The Media & Entertainment industry has witnessed drastic changes in the last few months due to the coronavirus pandemic. Nationwide lockdowns have forced the entire world to change their way of living, which has had a massive impact on consumer spends. The Covid-19 pandemic has disrupted media and entertainment segments all over the world such as – events, cinemas, stadiums, entertainment parks, broadways etc. The cancellation of major events and shows has destabilized the industry. In addition to this, media and broadcasting companies are running into losses as advertisers have lowered their ad spend.
How Covid-19 gave a boost to online gaming
With social distancing and quarantine in the play, a significant positive impact has been noticed in the online gaming sector. As compared to the pre-lockdown times, there has been a 40% surge in the time spent on online games on mobile devices, PCs and gaming consoles specially in the US and UK region. Canada and Germany witnessed an increase of 15% and 18% in the online gaming activity respectively.
The drastic transformation of consumer life has strengthened the online gaming market. People across the globe, isolated by lockdown orders, have turned towards video/online games for some entertainment and fun. The results of a poll conducted by Neilsen Games during the period March 23-29 showed a big bump in the usage of video games. The most pronounced increase was seen in the US (45%), then France (38%), UK (29%) and Germany (20%). Gaming sales in the United States touched $3.3 bn in August (NPD Group).
Time spent playing online games has also significantly increased in the US as 29% of the respondents agree to have been playing more frequently with their friends online since the covid-19 pandemic began. As a result, people have been spending a lot more on this entertainment medium. 39% of the respondents of the Neilsen Games poll agreed to have started to spend more on video/online games. A trend of buying games online or digitally has been seeing an upward growth path since the temporary closure of brick-and-mortar retail store.
Cancellation of gaming events and conferences
Some of the world’s biggest gaming conferences and events such as E3 by Entertainment Software Association, GDC (Game Developer Conference), esports competitions and Minecraft Festival had to be cancelled or postponed in order to fence the spread of the deadly disease. The postponement and cancellation of these conferences has created various ripple effects specially for the young-less-established game developers, who rely on such conferences for business growth. The GDC, which was scheduled for March 2020 was also postponed after major gaming companies such as Sony, Electronic Arts, Kojima Productions, Unity, Amazon, Facebook and Epic dropped out of the event. EA (Electronic Arts) also suspended all live gaming competition events. Some of the other events which got cancelled were Overwatch League and Call of duty League.
Hardware production delay
Several gaming companies such as Nintendo faced hardware challenges since they mostly rely on China. With factories being closed, large gaming console corporations felt the effects of the pandemic quickly. The production delays resulted in shortage of switch consoles, accessories, games etc. The popular VR headset, Oculus Quest also faced manufacturing delays. In April, Sony announced that dozens of PlayStation video games including ‘The Last of Us: Part II’ would be delayed to an undetermined date. Other video game developers cited challenges of printing, shipping and retail selling of video games as reasons of further delaying the launch.
More reasons for growth of online games
Even though people are opting multiple forms of entertainment such as TV, music and video, online gaming has clearly emerged as a winner. The extended periods of self-isolation have triggered higher engagement rates. However, on a long enough timeline, online games are far more favourably positioned to come out stronger from this crisis than TV, music, video, and other formats that may be hit hard by recession. Reasons for this include:
(i) Online games have extremely high engagement rates with sessions much longer than traditional long form videos
(ii) Online games are turning into ‘socialising destinations’ as more and more people self-isolate
(iii) Due to the pressing need for social distancing, online events are picking up and are being fashioned into ‘live online worlds’
(iv) Online games are not held up by traditional hiccups such as ‘production delays’
(v) No distribution bottleneck owing to online distribution
Esports as a traditional sports substitute
The looming threat posed by Covid-19 has put the professional sports industry in a lurch. With major sports events getting cancelled, stadiums in the United States have been lying dormant ever since the pandemic started. In response, sports competitions have swiftly moved to online entertainment arenas. According to a research, the Novel Coronavirus pandemic will permanently increase the economic trajectory of eSports (MatthewBall). Beginning now, the segment will earn more revenue, funding, viewership and much better distribution.
The pandemic has given the esports segment its much-required thrust, where in pre-Covid times the companies operating in this segment were continually stuck in a vicious cycle of underachieved revenue targets. Huge losses made it impossible for the companies to invest in the right direction of growth. According to WeForum, the Covid-19 pandemic might result in eSports being normalized, all thanks to the accidental adoption of esports by various leagues, broadcasters and athletes. For example, NBA 2K – a popular basketball game has planned to host its first ever “3-on-3” tournament, where individuals can compete online and win a prize money of $25,000.
ESPN, NBC, Fox Sports and Fox have been streaming officially licensed video games of the NBA, Major League Baseball, NFL, Formula 1, FIFA and NASCAR while several video game streaming sites are getting massive viewership traction. As compared to Q4 of 2019, in Q1 of 2020, Twitch – a popular video game streaming platform hit a record of more than 3 billion watch hours, as reported by Streamlabs. It is estimated that global esports revenue will have a surplus of $1 billion this year, with China emerging as a leading market (Oxford Business Group).
Emerging markets re-align their strategies
The Coronavirus pandemic has forced the audience to become captive in their homes. As a result, it is estimated that $159.3 billion will be spent on video/online games in 2020, according to a report by Newzoo. The gaming market is forecasted to reach more than $200 billion by 2023. In the recent years, the emerging markets have witnessed a rapid growth of video/online games industry. Three driving factors of this are
1. Increase of usage of smart phones
2. Easy availability of high-speed internet
3. The overall growth of the online gaming industry at a global level
Another online technology that will boost the market is Cloud gaming which would enable players to stream high-end games on mobile devices, iPads etc, without spending on expensive hardware. Due to the pandemic, there is a notable increase in user engagement with mobile games. It is estimated by Newzoo that the mobile games market is set to generate revenues of $77.2 billion in 2020, with a YOY growth of 13.3%. In terms of game production and development, mobile games are far less impacted as compared to console games. Also, the programming for mobile games is far simpler than other console based complex platforms. Hence, the market is less prone to disruption.
South-east Asia and Latin America are the two hottest growing markets for online games. The online games market in South-east Asia generated more than $4.3 billion revenue in 2019, growing year-on-year with a growth rate of 13.9%. The rollout of 5G will accelerate the adoption of mobile games but due to extended lockdown periods, the actual deployment of 5G is hard to predict and several western markets expect delays.
Great opportunity for advertisers
The online gaming inventory has emerged as a secure space for advertisers to reach their target audience. In order to reduce the anxiety & stress levels, users are increasingly indulging in online gaming which means that in-game ads are bound to have a larger reach. A report by MiQ reveals that since the beginning of the pandemic, there has been a 60% increase in impression opportunities on gaming apps and domains. The United States has the largest impression opportunity followed by the UK.
The Coronavirus pandemic has overall provided a boost to the online gaming industry even though it has created several supply-chain challenges and it continues to pose a threat to less-established players. It has also been noticed that Covid has bumped up the AYCE (All You Can Eat) game subscriptions. According to Google, the daily search traffic for Microsoft’s Xbox Game Pass has increased by 50-150%. This highlights an interesting insight that during such low times, it is the low-cost and high-value form of entertainment that thrives. In addition, the game developers who have launched their games during the pandemic will enjoy the benefits of larger-than-normal audience.
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