Litebulb Entertainment Research™

Industry

Opportunity

Analysis: Gaming Written by Taylor Stanyon. ID N8614326

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Executive Summary

It is important for trends within the entertainment industries to be effectively understood to

ensure that the development of entertainment content is on target. Perhaps the most open

to change area of the entertainment industry is gaming, with many technological

developments allowing for constant advances and shifts in how gaming is consumed. This

document includes a detailed analysis of where the current industry stands in regards to

trends that affect content, conduit, consumption and convergence. These trends are largely

caused by technological advances rather than audience changes.

This document also includes an analysis of the primary and secondary audiences within the

gaming industry. Trends that become apparent in these audiences are also addressed and are

important to understand what opportunities may arise within the industry, and what will

allow for future development and growth. Two very key opportunities have been outlined

and deconstructed. Three possible ideas to allow for future convergence in the gaming

industry have also been created and explained all with reference to the existing industry and

audience data and trends.

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Table of Contents

Executive Summary ................................................................................................... 1

Industry Analysis ........................................................................................................ 3

Audience Analysis ...................................................................................................... 5

Key Opportunities in the Industry ............................................................................... 6

Ideas for Future Implementation and Development ................................................... 7

Mobile and Console Platform Integration ............................................................... 7

Virtual Reality Implementation ................................................................................ 7

Development of a Traditional Sport- Entertainment Model for International E-

Sports ..................................................................................................................... 8

References ................................................................................................................. 9

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Industry Analysis

With the rise of the digital age, video games have evolved from occasional leisure activities to

parts of life consumed on a daily basis by millions around the world. According to the

Entertainment Software Association (ESA) (2013, page 11), the consumer spending on video

game hardware, accessories, and content in 2012 exceeded $20 billion. This is a staggering

statistic when compared to the cumulative box office gross of $7.5 billion for the film industry

so far in 2013 (The Numbers, 2013). This incredible figure is a direct result of the massive

paradigm shift and convergence that the video game industry has recently undergone. This

shift, caused by the advances in technology and wide usage of smartphones and wireless

devices has changed the way audiences consume gaming content. The popularity of mobile

gaming has risen drastically, as 51% of gamers play on a smart phone or wireless device (ESA,

2013). It is obvious that this industry, along with many others, will continue to evolve and

shift as technology creates more opportunities for convergence.

There are currently three main conduits that video games are consumed on; consoles,

personal computers, and mobile devices. Console gaming is where the industry was born and

is still a huge focus and a competitive market with over 6.8 million console sales in 2013

(D’Angelo, 2013). These console sales were dominated solely by three hardware

manufacturers that produce the three most popular consoles the Sony PlayStation, the

Microsoft X-Box 360, and Nintendo Wii. Sony dominates the 2013 console market with 50.8%

(3.4 million console sales) market share, followed by Microsoft with 36.4% (2.4 million

console sales) market share (D’Angelo, 2013). An astounding 51% of U.S households own a

video game console, and those that do own an average of two. Important times for the

industry are often when manufacturers release the announcement of a new generation of

consoles. Content creators utilise the ‘stores’ available on the consoles to distribute

downloadable content (DLC), often at extra charge and with great success. Microsoft and

Sony are currently marketing their next generation of consoles, the X-Box One and

PlayStation 4 respectively. According to D’Angelo (2013), consoles see the most sales the

year of their release, so as to take full advantage of this and to ensure that each console is a

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success, the manufacturers must effectively advertise their products to international markets

and ultimately change the way gaming content is consumed.

