Anyone who hasn’t lived under the cliff knows for sure that the gaming industry is in full swing. It is one of the industries that have benefited the most from the COVID-19 pandemic.
At the same time, the average investor may not know the following growth indicators:
The global gaming market is currently worth $180 billion and is the fastest growing form of entertainment in the world. For the record, the global movie industry is worth $100 billion, and North America’s annual sports revenue is $73 billion.
Revenue from the global gaming market. Source: Bloomberg, Pelham Smithers, GamingScan.com.
Experts predict that by 2025, the number of online game players will rise to one billion people – today it is one in nine.
Three of the four most-watched American sports events in 2018 weren’t even traditional sports events. These were electronic sports events. For example, the League of Legends tournament has garnered 30 million more views than the AFC Championship and 45 million more views than the NCAA Football Championship.
American Sports Watchers. Source: MBA @ Syracuse
Travis Scott gave a live performance on the popular gaming platform Fortnite in April of last year. It has garnered over 12.3 million views and made Scott over $20 million on TechCrunch and GamesIndustry.biz.
So what is going on here and where is this growth coming from?
Much of this can be explained quite simply by technological progress and exponential growth. Technology continues to change the way we communicate, how we collect, how we create and consume information, how we convey value and how we shape online communities.
Howard Schultz, former CEO of Starbucks, popularized the idea of a “third physical room” in his concept for the café. He believed that people needed a “third place” for meetings outside the office and at home. Starbucks was the answer.
Today we see the same concept being played out among the younger generation. Except that the new shared space is digital and called the Meta-verse. This is where children are increasingly connected these days. They go there to chat with their friends. Listen to music or play video games. We can think of this as the next iteration of digital communities: AOL conversations, then Myspace. Facebook and finally the Meta-verse.
We have concerts in Metverson now. Digitizing Burning Man. We have just started.
The first video games appeared in the late 1950s – a simple game of tennis, similar to a game of pong. Later in 1977, Atari was invented. Nintendo started releasing popular games from the early 80’s, with Mario Bros, The Legend of Zelda, Donkey Kong, etc.
It is important to note that the business model has changed significantly over the years. We used to pay $60 for a game, say GameStop, and then left. It was a one time fee with unlimited play. Games were released in a similar way as Hollywood movies were promoted and released. 90% of the income will come within the first two weeks.
This form is not currently available. It is a freemium model. Users play for free and have to make in-game purchases to improve skills, decorate avatars, buy weapons, improve animations, etc. Today we see this in Roblox, Fortnite, and other popular games.
It is a more profitable model for game developers because it keeps users interested and is constantly updated to compete with their friends. We are transported to a world where social cues are visible among younger generations in the metaverse through their in-game avatar, the weapons they use and the rods they use. Welcome to the future.
Why games will move to the blockchain
Today, games take place in fenced computer networks. This means that users cannot own their assets in the game (skins, avatars, abilities, etc.). The platform owns them. Axie Infinity breaks this model because users own their assets, such as non-financial tokens (NFTs) on Axie, and can sell them in a free market/gaming economy for a profit. Here is an overview of the revenue that Axie Infinity users have generated since May of this year:
Total income from Axie Infinity. Source: Token Terminal
Annual revenue per terminal token has grown to $2.7 billion for this open, unlicensed blockchain game. Important Note: Blockchain technology is a means by which users can own their own gaming hardware. This is not possible with the technology used today.
Blockchains allow you to organically shape the gaming economy. Users can get paid to play. Once again, Axie Infinity leads here. Axie users invest in buying Axie NFT and their AXS token to get started.