The Metaverse
Why games will be the next generation social hubs, make a bigger splash in pop culture, and grow larger than ever before.
Games are increasingly moving toward being social hubs, where players log in not just to play but to hang out with fellow gamers, and integrating non-gaming content to keep players online is becoming more popular. One example is the Travis Scott concert in Fortnite earlier this year.
The concert, where an animated version of Scott performed while players interacted with a constantly changing world, attracted 28 million players over 5 shows. Each show was a 15 minute set where Scott played his most popular hits leading up to the release of a new song.
Compare this to his “Astroworld” tour which attracted roughly 700 thousand visitors to 56 shows over a year. Not only was Scott seen by more people in a shorter time period through Fortnite, but he also attracted audience which would otherwise not have seen his show due to them being avid Fortnite fans.
The result? Scott’s new single “THE SCOTTS” immediately climbed to the top 100 list and his 2018 album “Astroworld” returned to the top list. After the event, limited edition Travis Scott skins, a physical “nerf gun” and action figures were released for players to buy online.
While there are no official revenue numbers for this event, it’s possible to make a conservative estimate to understand the power of these types of events: If only 10% of the 12.3 million players seeing the first show bought a skin that would equal a revenue of $18.5 million. In comparison, Scott made $65 million on his whole “Astroworld” tour. One weekend vs one year.
The possibilities for this type of entertainment in-game is extremely interesting. Not only is it possible to monetise with skins and in-game items, but also physical merchandise. Or why not sell tickets to an exclusive, virtual show? It’s clear that these types of revenues are very scalable.
In April, Fortnite generated $400 million in revenue on 3.2 billion hours of playtime which equals $0.125 per hour. In comparison, many AAA console/PC games (video games produced and distributed by a major publisher e.g. Call of Duty) monetise at roughly $0.50 per hour. This means that Fortnite is currently monetised at a lower rate per hour of game play than AAA games. However, I think this is skewed by Fortnite being played for a much longer time than the average AAA game resulting in revenue per hour decreasing but lifetime value of each player being higher.
But Travis Scott was not the first time that Fornite opened up for collaboration to get it’s players to open their wallets, rather it’s one of many. Brands/Artists that Fortnite has collaborated with in the past include Deadpool, Star Wars and the artist Marshmello, who held a concert/party attracting 11 million players.
Live streaming
Not only are non-content events increasing the lifetime of a game and keeping players engaged: Live streaming of games has exploded in popularity and e-sports are now without a doubt “mainstream”. Over 200 million people watch the “League of Legends” Final, which is a larger audience than the Super Bowl.
Something interesting to note is how the younger audience doesn’t differentiate between “internet celebrities” (YouTube, Instagram, Twitch) from “regular celebrities” (musicians, actors). They are all celebrities and entertainers, and this stream of thought is becoming increasingly accepted.
We’re seeing music artists like Drake stream together with Fortnite streamer Ninja, the musician Logic is retiring from music for an exclusive streaming contract with the streaming platform Twitch, and the rapper Offset is an investor in Faze Clan, one of the worlds largest e-sport teams.
It’s all about entertainment, and if you can deliver entertainment you are a “rock star” no matter if you play a video game or sing on stage.
The rise of live streamers and e-sports has affected how games are marketed to new players. Traditionally large game publishers would spend millions on marketing through online ads and TV advertising. Now the best marketing is done through Twitch, Discord and Reddit.
Building an early community to create hype around a game outside of regular marketing channels is no doubt the future. Many of the most popular games coming out now have mostly been advertised through Twitch, like Apex Legends which was released 2019.
GaaS - Gaming as a Service
Games now having a larger and more integrated player base than ever before means that it is likely that there will be a shift in how games are played, produced and distributed. A reasonable assumption is for more games to use a Gaming as a Service business model with recurring revenues.
Instead of a new version of a game being released every or every other year, new content is released on a rolling basis monetised through a subscription or in-game purchasable content. These types of games have a higher possibility of keeping players engaged and building a higher lifetime value on their customer base and a larger network effect.
Game motors like Unreal make it possible for developers to distribute their code to multiple platforms (PC, Console, Mobile) making the pool of potential players much larger than ever before. This also increases the possibility for cross play: play with friends on different platforms, a major attraction for many players.
Fortnite’s 250 million player base is in large due to the possibility of cross play and it’s availability on every platform which allowed them to quickly develop their early community. Historically, developers had to choose one or two platforms to develop for and there was no option for cross play.
If games become more like social networks moving forward, have a longer lifetime through GaaS and use social channels like Twitch for marketing, it’s not unreasonable to imagine that developers will move away from an AAA/publisher based business model (releasing a new version annually) to a Fortnite style model where developers have a higher level of control over their own IP, making money on skins, merchandising and other franchising (toys, movies etc.). Maybe some games will even adopt a mix of both.
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Original Tweet from 22 July 2020: