The Future of the Video Game Industry: What You Need to Know to Stay Ahead of the Curve
In the next decade, video games will become even more immersive and engaging, thanks to better technology and innovative new designs. To stay ahead of the curve, you need to understand these three big trends: scale, metaverse-style environments, and new monetization models. With so much competition in the industry, it'll become increasingly important to have a massive global audience. Good franchise management and fan engagement will be essential for continued success. You'll also need to find and keep the best creative and technical talent in order to make your games stand out from the crowd.
The video game industry is doing well and is expected to continue growing. This means that there will be more games available and that people will spend more time playing them. Games are becoming a bigger part of our lives. The average person now spends six hours a week playing video games, which is more time than they spend on social media or watching television.
With this growth comes opportunity. For game developers, this means that there is a larger potential audience for your game. However, it also means that there is more competition. To succeed in the rapidly evolving game industry, you need to be aware of the following three big trends:
The gaming industry is currently experiencing a period of unprecedented growth, largely due to the engagement of younger gamers. Gamers between the ages of 13 and 17 are spending more time in video game "environments" than with any other form of media, including social media, music, and television. Compared with slightly older gamers, younger gamers are more comfortable in virtual environments and prefer hanging out with friends in a game rather than in person. The heavy engagement from younger gamers is expected to continue to drive the growth of the gaming industry in the coming years.
In the past, most gamers have been young. But now, it looks like fewer gamers are getting older. This change is probably because gaming is becoming more popular and people are using it for other things too.
Game changing trends
Technological advancements are increasingly enabling developers to create larger virtual worlds that run on any device. Genshin Impact from miHoYo is one of the most recent games to take advantage of this development. Virtual and augmented reality are beginning to deliver experiences that live up to the hype and real competitive prices. One indicator: More Meta Quest 2 headsets have been sold than Xbox Series X and S combined. Advancements in game engines (principally Unity and Epic Games’ Unreal) are making it easier to develop higher-fidelity games, inviting more developers into the mix. All of these factors are coming together to create a new golden age for video games, one in which even greater innovation and creativity can flourish.
The next wave of gaming experiences will be defined by innovative gameplay and monetization models, rather than impressive graphics. With new development tools making it possible for more developers to create realistic virtual worlds, the playing field is being leveled. The key to success in this space will be creating virtual worlds that are not only fun and social, but also well-designed. Gaming experiences that can revolutionize the industry will do so by leveraging cutting-edge technologies to deliver unique and immersive gameplay experiences. In addition, they will need to adopt new monetization models that better reflect the value of the experience being provided. With the right combination of these elements, the next generation of gaming experiences has the potential to redefine the industry.
The development of metaverse-style experiences is a natural extension of the current trends in digital media consumption. As consumers increasingly demand more immersive and interactive experiences, technology and media companies are responding with ever-more innovative offerings. Live virtual events, e-sports, and socializing are already well-established examples of this trend; it is likely that other media experiences and forms of commerce will soon follow suit. The rise of the metaverse represents a significant opportunity for both tech companies and content creators to engage with consumers in new and exciting ways. With the right mix of creativity and technical expertise, the possibilities are virtually limitless.
Recent research has shown that virtual worlds are becoming increasingly popular, especially among younger generations. These worlds offer immersive experiences that can be customized to suit the user, and are often persistent, meaning they exist even when the user is not logged in. With e-commerce capabilities, virtual worlds also have the potential to be monetized. Given all of these factors, it is not surprising that younger players are particularly drawn to virtual worlds and believe they will spend more time there in the future. Developers should keep this in mind when creating new virtual experiences and consider incorporating features that appeal to this demographic. Cross-play capabilities, for example, are likely to be very important to young users.
New monetization models
The free-to-play model has been critical to the success of virtual-world games over the last decade. By massively expanding the addressable player base and enabling the network effects required for those games to succeed, this model has allowed virtual-world games to generate significant revenue. In fact, at 78% of games’ revenue, the free-to-play model is the most popular monetization model in use today.
However, the free-to-play model is not static; it has evolved over time in response to changes in technology and player behavior. In particular, ad-operated free-to-play games have become more accepted on mobile platforms, and in-app purchases have become more differentiated. These trends are likely to continue as virtual-world games become a foundation for other monetizable experiences (such as live virtual events and commerce) and more players join the metaverse. As a result, the economics of free-to-play are likely to continue to grow exponentially.
It's no secret that the gaming industry is undergoing a major shift. For years, console and PC gamers have been accustomed to paying for their games upfront, either through purchasing physical copies or digital downloads. However, subscription models are starting to emerge as an alternative way to access games. Following the lead of other forms of media, such as music and movies, some gaming companies are now offering subscription services that give users access to a library of titles for a monthly fee.
Despite the heavy marketing and early signs of subscriber satisfaction, this model has received a lukewarm response from the broader gamer community. There are several reasons for this. First, free-to-play games have become increasingly popular in recent years, offering gamers a way to access a wide range of titles without having to pay anything upfront. Second, games are typically consumed differently than other forms of media—fewer titles are played more deeply and for longer periods of time. As a result, many gamers don't feel that a subscription service would offer them enough value for their money.
