Mohammed NaserA brief look at investing in the gaming industry with an emphasis on market drivers and monetization strategies for 2021. Read more.
There was a lot of skepticism about investing in the gaming industry during the first half of last year. The pandemic and tumbling economies made people think that the gaming industry will also suffer. But, there has been a great influx of online gamers, and for 2021, the larger prediction is that this trend will continue. This year looks to be a good one for investments in gaming. Here is a brief look at the market drivers for this rise and some of the monetization strategies that investors and gaming companies adopt.
Market Drivers for Investing in the Gaming Industry
With most people staying and working from home, the gaming industry not only survived the pandemic crisis but soared. It is projected that the industry will grow 19.6% this year, generating a revenue of 174.9 billion dollars. Among the variety of players in the gaming industry, E-sports is the only one that has been struggling as any in-person events are on hold for the foreseeable future. Almost all of the events have been moved to virtual spaces, but we are yet to see if it is sustainable in the long run.
Investing in the gaming industry is now primarily dependant on the rise of users in mobile, console, and PC gaming. Young gamers, particularly under the age of 25, are the primary targets for most games. Therefore, we see a significant rise in the number of gamers and related investment and revenue in countries such as India, where there is a large young population. The fact that high-graphics compatible smartphones have become more affordable to the largest public is also a key market driver. Higher internet-penetration in otherwise technologically lagging geographies, multi-national investments, and the rise in digital payments are also factors that contribute here.
Monetization in Online Gaming
The engrossing nature of online games makes them ideal tools for generating revenue. Gaming companies have seen the potential of such opportunities and monetize them using various strategies. Here are some of the strategies.
- In-game advertisements: If the graphics and content are good, gamers wouldn't mind going through an ad or so once a while - added benefit, it could also be an opportunity for the gamer to take a breather. In some cases, watching an ad can also mean getting some extra points to play with. Most of the time, these ads are placed between levels not to affect the continuous gaming experience.
- Free games with add ons - the game would be available as a free download. However, when the user opts for add-on's such as virtual goods, they are charged a little money by the company. The more premium the feature gets, the more money gamers have to spend.
- Play-to-win and pay-to-play - With play-to-win, premium features are provided faster and easier to gamers who pay. Hence, they have an advantage over free gamers, who often have to spend a lot of time playing to unlock the same features. As the name suggests, you have to pay in advance to get tokens or virtual coins to play with pay-to-play games - this is most popular with casino games and certain tournaments.
- Demo versions - Gaming companies release demo versions of the game and offer them for free for gamers. Once the gamers are hooked, the chances are high that they will purchase the full version when available.
- Merchandise: Merchandising has always been there as a way to earn revenue for gaming companies. From key chains to t-shirts, there is always a market for memorabilia from popular games, sometimes even transcending the game itself.
With game streaming and mobile gaming seeing a huge rise, many experts view 2021 as a suitable year for investing in the gaming industry. From tech giants to small entrants, there are many players in the field to make the most out of the demand. One thing they all agree with, using the best combinations of current technology such as cloud computing, 5G, AR & VR, AI, and edge computing to boost their offerings.
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