In-line with the age of digitalization, the online gaming industry is growing at an exponential rate. As one would expect, this has created a plethora of innovative revenue streams for gaming developers to monetize their designs.
To put things in to perspective, a recent Global Games Market Report claims that by the end of 2018, more than 2.3 billion enthusiasts will have spent an estimated $137 billion on games.
This will result in an unpresented increase of $16.2 billion from the year previous, or 13.3%. In this brief article we will attempt to explore which sectors in particular are leading the way and how their revenue models are transitioning in to financial growth.
Within the aforementioned Global Games Market Report, it was concluded that mobile gaming is once again leading the way. Within a ten-year period, the sector has gone from being the smallest gaming segment to the largest. In fact, it is estimated that by the year 2021 the mobile gaming sector will be worth close to $100 billion in annual revenues.
Interestingly, the vast majority of financially successful mobile games are actually free to download. End users have the ability to earn points, which in turn gives them additional privileges – such as upgrading a character or simply being able to proceed to the next level.
However, if gamers do not have the required amount of points that they need, they have the option to purchase them directly from their phone. With payment methods such as a debit/credit card or PayPal now easily compatible with on-the-go purchases, this is an excellent way for developers to monetize.
One such example is the hugely popular mobile game Clash of Clans. Although the game is free to download, it reportedly generates close to $60 million in monthly revenues, just from users purchasing the game’s in-house currency. This goes to show that innovative gaming developers have recognized that significant financial rewards are there for the taking, even when users are not initially charged to download the app.
Traditional Video Console Market
Recognizing the huge growth potential of in-game rewards, the traditional video console market is also expanding in to similar revenue streams as their mobile gaming counterparts. For example, popular EA title Star Wars Battlefront II – which is available on both XBOX One and PlayStation 4, charges an average of $60-80 to purchase the game. However, players are also accustomed to in-game purchases to unlock additional rewards.
According to a user on popular social media channel Reddit, they paid a reported $80 to unlock the Darth Vader character. In response, EA claim that in-game purchases are not compulsory, as players can instead use points that have been accumulated throughout the game.
However, the same Reddit user claimed that it would take 40 hours of straight game-play to unlock just one character if gaming points were used. As a result, traditional developers are joining the highly lucrative in-game purchase bandwagon.
eSports, the art of ultra-competitive gaming between two or more professional players, is also going through a period of rapid growth. According to Forbes, eSports revenues are expected to surpass $900 million by the end of 2018, illustrating an impressive increase from the $655 million the industry generated the year previous.
The vast majority of the aforementioned financial growth consists of advertising, sponsorships and media rights. Moreover, developers are also paid a fee when tournaments include one of their gaming titles. A further avenue that could play a role in the monetary growth of eSports is the ability for players to wager on the games they play.
Although this will initially present a range of regulatory hurdles, especially with regards to gambling licensing, there are already a variety of operators looking to target such a model.
For example, Unikoin Gold – who claim to have more than 4 million registered users, are an eSports gaming platform that utilize the benefits of cryptocurrency and blockchain technology. Although the project is still in its infancy, Unikoin Gold aim to facilitate peer-to-peer wagering on a variety of popular gaming titles such as DOTA2.
Interestingly, parent company Unikrn claim that they already in full receipt of a gambling license from the Malta Gaming Authority, who license close to 80% of the European gambling market.
To continue on from the above discussion, a reasonably new addition to the industry is that of blockchain-based gaming. By utilizing the decentralized characteristics of the blockchain protocol, gaming developers have the potential to cut out of the middle-man and market their designs directly to the consumer.
Moreover, it also provides a seamless barrier to entry, as there is no requirement to inject resources in the hosting of an independent server.
In terms of monetization, blockchain-based gaming has the opportunity to install a similar model to that of mobile gaming, insofar that users are not charged a fee to play but they do have the option of purchasing additional in-game products. However, the key difference is that instead of using conventional payment methods such as a debit or credit card, users pay with cryptocurrencies.
Although this particular gaming segment is still in its infancy, the first blockchain-based game was actually launched back in 2013. Huntercoin – built on top of the Namecoin code, also offers players the chance to earn rewards in the form of its own native HUC token through ongoing gameplay.
Known as human mining, unlike popular cryptocurrencies such as Bitcoin – whereby the only way to earn new coins through mining is to contribute vast amounts of electricity, Huntercoin issues new coins to players when they reach certain milestones within the game.
Interestingly, the team behind the Huntercoin project have recognised growing consumer appetite for blockchain-based gaming and as such, are launching XAYA – a decentralized platform that that will provide an open-source gateway for developers to host their games on a blockchain infrastructure, allowing for 24/7 uptime.
Just like in the case of Huntercoin, not only will innovative developers be able to monetize on their designs but the end-user will also have the opportunity to earn rewards in the form of the tokens.
It appears that the online gaming industry has a bright future, not least because developers have recognized the huge demand for in-game purchases. Judging by the year-on-year growth attributable to such a business model, consumers see no problem in spending additional money in order to obtain rewards that otherwise, would be difficult to get through game-play points alone.
However, with the age of digitalization now transitioning over the world of blockchain technology, could we soon see a more equal playing field – whereby both developers andthe end-user have the chance to benefit?
Disclaimer: This is a contributed article and should not be taken as investment advice