Only time will tell if subscription models will catch on in the gaming world. For now, it seems that most gamers are still happy with the traditional ways of paying for their games.
Blockchain technology is increasingly being used in the gaming industry to enable players to own and trade virtual assets. While this is still a relatively new development, it has the potential to become a major part of the gaming market. However, for this to happen, developers need to focus on creating a good player experience, rather than on the marketplace. In the long run, different monetization models will coexist, with free-to-play games being the most popular, followed by in-game purchases and subscriptions. Premium games that charge for the initial purchase will still have a place in the market, but they will not be the dominant force. By focusing on the player experience, developers can ensure that blockchain-based games have a bright future.
The future of the game
Looking at the trends, it seems like gamers, developers, and publishers will want four things from games: a large scale, good franchise management, a great customer experience, and talented creators.
Scale is truth
When it comes to video games, size matters. With development and operational costs reaching into the hundreds of millions of dollars, game makers need to find ways to generate massive player bases in order to recoup their investment. The free-to-play model has proven effective at building scale and creating the network effects that can only come from having millions of players and fans supporting the game and franchise. As the industry continues to grow, it will be interesting to see if other business models emerge that can achieve similar levels of success.
Reaching scale as a game company can be achieved in a number of ways. One is to organically develop capabilities and find the right talent. This approach requires significant investment and a long-term commitment, but can be very rewarding. Another way to reach scale is through partnership with other studios. This can be a more efficient way to gain access to new markets and distribution channels. Partnership can also create essential relationships with key players in the industry. However, it is important to choose partners carefully, as not all partnerships will be equally successful. The most successful partnerships are those that are based on complementary strengths and shared goals. In any case, reaching scale is essential for game companies that want to compete in the global market.
In the gaming industry, scale refers to a company's ability to reach a large number of consumers and generate revenue from multiple sources. The most successful companies are those that have built a platform that provides a home for fans across all stages of their gaming journey, from playing games to watching others play, streaming media, socializing, and making purchases. This year, Microsoft made a splash in the industry with its pursuit of Activision, one of the biggest players in the gaming world. The acquisition is a clear move on Microsoft's part to build scale by expanding its consumer base and content library. With more than 500 million active gamers worldwide, there is huge potential for companies that can tap into this market. Microsoft is clearly betting that it has what it takes to be a leader in this space.
There is no doubt that M&A activity is on the rise across the game industry. This is largely due to the fact that organic growth has become increasingly difficult to achieve. In addition, the entry of big tech and media companies into the market has made it more difficult for midsized publishers and studios to compete. As a result, many game companies are turning to acquisitions as a way to fill critical gaps in their organizations. However, this approach can be very challenging and many companies lack the necessary integration capabilities. In order to be successful, it is important for game companies to develop a clear and consistent approach to M&A. Only then will they be able to take advantage of the opportunities that are available in today’s marketplace.
As the business landscape continues to evolve, executives will need to invest in building up their M&A skills. This often means hiring the expertise they need, as well as establishing a consistent M&A process. A clear set of criteria for screening and integrating targets is essential for long-term survival. While this may be a challenge for most companies, it is essential for those who want to thrive in the ever-changing business world.
The success of any given video game franchise is usually contingent on three factors: the going rate for initial investment, the level of engagement from the target audience, and steady growth in fanbase. Out of these, "engagement" is perhaps the most important, since a player who is actively involved with a game is more likely to continue supporting it through DLC purchases (downloadable content)and positive word-of-mouth. Franchise management, then, becomes a question of how best to keep players engaged with the IP over an extended period of time. Some publishers opt for a "games as service" model, continually releasing new content to keep players interested; others focus on putting out sequels or spinoffs at fixed intervals. Whatever the strategy, the goal is always to ensure that the franchise remains visible and relevant in the minds of gamers. With so much competition in the marketplace, it's more important than ever for publishers to get this right.
Gaming companies need to strategize in order to manage their franchises across genres, technologies, and regions. This includes putting the fan at the center of decisions and focusing on engagement. Additionally, companies need to balance how much they spend on games and how much they spend on the franchise as a whole. New partnerships are essential, but each one requires different levels of investment and management. If gaming companies invest now in effective franchise-management capabilities, they will be better prepared for global media deals in the future.
Turn Customer Experience Into a Competitive Advantage
Current customer experience models in the video game industry are based on a linear progression from awareness to purchase, and rarely take into account the many touchpoints a customer has with a brand. However, as the metaverse continues to grow in popularity, companies will need to evolve their customer experience models to reflect the way customers interact with games, social media, and commerce in both physical and virtual spaces. A successful customer experience strategy for the metaverse will need to be based on a holistic view of the customer journey, and provide a seamless experience that moves between game play, socializing, and commerce. By understanding the way customers move through the metaverse, video game companies can create a customer experience that is truly beyond the game.
