For some reason, we are inclined to talk about video games as if they are from a niche sector. In doing so, we underestimate an extremely powerful and influential industry that will directly impact the human experience in the years to come. While the pandemic wreaked havoc in certain industries, other industries flourished. And while much of the discussion around “flourishing” companies revolved around companies like Zoom, we often forget to talk about another obvious pandemic-era beneficiary: the video games industry. In 2020, the video games industry experienced unprecedented growth. We can take a deep dive as to why, but per Occam’s Razor, the simplest answer is often the correct one: we were all stuck at home, and we were looking for ways to kill time. Moreover, even before the pandemic, the video game industry has had a massive impact on the generations that will be entering the workforce. In a 2018 report, two-thirds of Americans teens age 13 or older considered themselves gamers. According to 2017 data, children ages 12 to 15 spend about 12.2 hours a week gaming. For older teens that number is much higher.
According to Newzoo, the global games market generated 177.8 billion USD in 2020, up +23.1% year on year, the highest growth since the company began tracking revenues in 2012. Given the events of 2020, many expected the white-hot market to cool off. This prediction was partly due to the simple fact that pandemic restrictions eased, but also because the release schedule for new, big games (dubbed “AAA releases”) was sparse for the calendar year. But as 2021 wore on, the industry experienced a pleasant surprise: consumer spending on games was resilient to the longer-term consequences of the pandemic. The games market in 2021 generated total revenues of $180.3 billion, up +1.4% over. Despite lower sales among consoles and PCs, the mobile gaming market grew so much that it offset the losses of other platforms.
The Future of Gaming, Life, Everything Else: The Metaverse
Perhaps the most interesting aspect of the video games market is that its future is set to be far more expansive and influential than we can currently imagine. If you have been anywhere near the tech industry, you may have started hearing rumblings of “the metaverse”, much like people started hearing about “the cloud” in the mid-aughts. For the uninitiated, a metaverse is “a network of 3D virtual worlds focused on social connection facilitated by the use of virtual and augmented reality headsets”. Think of it as a virtual reality internet, a combination of social media and video games.
As Epic Games CEO Tim Sweeney points out, “nobody knows exactly what the Metaverse will be. We have a lot of fictional references on it… Most of it was written before social networks even existed… But the Metaverse is going to be some sort of real-time 3D social medium where instead of sending messages and pictures to each other asynchronously, you’re together with them and in a virtual world and interacting and having fun experiences which might span anything from purely games to purely social experiences”. Mr Sweeney’s company, Epic Games, is among the vanguard of companies that have begun blurring the lines between video games and social networks. Within Fortnite, the company’s flagship product and the most-played game in the world in 2021, a whopping 78 million players watched Ariana Grande perform a virtual concert.
The Metaverse will be a virtual gold rush, and the world’s largest companies are already lining up to claim their stake. Facebook CEO Mark Zuckerberg recently announced the company’s intent to create and launch its own Metaverse. But while companies like Google, Apple, and Facebook want to keep things closed, other influential voices are trying to keep things open. “By and large, nobody saw the social network having as large an effect on society as it has had today. People were kind of tricked into signing up with these walled gardens without recognizing the long-term ramifications… This time around, everyone realizes that there are 3.5 billion people on the internet who are going to be connected to the Metaverse in the future. Every company—well, most companies would probably prefer to have it be their own closed proprietary thing, but everyone’s second choice is an open system, as opposed to somebody else’s closed system. I think there’s enough recognition and realization of the risks of lock-in and the importance of this coming platform that we’ll be able to get companies to work together collaboratively and do this”.
What makes the Metaverse so exciting is that we still have little idea what it will look like, but we do know that it is coming. With so much at stake, a battle is brewing between the world’s largest companies and everybody else. Despite the stakes, Mr Sweeney is still hopeful that his side will win out: “We’ll make business decisions that are painful in the short term in order to stand up and keep our freedom in the long term. With enough awareness of this, I think we’ll be successful. Open platforms are much better, and they’ll ultimately win.”