Finance in the Gaming Industry
Parram | Fintech Market Review
Hi, this is Clément from HUB612 👋🏻.
Parram is a weekly newsletter about (underrated?) trends, topics, and perspectives on the Fintech Market. As the subscribers tend to be more global, I decided to shift to an English content format. I hope you’ll like it!
Today I’d like to talk to you about finance in the gaming industry 🎮
Photo by Youcef Chenguitti on Unsplash
When was the last time you played a video game?
Every generation had a controller in his hands. In the past years, the spread of a stable and reliable internet connection led the industry into new business models.
Let’s unbox the gaming industry and see how finance has spread into it.
According to Microsoft, there are around 2 billion players in the world, all platforms taken into account. The industry has grown rapidly from $55.8 Bn in 2012 up to an impressive $152.1Bn in 2019, a CAGR of 15,4%! Consumer spending on games is expected to grow to $196 Bn by 2022 🤯
As an order of magnitude, in 2018 the global box office industry was worth US$41.7 bn while global music revenues reached US$19.1 bn. Can you spot the difference?
Not to mention the black market (counterfeit games, off-line deal, cracked games, .. )! I haven’t made up my mind on this point. Maybe you have some input?The gaming industry reaches a point at which even adjacent markets suffer from this growth. Indeed, Netflix thinks ‘Fortnite” is a bigger threat than a direct competitor like HBO. The video games industry is silently taking over the entertainment world.
VC activity in esport sector alone (As of May 2018)
Investors are obviously on the rise in this sector. So are the acquisitions! GAFAM and BATX are extremely active on the following sub-markets: cloud gaming, live streaming, game-editors, 5G for gaming, AI & content generation,...
This business diversification is so notable as it is currently helping Tencent resisting to the COVID-19. Wait, really??
I came across this tweet and I was both puzzled and impressed by the gamers. In Animal Crossing: New Horizons players can design lots of things among which tiles. Here the players took advantage of it by re-creating their WeChat Pay and Ali Pay QR codes in the game so that people in the real world can send them real $ for digital items !! Very few games offer the possibility to shift a digital item back to cash, yet players find unexpected ways to do so.
Digital ownership is a thing that this player managed to make more tangible!
Console publishers have been creative in the past decade, lots of new business model appeared. We went from the now un-famous loot boxes considered by many countries as online gambling, to free-to-play games still living on whales. The latest trends are certainly the largely popularized Battle Pass that reward players for playing regularly and well, as well as the customization and panini-effect which are on the rise!
Hereunder you’ll see a quick overview of where the gamers financial interests are now:
What if games were an inspiration for large corporations? Well, they are already!
At BBVA, the bank is intrigued about how currently most popular games built and grew successfully such digital offerings.“When I think about the bank of the future, I often think about my sons and how they play Fortnite with their friends”
- Derek White former Global Head of Client SolutionsFor instance, let’s take Fornite. With over 250m users and a revenue of $2.4b in 2018, the game just set a benchmark in how to attract, engage and monetize a free to play offering which is built around the needs and habits of a mainly millennial target group. For the banks, those are potential future customers. This is why it is financially important to know how to reach this crucial user segment.
Hereunder, I selected three startups which are working on financial topics :
Zelos is a software company out of Y Combinator’s Winter 2020 batch, providing to gamers a cross-game battle pass. Each day, Zelos will provide plenty of new challenges for gamers, rewarding them a certain number of “zips”. One a gamer gets a pile of zips, he can be redeemed for all sorts of virtual goodies. Interesting way of retaining players on specific games.
Blast is a micro-saving app, making the saving process much funnier by playing games. Once set-up, Blast will move a little bit of your money into a savings account while you play games. The idea of making savings jazzier to inspire discipline is not new. But rather than creating a new game, Blast works in the background of games you already like to play.
NB: I made a 3 part memorandum on savings! Look it up here
Neopolis is a free-to-play geolocalized app for gamers to explore their surroundings and buy virtually pieces of their city. Whenever you are close to a specific building in real life, you can buy it in the app with virtual coins you generate with the building you possess and the numerous bonus you may get on the map. I like the idea, for two reasons. First, compared to other geolocalized games Neopolis makes you experience more personal as you can virtually buy places around you in the real. Second, the nomadic gamers are really hard to harpoon. But once you get a recurrent number of gamers, high-value data can be retrieved for growth opportunities (value of blocs for an estate agent, data for geo-marketers, .. )
Game financing (is a Kickstarter investment you make you a shareholder ?)
Pay to win is sometimes a nightmare
In-game economy vs our economy (Eve Online)
Game on Finance Education
Bridges between digital and real currencies
❤️ Drop a heart if you’ve learned something! ❤️
📰 https://www.businessinsider.fr/us/this-insane-graphic-shows-how-the-web-dominates-the-gaming-industry-2012-8
📰 https://www.fintechfutures.com/2019/11/how-paytech-helps-the-gaming-world-tap-the-under-banked-populations/
📰 https://rossrepublic.com/how-gaming-just-set-a-benchmark-for-the-future-of-fintech/
📰 https://www.polygon.com/2020/4/1/21202848/animal-crossing-new-horizons-turnip-prices-stalk-exchange-tips-nintendo-switch
📰 https://techcrunch.com/2020/04/03/zelos-is-like-a-cross-game-battle-pass-rewarding-you-for-completing-challenges-in-games-you-already-play/
📰 https://www.telusinternational.com/articles/fintech-player-support