Video gaming – Rising industry amidst global crisis.

One could say that with each closed restaurant, theatre or club, the number of potential consumers interested in video-gaming rises exponentially. This is due to each being social in nature, thus transposing their already constructed social nets onto other environments offering similar kind of entertainment, and with entire countries in lockdowns, what could potentially be better for socialising than engaging oneself in online video-gaming? This statement seems to ring true for majority of countries where video gaming has developed into an accepted form of spending leisure time.

However, despite significant increase in potential consumers, incessant spread of COVID-19 interferes with video gaming industry in areas when it is highly dependent on other industries. For example, closure of most manufacturing plants directly affects development of gaming hardware. Closure of development studios affects release dates of new titles and finally, the recommended practice of social distancing prevents gaming events such as eSports and trade shows from taking place at all [5].

All of this however, doesn’t affect video gaming industry as whole as much as other parts of the economy, as most of the physical difficulties can be overcome by moving to online space, and where development of systems and new titles is stalled, there is even more demand for already existing games available on every online store. It does seem like market mechanisms of supply and demand are disturbed in some regards. Nevertheless, other industries are completely shut down and the same cannot be said about most businesses operating within the video gaming industry.

Brief overview of video gaming economic cycle

As with most (if not all) economic cycles, the video gaming industry has its own endogenous (internal) causes for fluctuation. All fluctuations can be presented as increase/decrease of players and/or increase/decrease in total spend on games/gaming hardware. These causes can be easily diagnosed and defined as:

  • Release of next-gen systems;
  • Release of peripheral gaming accessories such as VR devices and gaming PC hardware;
  • Release of new software, e.g. DirectX;
  • Release of new gaming titles;
  • Monetisation methods used.

Overall, points 1, 2 and 3 can be understood in terms of strict technological advancement, whereas point 4 is mostly dependent on normative length of release cycles for each genre of games and point 5 relaying on the extent of social engineering techniques available to use in the practice of marketing. As for specific dynamics between these causes and their individual and/or collective impact on total output in terms of spend and/or number of players, these are usually inversely proportional to time, in that the more time passes without a release of new product, the slower total increase in spend and/or players, despite an absolute growth of total numbers on a year-to-year basis. The entire system of interdependent causes has also an intricate internal structure defined by development cycles of its own separate elements, i.e. the norm for interval in releasing a next-gen console is longer than the interval for releasing a title, and therefore each cause impacts the industry differently, with varying degree of strength.

However, it is not purpose of this article to extensively describe and explain each of the drivers of surge/drop in number of players or total revenue from final goods in the area of video gaming. On top of internal causes of fluctuation, there are also exogenous (external) causes, having to do mostly with the macroeconomic shape of national economy, and as such, not necessarily heavily impacting video gaming industry as a whole, unless a nation and its sphere of circulation is facing a significant expansion or recession across its major industries.

Impact of COVID-19 on video gaming economic cycle

Current national lockdowns in most Western countries can definitely be defined as a case of significant recession in national economies as a whole. That being said, it is definitely the biggest exogenous cause for fluctuation in video gaming industry it has ever experienced. As previously stated, this fluctuation is of expansive, rather than recessive characteristic, at least for most of the video gaming businesses.

In spite of that, it will have impact on the industry as a whole, moving forward. Most importantly, in regards to the planned release of next-gen consoles around the end of the year. There are rumours circulating already about the possibility of postponing the planned 2020 release of PS5 and new Xbox Series X and the potential cause it might have on pricing, availability and overall marketing [6]. Indeed, it would be highly disruptive for both the manufacturers and retailers if the new systems were to miss their usual, very established before-Christmas release slots. Christmas period is well-known for its surge in total spend on video games, hardware and even in-game items and is a perfect opportunity for buying
a new system. If the release of both PS5 and Xbox Series X is to be postponed due to the current global health crisis, then the typical dynamic between Christmas spend and acquiring new systems will be disrupted, possibly forcing both manufacturers and retailers to tweak the prices and spend more on advertising as Christmas funds will have already been spend on something else, video gaming related or not. Therefore, the most predictable cause for video gaming industry upward fluctuation might be severely hit by the delay in development being experienced right now. Same goes for development and release of new titles; however the potential impact is significantly lower here. Nonetheless, it doesn’t change the fact that long-established marketing practices aimed at Christmas and pre-Christmas periods might have to be revised and focus turned more into already existing products.

Despite its potential effect on the most predictable and biggest endogenous cause for positive fluctuation and thus indirectly on the gaming industry as a whole, COVID-19 might prove to be a sole exogenous cause leading to a significant change in the video gaming economic cycle forcing businesses to rethink their strategy for the upcoming months. Before we get to that, let’s briefly take a look at reasons why people play video games and in what circumstances, so we can investigate potential effect of COVID-19 on consumer behaviours.

Research opportunities

People engage in video gaming for various reasons, some out of boredom, some to escape reality, some to engage with others. On top of behavioural aspects of playing video games, there is also availability and feasibility, i.e. whether a specific amount of leisure time should be spent on video gaming or other activity. With current global situation and enforcing of social distancing as a normative practice, those who would usually engage in other-than-gaming activity to satisfy their need to socialise need to turn to other, easily available forms of socialisation. Some are in need of adrenaline and just simply can’t make do with sitting at home all the time. Some in turn, would like to distance themselves not just physically, but also mentally, from the perceived dangers and consequences of current global situation.

