HOW GAMING BECAME A $180 BILLION INDUSTRY - Abhidyu Adukia

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The E-sports industry has been growing at an unprecedented rate. In 2017, according to SuperData, gaming had more viewers than HBO, Netflix, ESPN, and Hulu combined.  According to KPMG, gaming became the most profitable media sector in 2020, with revenue of 180 billion dollars, which is more than the combined revenue of movies and sports, all thanks to YouTube Gaming and Twitch. This clearly suggests that the E-sports sector could soon be larger than the most prestigious sports leagues in the world. In the coming future, we could see Drake courtside cheering for some kid in an E-sports event.

The first thing to comprehend is the distinction between E-sports and gaming. It is the most common source of misunderstanding. In the field of video gaming, anyone who plays games on an electronic device is considered a video gamer, but E-sports is a distinct category of gaming, similar to the NBA, La Liga, and the IPL. It's as simple as the difference between playing Gully cricket vs playing IPL.

Just like the IPL, the E-sports sector has a number of stakeholders who put their money into it in the hopes of getting a good return in terms of money, visibility, and entertainment. The stakeholders present in this giant industry are: Developers, Publishers, Leagues, Players, Streaming platforms and Fans. The first set of stakeholders who actually bring the game to life are publishers and developers.  They are either the same organisation taking on both roles (eg: Epic games) or they share a principal agent relationship where in the Developers work for the Publishers (eg: Tencent & PUBG). Below these two we have the third stakeholder, the Leagues (similar to IPL). The publishers and leagues share a symbiotic relationship where the publishers give them money to host various tournaments while in return the leagues offer them popularity and viewership which translates into revenue. Some of the biggest events organized for the games of Fortnite and Dota had prize pool upwards of $30 Million. The next stakeholders are the players themselves. They are the one who play events to win prize money, earn popularity and generate sponsor interests. Now, the most influential stakeholders in the group who are the streaming platforms such as YouTube gaming, Twitch, etc. Here, players ranging from amateurs to world class professionals display their gameplay to attract viewership. Finally, the last stakeholder who give meaning to the industry itself, the fans. They are the ones who play the games and even show up at events and tune in to the streams of professionals. More fans translates to more visibility which translates to more sponsors which ends up resulting in more money for everybody. This is how the gaming industry operates.

During the initial years of gaming when games like Counter Strike dominated the market, all games were purchase to play. Not only that, the setup cost in terms of the hardware required to play these games were very high. This is easily visible within the Play Station ecosystem. Now, the industry is going a paradigm shift. There are 2 new models called Freemium model and cloud gaming which have transformed the gaming industry into the giant we see today. In the Freemium model, the game itself is free to download while the main source of revenue is the in-app purchases (mostly in the form of Battle pass). In the case of PUBG, not only can the game be downloaded directly on your phone for potentially zero setup cost but also you can spend money on the Battle Pass which helps in unlocking cool looking skins for guns, characters, etc. By doing this, the visibility of the game is multiplied. In India alone, millions of people downloaded the game. I believe that PUBG wouldn’t have been this popular if it was a paid game. Now, in the cloud gaming model, fellow gamers can play games on any device they can imagine. A game like GTA 5 which requires very high graphics couldn’t be played on a phone but with the magic of cloud gaming, GTA 5 runs smoothly on any phone.

Seeing such shifts in the industry, it will become easier to play heavy graphic demanding games. This will increase visibility which will translate into revenues for publishers. Being an avid gamer, I am really looking forward to more such developments.

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