how coronavirus is affecting the media industry

The global video game industry is thriving, despite the widespread economic disruption caused by the coronavirus. With the practice of social distancing reducing consumer and business activity to a minimum, gaming offers an engaging distraction for people at home looking for social interaction, and initial data shows huge growth in playing time and sales since the lockdowns began.

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The gaming business model
The global video game market is forecast to be worth $159 billion in 2020, around four times box office revenues ($43 billion in 2019) and almost three times music industry revenues ($57 billion in 2019). The biggest market by revenue is Asia-Pacific with almost 50% of the games market by value. North America accounts for a quarter of revenue.

Gaming revenues are almost entirely driven by consumer spending, but the business model has evolved significantly in recent years. Consumers today buy fewer games than previous decades, but spend more time with those games, shifting the business model from single-unit to recurring revenue generated from a base of active users.

As a result, the industry is laser-focused on increasing engagement per user. Aside from making video games as compelling as possible, the strategy for doing so has been the adoption of in-game monetization opportunities. This additional downloadable content (DLC) can include expansion packs, new features, tools and characters, and “loot boxes”, which are effectively a lottery of virtual items.

This business model has come in tandem with improvements to gaming hardware, bandwidth and mobile internet, which have made high-quality games more accessible across devices and platforms. Indeed, close to half (48%) of the industry’s revenue now comes from mobile gaming.

A separate part of gaming is esports, which refers to organized, multiplayer video game competitions. This sector is forecast to grow to just over $1 billion in 2020. Business models in esports closely follow professional sports – though competitions are far more fragmented – with the majority of revenue coming from advertising and broadcasting. Although relatively small in comparison with the overall gaming market, esports is relevant here because it appears connected to the continued growth of gaming.

COVID-19 has boosted engagement with video games, but has complicated hardware and software development
Like many companies, the gaming industry is supporting community initiatives to mitigate the effects of COVID-19. These include charitable pledges worth millions of dollars, the donation of surplus computational power to help researchers better understand the coronavirus, and solidarity response funds to help medical workers, children at risk and employees who have been adversely affected.

Social actions aside, the consequence of COVID-19 on gaming has been a massive enlargement of the audience available to publishers. Gaming is typically an at-home activity, and a steady stream of headlines has shows that it is flourishing during the pandemic.

Asian gaming giants Nintendo and Tencent both saw sales increases during the first quarter. The former sold almost half of its games digitally, a record that helped increase profits by 41%, while Tencent’s year-on-year online games revenue increased by 31%. Analysis from GamesIndustry.biz shows that sales across 50 key markets rose by 63%. Even games released during the pandemic are performing well, with titles as varied as Doom Eternal (a first-person shooter) and Animal Crossing (a world-building simulation) both breaking sales records after launching. This is reflective of data from Comcast that shows how new game downloads have increased by 80%, compared to a rise of ‘only’ 50% in total gaming downloads.

Looking at downloads and sales in isolation does not paint a complete picture, since many games are now available for free (and then monetize in-game). But other metrics for engagement tell the same story. Verizon has reported an increase in gaming traffic during peak hours of 75%, compared to increases of 12% increase in digital video traffic and 20% in web traffic. Meanwhile, data from Streamlabs shows that platforms like Twitch, YouTube Gaming, and Facebook Gaming have also experienced a surge in growth, with around a 20% increase in usage hours reported across services.
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