Personal computers (PC’s) have been used for gaming since the late 1990’s, and have evolved

into the most effective platform for PC gaming. As a platform, PC’s offer many ways to access

different content; through free to play downloads, digital purchases (both online and through

clients) and physical purchases. Free to play gaming has seen huge growth in the past year, in

particular multiplayer online battle arena (MOBA) games have become more popular than

gaming juggernauts such as World of Warcraft (a peak of 12 million players in 2010) and

other paid subscription based games (Sinclair, 2013). One particularly noteworthy free to play

MOBA is League of Legends, with over 32 million registered players and international

professional tournaments and leagues that run year round (Augustine, 2012). PC gaming is

the foundation of E-Sports, a professional gaming movement that broadcasts online

internationally. The Season Two World Finals for League of Legends had 8.2 million viewers

becoming the most watched E-Sports event ever with a prize pool of 5 million dollars (Lien,

2012). PC gaming has also seen a paradigm shift as a result of digital convergence with

regards to content accessibility very similar to that of the iTunes shift in the music industry.

Digital game purchases are now common and accessed through websites and downloadable

clients, the most noteworthy of which is Steam, with approximately 6.2 million user logins

daily (Steam, 2013). This noteworthy shift towards the consumption of the E-Sports sub-

product, and the increase of digital sales must be recognised by producers as this is the

future of PC gaming.

The final and most popular gaming conduit that has only recently become a player in the

gaming industry is the mobile device. One reason for mobile gaming’s success is what can be

referred to as a ‘triple crown’ of mobile usage, which is reach, engagement and monetisation

which has allowed gaming to be consumed as it never has before (Chou, 2013). In the USA

alone the amount of mobile gamers has surpassed 100 million, seeing an increase of 35% in

the year (Newzoo, 2012). Over 80% of revenue generated from mobile applications was from

gaming content, which is extremely broad and caters to numerous audiences (Chou, 2013).

93% of paid application downloads are game applications, a staggering amount which

resulted in $12 billion dollars being generated in 2011 (Intellectsoft, 2013). These staggering

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statistics are a direct result of the convergence seen through application stores, allowing for

device users to consume gaming content in the touch of a button.

Audience Analysis

Gaming content is extremely diverse, with target audiences ranging from children to teens to

adults, and as a result gaming as an entertainment platform has an incredibly huge

international reach. With the rise in mobile gaming, the amount of audience demographic

variance has increased, meaning that game developers must adapt in order to effectively

deliver popular gaming content. Each gaming platform caters to an individual primary

audience depending on levels of involvement with the games and industry. As technology

advances and allows gaming content to develop and undergo complete paradigm shifts, so

will the audiences for gaming content change, and these trends must be recognised by

developers in the industry.

On a superficial level, research shows that 68% of gamers are over 18 years of age, and that

the average gamer is 30 years old. These statistics may be surprising, however not as

surprising as the fact that 45% of all gamers are women, representing a larger portion of the

audience than boys under the age of 17 (ESA, 2013). These statistics make the primary

audience obvious as the highest number of gamers internationally are males aged 18-45. This

perhaps stereotypical audience may be overtaken in the future by the current secondary

audience of 70% of all women aged 12-24 that currently play video games, mostly on mobile

devices (ESA, 2013). The rise in the numbers of female gamers is a direct result of mobile

gaming emerging as a viable entertainment conduit.

Geoffrey Zatkin of EEDAR Research says “We basically have a gaming device in every single

pocket… It’s now social(ly) acceptable to play games anywhere” (Mobile Minute, 2013). The

mobile gaming explosion has seen females rise to represent 60% of mobile gamers, and 63%

playing social games with interactive engagement mechanisms (DeLuca, 2013). Females

between 20-35 play brain quizzes, simulation games, and management games the most,

whilst females ages 35-50 played slots and social turn- based games the most (Laughlin,

2013). Male mobile gamers tend to skew towards competitive games, focused on action and

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role playing (Laughlin, 2013). According to Laughlin (2013) mobile gamers have a high

willingness-to-pay in order to progress faster in a game, in particular commitment- oriented

games (popular with females) have incredibly high monetisation prospects that are achieved

through ‘in-app’ purchases.