This very brief profiling of behavioural types outlines the opportunity for diagnosis of needs of more potential consumers than it is usually possible. Not everyone sits at home all the time - right now it’s the norm recommended by governments. Some have no idea how to cope with this situation and are completely unaware there are types of entertainment out there they have not experienced before or at least haven’t seriously gotten themselves into.

Any online or party game seems like a great idea for someone who’s in dire need of socialising. In need of some quick dose of adrenaline? Action games are the best cure here. Feeling insecure and willing to escape the reality? Role-playing and adventure games can fill in the blanks. Too much free time and nothing to do? How about trying out a game or two on a mobile device?

With the majority of population sitting at their homes, there is an unmatched opportunity to tap to highly representative sample, specifically including those who either don’t have time or have not experienced video gaming as means for spending their leisure time. As with most businesses, making first contact and developing praxis of gaming amongst potential consumers is the most important step in fulfilling their needs and further developing their journey. Moreover, if there is a similar situation in the future, where a person is stuck at home for prolonged period of time (might be temporary unemployment, retirement or sabbatical leave); they will have already developed behavioural means to cope with that additional spare time, and so ultimately video gaming will be a cognitive construct readily available in solving the mental dilemma of too much leisure time.

Monetisation method is yet another important factor within video gaming industry as it defines the character of entry level to the world of gaming. A perfect example of a highly successful game driven by its monetisation method is Fortnite, where all you need to do in order to start playing, is to just download the launcher and set up your free account. It is highly probable that this type of game acquisition might be very popular amongst a lot of potential consumers who were either otherwise unwilling to give video gaming a go, due to initial monetary barriers in making their first contact with a game. Now is the time to properly test it.

Additionally, widespread closure of entertainment centres determines a change in dynamics of leisure spending. Total budget for entertainment of individuals or entire household will most likely not change due to global pandemic; its share however, will be drastically different. Some might be enticed to save, but vast majority will redirect their funds onto different forms of entertainment. There is a hypothesis that direct stagnation of normative (in-person) social life will boost its virtual counterpart. That is, games offering party play and various forms of multiplayer are expected to boom, although there is no data as of yet to predict which, during the times of global crisis, groups of consumers would be affected the most, and what would be the conversion rate from non-players to players and players to spending-players under these very unique circumstances. All in all, there is a significant lack of information about consumer behaviour in a crisis such as the one we’re experiencing at the moment, and this lack of information prevents everyone from making accurate business decisions. Let’s take a look at how we can use already existing and long established research techniques to shed some light on the current situation.

What can GameVision offer during these troubled times?

Whether it be an analysis of the industry as a whole – its trends, fluctuations and developing strategy for the foreseeable future or just profiling of individual groups of consumers - our on-going tracking study has a unique opportunity to collect data amongst more robust sample than usual - both quantitatively and qualitatively. Quantitatively, as there is more potential respondents willing to get themselves engaged in the process of market research and qualitatively, as we gain access to potential consumers who would not prioritise video gaming over other types of entertainment if their regular social and leisure time was not disrupted. Due to this, there is a tangible opportunity to pursue topics such as these:

  • Which types of needs in relation to in-game activities need focusing the most amongst those completely new to video gaming;
  • What drives people to try out video gaming in the first place and how to reach to them during their prolonged stay at homes;
  • What is the total conversion rate from non-players to players and from regular players to paying consumers and what these types of conversions are most dependent on;
  • What kind of in-game experiences and genres are the most popular in the times of crisis;
  • Attitudes to release of new systems and predicted spend on video gaming during the upcoming months;
  • Information channels used to make decision in how to substitute regular types of entertainment with others;
  • How strong is the surge in players and paying-players month-after-month in the current situation, compared to regular circumstances;
  • Predictions on how long will the current surge last and what is the total predicted number of freshly arrived consumers that need special attention in keeping them interested;
  • Which gaming brands gain the most popularity and to what extent does this increase lead to total surge in spend;
  • Composition of types of gamers in online-based games and how to effectively monetise the freshly arrived ones;
  • With fixed household budget for leisure/entertainment, at the expense of which specific types of regular leisure/entertainment activities video gaming gets prioritised and gains monetary advantage;
  • What are the gaming systems with the strongest consumer focus and awareness, including factors such as disruptions to manufacturing and distribution difficulties.

These are all ideas born out of uniqueness of current situation and are pivotal in building efficient business strategy for both the coming months and more distant future, when similar disruptions might occur again. Damage control is one side of the coin here, whereas diagnosis of emerging trends and identification of dynamics and internal structure of the market and its ever-changing composition is the other. As mentioned before, exercise like this, on a large scale, may bring to light unidentified and uncatered types of consumers who are willing to get into gaming only in specific circumstances, but are unreachable most of the time due to lack of behavioural contact (experience) and cognitive availability (awareness) towards video gaming. Actually, not just types of consumers, but also whole sets of behaviours and social norms dictating change of distribution in the area of leisure/entertainment spend.

As usual, initial research efforts undertaken on unique and not-yet-observed social and market phenomena focus on identifying and reporting ad hoc changes in the usual trends. This is, however, just the tip of an iceberg as scientific approach to research methodology dictates digging deeper by moving to phase two and three of the entire process – explanation and prediction. Only evidence-based and data-driven prediction based on reliable analyses guarantees production of actionable insights that can be then applied to solve business-specific commercial problems and help in developing efficient strategies.

Peter Konopka
Research Executive