition in the entertainment industry due to competition for screen time, some players, such as Facebook and Amazon, have entered the gaming space more successfully than others. So what does this mean for consumers in the ever-evolving media landscape, and more importantly, how can the entertainment industry overcome this potential hurdle?
In contrast to traditional media, gaming creates a sense of community. A 2020 PubNub survey found that 43 percent of gamers found friendship through gaming. It is also becoming increasingly more of a form of social media, a network of people with shared interests and experiences focusing on doing something they enjoy. Whilst traditional social media platforms bring together people from a broader demographic; gaming has the potential to create personal connections amongst its users.
eSports has become a central aspect of online gaming culture; its growth is primarily driven by audience expansion, sponsorship, and advertisement revenue, with its total viewership rivalling the fan base of traditional sport. Entain, an international sports betting and gambling company that owns brands such as Coral, Ladbrokes, PartyPoker and Sportingbet, has grown by about 18.5 percent over last five years, with an estimated 1.2 billion audience size as of 2020. Their market growth could be due to the increase in streaming, online games, and competitions, but the growing popularity of eSports has had a significant contribution.
Traditional gaming is becoming increasingly diverse with a broadened audience. In 2020, women accounted for nearly 41 percent of all gamers in the United States. Jana Hladikova, Xbox International Sales Lead shared that "Xbox is an entertainment hub, not just a game," and she highlighted that most consoles are now kept in the living room despite the stereotype of having it in "the man's den." Consoles are being used not just to play games but also to watch films, listen to music, and talk to friends and family. They are becoming an integral part of day-to-day entertainment and communications.
We are also seeing new technologies and innovation penetrating the market with growth in cloud gaming, enabling users to stream games on multiple devices. Virtual reality (VR) and augmented reality (AR) markets have experienced significant growth, increasing 183 percent from 2015 to 2020. These innovations have enhanced the gaming experience by offering a real-time ability to create a virtual world and take gamers into their screens. The growth of VR and AR shows no signs of slowing down, which could be an opportunity for growth for media companies.
New developments in technology, cloud gaming, and the increasing popularity of eSports mean we are likely to see continuous growth in the gaming market over the next several years. We can expect to see an increase in big tech entrants, partnership and M&A activity. While the industry may be adapting to this disruption, media companies must have the proper institutional knowledge of the gaming industry before entering the gaming market to prevent some of the failures that we have seen in recent years. Google Stadia was to be the "future of gaming", yet in February 2021, Google ended up shuttering Stadia's first-party development team and cancelling all exclusive games in the process. Developing games is a challenge but making a platform for games is even more complex.
When looking to the media industry's future, gaming has the potential to be the next significant disruption. Media companies have the existing infrastructure with video streaming capabilities and financial backing, yet it has been challenging to enter the space. On the other hand, gaming companies may find it easier to enter the broader media market. HBO announced a television adaption of the award-winning video game 'The Last of Us.' The series will not have an initial pilot episode to test the waters or another preliminary litmus test. This confident move is unlikely to be the last of its kind, with more collaborations and acquisitions on the horizon. The industry is very complex and often not easy to get right, but where do the opportunities lie? Is it with media companies entering gaming or gaming companies entering media?