Gaming, often viewed as anti-social, has become one of the only viable and available community vehicles
In the Great Recession of 2008-2009, IDG Consulting’s gaming thesis was that the gaming industry was not recession-proof, but recession-resistant. The games market actually grew in 2008 by 20%; it still declined in 2009, but its 12% drop was less pronounced versus other segments.
After September 11th, the U.S. gaming market actually grew by 42% in 2001, and 11% in 2002. The replayability value of gaming insulates it from downturns and in both historical cases, made it more compelling versus alternatives. In 2008-2009, there was also a marked increase in content innovation on console and PC, and the early signs of a burgeoning smartphone market.
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Gaming will likely once again prove to be recession-resistant. One caveat is that the last recession occurred in a pre-subscription era. Today, consumers absorb copious amounts of content through entertainment subscriptions (e.g. Netflix, Hulu, Disney+, Spotify), which gaming will have to contend with this time around.
By no means are we saying that all consumers will be able to spend freely on games, and the level of recession resistance may vary by platform. While free-to-play (F2P) makes up a greater proportion of game offerings in today’s world, even these games have to monetize somehow for developers to stay in business, and the sad fact is many consumers will lose jobs and struggle just to pay rent over the coming months. In this scenario, mobile games might prove to be the most recession-resistant because of their freemium nature, followed by PC, which has the most core audience. And while most hardcore console gamers are not price-sensitive, a global recession would likely hinder next-gen adoption at $499 if the downturn period is long and deep. Due to belt-tightening, even early adopters might over index on free-to-play or purchase fewer games, focusing more on top titles that promise high hours of replayability.
In the U.S., the government stimulus might have a small but noticeable impact. In earlier research studies with gamers, the core and mid-core gamers contextualized gaming in the following order of importance: food, rent, internet and mobile access, then games. For those who still live at home or get subsidies from parents, paying for their own data plans and games were the top two priorities. So it is possible that these short-term infusions of cash could potentially be spent on instant gratification by these particular gaming cohorts, although that would only apply to a minor percentage of the populace.
Early Signs of Audience Size and Engagement Increasing
Although it is early days, IDG’s research indicates that the games market has actually grown during this time. Steam’s Peak Concurrent Users (PCCU) grew from 17 million in early January to 18 million in late February, to more than 20 million in March.
Average Peak Concurrent User (APCCU) levels for individual titles have also increased in March versus February, with the average title seeing a 34% increase month-over-month. Engagement is also spiking, as average Hours Per User (HPU), weighted by top titles, has grown 9.4% in March versus February. The data indicates that users are likely turning back to Steam and playing what is already in their library, with top titles sucking up more of the increased activity than smaller games. In China, IDG’s checks indicate that mobile and PC gaming both increased during the height of the coronavirus outbreak. Console has also benefited, as user numbers on Xbox Live and PlayStation Network have increased materially. In March, Xbox Live crashed for many users, followed by Nintendo eShop several days later, demonstrating the higher-than-normal player bases on these online platforms.
In a World of Social Distancing, Gaming Becomes a Community Anchor
It is a bit counterintuitive to think that gaming (often viewed as anti-social) has now become one of the only viable and available community vehicles. In the past 10 years, gaming had already become more community-centric with the onset of online multiplayer, livestreaming, esports and community platforms bringing gamers together. And gaming has emerged as a new form of social media, with highly-engaged audiences who spend as much time in the virtual world as in the physical world. With social distancing as the norm, gaming becomes a popular and acceptable community hub. We will probably see developers bulking up the social/community elements of games over the next few months.
Esports and Livestreaming Benefit, but Live Events Will Suffer
Online-only esports events and livestreaming activity will likely grow as more people stay inside. Streamers and content creators will increase their captive audience. While live in-person esports tournaments will suffer, the broader value proposition of esports improves, as traditional professional sports have all been cancelled. One example is in Spain, where La Liga is broadcasting a FIFA tournament where 20 real-world players will compete. This was organized in 5 days through a Twitter post by Spain’s most famous shoutcaster Ibai, with 10 million Twitch views. Suddenly, the world moves from the NBA, March Madness, the Masters and UEFA, to a world where esports is the only “game in town.” To that point, StreamElements has estimated that global viewership increased 10% on Twitch and 15% on YouTube Gaming. In a quarantined-Italy, hours watched of livestreamed content is up by a whopping 66%. Verizon stated that online gaming has increased 75% during North American peak hours.
Supply Chain Issues Could Put Console Launch Timing at Risk
Depending on the length and depth of this crisis, it is possible that the Coronavirus could present a major overhang on manufacturing, to the point where the launch of the PS5 and Xbox Series X might not only be compromised in terms of available supply, but the timing of the launch itself. Currently slated for Q4 2020, IDG believes that the likelihood of a launch delay for one or both platforms is remote, but could increase if the current manufacturing slowdown has not been resolved by summer. In that scenario, it might not make sense for platforms to launch in a severely supply-constricted environment.
Games Could Launch with Less Content
The supply chain effects go beyond hardware, as many publishers also outsource certain game development tasks such as art assets, additional in-game features, and multiplayer maps, to companies in China and other affected regions. Due to the strict quarantine in China, many developers have not been able to produce content recently. If these outsourcers are unable to complete these assignments, some games will be released with less content than anticipated. Other studios around the world who were not prepared to transition to remote work, will also be negatively impacted. In this scenario, it is possible that some games will either be delayed, released in leaner states, or crunch-time could be amplified for the core development teams.
Digital Share Shifts Could Accelerate
Currently, IDG channel checks indicate that retail game activity is brisk, perhaps tied in part to a “hoarder mentality” in buying a console or their favorite titles ahead of a lockdown. But long-term, COVID-19 could accelerate digital share shifts. Long months of sheltering in place may evangelize many gamers who would never consider digital, to give it a try. Retail will remain relevant going forward, but digital share could uptick more due to Coronavirus. And if there is a prolonged quarantine situation in retail-heavy areas, this could disproportionately hurt retailers who will also need new working capital to get back up and running, if and when that time comes.