Key Opportunities in the Industry

No other entertainment product can be consumed in as many ways as gaming can. The

infinite amount of content and various conduits allow for new developments to be made in

the industry almost daily.

The future of the gaming industry evidently lies within mobile gaming. Whilst this conduit is

not the most exclusive it is the most popular and effective at this current point in time.

Applications that are free to play and offer in app purchases are extremely successful on the

most part as a result of the reasons mentioned in the industry analysis above. An excellent

example is “Candy Crush Saga”, a free to download game that has set records for the highest

grossing application of all time. With 44 million monthly active users, “Candy Crush Saga” is

played more than 600 million times a day, generating an estimated $633,000 each day

projected to amount to $231 million in 2013 (Dickey, 2013). This format of content (free to

play- in app purchases) is the most easily monetised game type for the mobile gaming

conduit. This style of content has already been proven incredibly successful and is a key

opportunity in the ever-expanding mobile gaming market.

Whilst mobile gaming has reach to casual gamers through mobile devices, professional

gaming based around console and PC gaming has a well connected core gaming audience

that is significantly more invested in the industry. The already established yet growing

professional gaming scene create huge community events that have exploded in popularity.

Major League Gaming (MLG) is a “…producer of broadcasts and video game tournaments for

the hard to reach, highly- engaged audience of 18-34 year old males” (MLG, 2013). The 2012

MLG season saw one year growth of 334% in live viewers to reach 11.7 million, statistics

which are consistent throughout all content broadcasts and professional leagues (MLG.

2013). The live event for the 2013 League of Legends World Finals sold out the Stapes Centre

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in under an hour with more than 10,000 tickets sold ranging from $40US-$100US (Pitcher,

2013). Monetisation of these events is also achieved through advertising, sponsorships,

merchandise and much more. E-Sports is now a viable entertainment sub-product of the

gaming industry, and the producing of E-Sport content represents a massive opportunity for

monetisation and eventually all aspects of the traditional sport industry will be emulated by

E-Sports.

Ideas for Future Implementation and Development

Mobile and Console Platform Integration

With the rise of mobile and the fall of console, console content developers should integrate

the two platforms together creating a much more involved gaming experience. For example

players could have the primary gameplay played on a console, and then utilise an app to

manage the character, quests or play mini-games and access bonus content whilst out of the

house. Current downloadable content (DLC) for consoles is purchased on the console itself,

however this convergence would make this DLC available on mobile devices and therefore

conform to the in app purchase content format mentioned above. By combining the primary

console gameplay with the mobile gaming platform juggernaut, content developers would

create the ultimate immersive gaming experience with a hugely broad potential audience,

and open many doors for monetisation opportunities.

Virtual Reality Implementation

The idea of virtual reality simulators has made a return in the form of the Kickstarter project,

Oculus Rift. The development of this brand new conduit for gaming will allow for new

content to be developed and consumed as it never has before. Once the technology is

released (expected to be late September), console manufacturers, in particular Sony and

Microsoft, should actively support and integrate the Oculus Rift into the next generation of

consoles (OculusVR, 2013). The Oculus Rift and the next generation consoles could be sold in

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bundles, ultimately the same process that was undertaken with Xbox Kinnect could be

imitated and would prove incredibly successful as virtual reality technology has not been

made widely available before.

Development of a Traditional Sport- Entertainment Model for

International E-Sports

Current E-Sports as entertainment is very similar to that of the traditional sports model (NFL

or NBA), yet there is enough content available to extend the current model even further. The

development of a gaming exclusive television channel that featured gaming industry news

programs, E-Sports tournaments, player and team streams, advertising, and other exclusive

gaming related content would prove incredibly successful considering the huge audience that

already engages with E-Sports. This channel would have to be made available through the

internet (subscription based) and other cable television providers to prove successful. Once

the channel is developed, mobile device applications would be developed (such as the official

AFL app) to once again immerse the audience into the channels extensive content. Overall E-

Sports has the audience base already strong enough to move towards a massive international

monetised conduit that would be consumed on many different platforms.

