Esports, games and mobile are probably three of some of the most innovative and fast-moving spaces in business today. You probably need to talk about trends every 6 months rather than annually. However, we’ll do our best to reflect on the esports, games and mobile trends in 2019 that Newzoo has recently shared (although some are predictions, not trends).
- The market will continue to grow – Newzoo states that “the global games market will generate revenues just short of $150bn” and that “mobile game revenues will [be]…mostly driven by emerging markets like India. Yet fewer game releases in China, the world’s largest and most lucrative games market, will limit its growth potential.” We think, added to this, sports businesses will increase their own game production activity and probably on mobile given its penetration and the ability then to own first-party data and develop one to one relationships with gamers and potential fans. However, we may not see the fruits of this labour for a year or so
- A relatively quiet year for Sony and Microsoft – the thinking behind this from Newzoo is this ” is mostly due to both companies gearing up for the next console generation.” Makes sense to us
- PC store wars will heat up – “On PC, Steam has had a monopoly on the digital game store market for over a decade” says Newzoo’s article. “The tail end of 2018, however, saw increased competition from the Epic Games Store and Discord Store, respectively.” Both are leveraging their large audiences, “…while also offering exclusivity deals and a better revenue split for developers wishing to add games to the store” to drive this competition. Fortnite’s continued success, or not, will no doubt have a large bearing on this for Epic, whereas the Discord audience is less susceptible to any passing fads/trends etc.
- China’s regulations will change developers strategies at home and abroad – In 2018, China created the Ethics Game Committee and stopped a number of games from being played in China. Given their huge population, and the proportion who are gamers, this had a huge impact on several companies – not least Tencent who saw a sharp drop in its share price. Newzoo believes this committee will continue to make it “…difficult for publishers to release games in China.” In response to that, they believe “the new regulations will also cause Chinese game companies to move their focus overseas. In particular, Southeast Asia, Japan, South Korea, Europe, the U.S. and the Middle East…”. Some games that are huge in China have found issues when trying to translate this success internationally. It will be interesting to see whether this acts as a barrier to foreign investment, or something to be learned from and adapted to.
- Premium passes become more popular – As Newzoo states, “premium content passes [give] fans the chance to pay extra for additional esports video content. Fans who purchased the Overwatch League All-Access Pass on Twitch, for example, got access to extra shoulder content. We will see plenty more premium passes appearing throughout 2019, as leagues and broadcasters continue to look to new monetization models.” We completely agree on the drivers for this, as monetisation in esports is a key for businesses as they start to mature and are expected to show a return on investment. What will be interesting is the audience’s appetite for this given their expectation of free content. New esports viewers may be more accepting, given different expectations. But the biggest driver will be the quality of the premium content and if it offers value.
- More esports athletes featured in brand marketing campaigns – We’re not sure if we’d class this as a trend as such, but as esports (and therefore the players themselves) continues its audience growth and non-endemic brands up their activity, this is a natural conclusion. It’s a process that already exists across other passion points e.g. sport and music. What is more interesting to us is how brands might look to use players in a different way to traditional ambassadors, given the different industry dynamics, rather than replicating processes done before.
- Esports venues on the up – “There are numerous esports arenas under construction, and many of these will open their doors in 2019. Some notable examples include Riot Games’ LCK Esports Stadium in Seoul; Full Sail University’s $6-million arena in Florida, which will be the world’s largest collegiate esports venue; and Canada’s first esports arena, based in Richmond. We expect plenty of more venue announcements in the coming months” says Newzoo.We don’t disagree that venues are a big 2019 theme, in fact, we’re currently in discussions with four international venue owners after they came to us looking to better understand esports and it has also been a topic for discussion amongst our investor clients.For us though, we see a bigger opportunity in the creation of gaming venues that from time to time host esports events, or at the very least run their own localised competitions (or are part of a network). We don’t believe a venue business model that purely focuses on esports is sustainable; there just aren’t enough big competitions you’d be able to attract and monetise to justify the capital outlay. You essentially run into the same problem every other venue-owner has, how do you optimise use when there is no big game on? By running essentially a ‘bowling alley’ model, you get people every day. There are multiple income streams then available to you. Then, from time to time, you host big competitions to get the additional revenue and boost in venue profile.
- Southeast Asia esports scene continues to take off – Newzoo’s research marks out Southeast Asia as “2019’s esports region to look out for. The region boasts the fastest-growing esports audience, which will reach 31.9 million in 2019. In Q4 2018, Singtel Group and its regional partners agreed to collaborate to grow the gaming and esports ecosystem across Southeast Asia, Australia, and India. This will mean plenty of new esports developments in SEA going forward.”We have already seen signs of this in the second half of 2018. Having taken on a new Malaysian-based client (soon to be announced), we’re currently in discussions with four other esports businesses in the region – all of whom have approached us. Having never before having had a presence in the region, we concur that it is going big!
- Epic will expand its store to mobile – More of a prediction than a trend (unless others start doing it too), but Newzoo believes “Epic has made its intention to compete with Steam on PC very clear. It is likely that the company will try a similar strategy on mobile in 2019. Epic already decided to bypass the Google Play Store earlier this year, when it opted to release the Android edition of Fortnite via a dedicated proprietary launcher.”
- More immersive and competitive games on mobile – one of the innate human behavioural drivers that motivate people to game is the chance immersive experience it gives you, taking you to another place. Therefore the technology of the platform that delivers the game is a key driver in the audience scale. “Over the past few years, smartphones have become powerful enough to match certain laptops in processing power—all while remaining small enough to put in your pocket. One result of this: genres that were once exclusive to PC/console—including shooters, MOBAs, and (MMO)RPGs—are now commonplace on mobile. In 2019, they will be even more common, with further releases of immersive and competitive mobile games” says Newzoo.
- 2019: not the year of 5G – Again, not a trend but a prediction, Newzoo says that “In 2019, only a select few cities will have access to 5G. At first, the difference between 4G and 5G will seem incremental, as 5G will need several more years of infrastructure investment and technological breakthroughs to deliver on its full promise.”
- Apple will enter the video-streaming space – One final Newzoo prediction, although the creation of video-streaming is a trend, is that Apple will enter a space that features Disney+, “…Netflix, Amazon Prime, Hulu, HBO NOW, and many more.”