As we move increasingly into a digital world, it is becoming more important for companies to provide a seamless customer experience. This means that identity, wallet, and memory of lived experiences will all need to move seamlessly with the consumer across devices and platforms. Every touchpoint has to recognize the consumer and enable a total seamless experience (e.g., one registration, one avatar). This can be a challenge for companies, but it is essential in order to provide the best possible customer experience. In order to do this, companies need to invest in innovative technologies that can help them provide a seamless customer experience across all touchpoints.
The customer journey has traditionally been seen as a linear progression, moving from awareness to interest to purchase. However, in today's multi-channel, multi-device world, the customer journey is no longer so simple. Consumers move back and forth between different media and touchpoints, often multiple times before making a purchase. As a result, companies need to focus on creating a personalized journey that takes into account the individual preferences of each customer. With so many possible experiences available, curation is key. Companies need to select the experiences that best fit the needs and interests of each customer, in order to create a journey that is both engaging and effective. By understanding the individual customer journey, companies can create a more personalized and targeted experience that ultimately leads to increased sales and brand loyalty.
A company's journey to creating an engaged and long-term community does not begin and end at the consumer's interactions with the company. There are a number of out-of-game communities, such as Discord and Reddit, that can provide valuable insights into what the gaming community is saying about your company. In addition, user-created content on platforms like TikTok and Twitch can be a great way to connect with potential customers. And finally, gaming influencers such as Valkyrae and Asmongold have a large following of US teens who are interested in gaming content. Therefore, it is essential for companies to establish a proactive approach to building community if they want to stay competitive in the gaming industry.
Talent is king
Video game company executives consistently cite talent as their number one priority. The demand for top talent in the industry is outpacing the supply, and this imbalance is only expected to worsen as game companies invest more resources into building large virtual worlds. A recent Bain study showed that many video game developers are leaving their positions for jobs at big technology firms, which typically offer salaries that are 20% higher. However, increasing salaries alone will not be enough to retain top talent. In order to remain competitive, game companies must develop a more holistic Talent strategy that encompasses recruitment, onboarding, training, and retention. Too many companies view human resources as an internal function rather than a strategic partner that can help create a forward-thinking model that aligns with the company's overall strategy. By taking a more proactive approach to Talent management, game companies can ensure that they have the necessary manpower to meet the demands of the ever-changing industry landscape.
A good talent strategy starts with an understanding of your company's strategic advantage. What sets your company apart from competitors? If creativity is your advantage, then top creative talent should be at the center of your talent model. Keep in mind that these creative leaders have many options (not only with gaming, media, and tech companies, but as the metaverse grows, any brand wanting to be represented), so it's important to design a workplace that will keep them engaged and motivated. Workplace culture is key to this; you need to create an organization that employees advocate for and feel included in. By doing this, you'll attract and retain the best creative talent.
Many companies are still struggling to find the right balance between remote and office work, while trying to develop consistent norms across locations and functions. The hybrid model appears to be here to stay, at least for companies that depend on tech talent. It’s become part of the employee value proposition, and many employees have come to expect and demand it. But getting workplace strategy right is a key element. For smaller companies, the issue can be easier to resolve, but as companies grow larger and more global, the challenge gets harder. While there is no one-size-fits-all solution, there are some best practices that companies can follow to develop a successful hybrid workplace strategy. First, it’s important to clearly define the company’s goals and objectives for the hybrid model. Second, leaders need to establish consistent policies and procedures across all locations. And third, they must create a communication plan to ensure that all employees are aware of the hybrid model and how it will impact their work lives. By following these best practices, companies can develop a successful hybrid workplace strategy that meets the needs of their employees and helps them achieve their business goals.
It is essential for businesses to retain their most visionary and ambitious employees in order to maintain a competitive edge. However, doing so can be challenging, as these employees often have a high demand for meaningful work. They may become bored with projects that endure over time or lose interest in large franchises. To keep these individuals engaged, companies must understand their motivations and provide a variety of work that meets their needs. This includes short-term and long-term projects, as well as working on different aspects of a business. By understanding the individual's needs and catering to them, businesses can ensure that their most essential employees remain engaged and invested in the company's success.
The future of video games is a bright one, with the industry slated to grow exponentially in the coming years. However, game developers and publishers will need to adapt to a changing landscape if they want to continue to be successful. The industry is becoming more globalized, more technologically complex, and more deeply integrated with other media platforms and aspects of life. As such, competition is stiffening and only the companies that are quick to improve their capabilities, talent, partnerships, and market positions will be able to stay ahead of the curve. Are you ready for the future of video games? It promises to be an exciting and challenging time for all involved.
If you're looking to stay ahead of the curve in the video game industry, or whatever industry your scope of business finds you, Frameworks can help! We provide the best talent management and business consulting and training, so you can keep your company competitive and successful. If you have any questions, please don't hesitate to comment below. Happy Hunting!