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References

Augustine, J. (2012, October 12). League of Legends has 32 million active players, is

now as big as StarCraft in Korea. PC Gamer. Retrieved from

http://www.pcgamer.com/2012/10/12/league-of-legends-has-32-players-is-now-

bigger-than-starcraft-in-korea/

Chou, K. (2013, January 31). Mobile Kills the Console But Advances the Gaming

Industry. Wired. Retrieved from http://www.wired.com/opinion/2013/01/how-

mobile-kills-the-console-but-advances-the-gaming-industry/

D’Angelo, W. (2013, September 3). 2013 Year on Year Sales and Market Share

Update to August 24th. VGChartz. Retrieved from

http://www.vgchartz.com/article/251276/2013-year-on-year-sales-and-market-share-

update-to-august-24th/

DeLuca, J V. (2013, May 13). Females and Mobile are Reshaping Traditional Gaming

Demographics. Trademob. Retrieved from http://www.trademob.com/females-

mobile-are-reshaping-traditional-gaming-demographics/

Dickey, M R. (2013, July 9). Insanely Popular Game Candy Crush Saga Is Bringing In

An Estimated $633,000 A Day. Business Insider Australia. Retrieved from

http://www.businessinsider.com.au/candy-crush-saga-daily-revenue-2013-7

Entertainment Software Association. (2013). Sales, Demographic and Usage Data,

Essential Facts about the Computer and Video Game Industry. Retrieved from

http://www.theesa.com/facts/pdfs/ESA_EF_2013.pdf

Entertainment Software Association. (2013) Game Player Data. Retrieved from

http://www.theesa.com/facts/gameplayer.asp

Intellectsoft. (2013). Most Wanted Gaming Stats. Retrieved from

http://www.intellectsoft.net/resources/wanted-mobile-gaming-stats/

Laughlin, D. (2013, March 29). Love, Courtship, and the Promiscuous Male Mobile

Gamer. Flurry Blog. Retrieved from http://blog.flurry.com/?Tag=Monetization

Lien, T. (2012, October 23). League of Legends final attracts 8.2 million viewers,

Season 2 Championships most-watched eSports event of all time. Polygon.

Retrieved from http://www.polygon.com/2012/10/23/3542424/league-of-legends-

final-attracts-8-2-million-viewers-season-2

Major League Gaming. (2013). Major League Gaming 2012 Season Generates 334%

Growth in Live Online Viewers. Retrieved from

http://www.majorleaguegaming.com/news/mlg-2012-season-generates-334-growth-

in-live-online-viewers

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Mobile Minute. (2013, April 1). Mobile Game Developers- Are You Targetting the

Right Audience? Mobile Minute. Retrieved from http://mobileminute.info/mobile-

game-developers-areyou-targetting-the-rght-audience/

Newzoo, (2012). Mobile Games Trend Report. Retrieved from

http://www.newzoo.com/trend-reports/mobile-games-trend-report/

The Numbers. (2013). Domestic Theatrical Market Summary for 2013. Retrieved

from http://www.the-numbers.com/market/2013/summary

Oculus VR. (2013) News. Retrieved from http://www.oculusvr.com/news/

Pitcher, J. (2013, September 2). League Of Legends finals a sell out at Staples

Center, North American regionals conclude. Polygon. Retrieved from

http://www.polygon.com/2013/9/2/4685046/league-of-legends-finals-a-sell-out-at-

staples-center

Sinclair, B. (2013, July 26). World of Warcraft drops to 7.7 million subscribers.

Games Industry International. Retrieved from

http://www.gamesindustry.biz/articles/2013-07-26-world-of-warcraft-drops-to-7-7-

million-subscribers

Steam. (2013). Steam and Game Stats. Retrieved from

http://store.steampowered.com/stats/

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