We live in a world where entertainment is big business. In 2019, media and entertainment companies spent over $120 billion on original content, including movies and TV shows. Five companies account for more than 70% of that total, All in the pursuit of our engagement with the omnipresent screens in our lives. While most of the public attention goes to Netflix or Disney and their massive content budget, another group of content creators has emerged as competitors for our screen time: gaming companies.
Gaming has gone mainstream. According to Nielson, 64% of the U.S. population 13+ plays video games on a device today. In 2019 the global gaming market size was $150 billion and is projected to grow by 13% annually through 2027. By contrast, the streaming services market size was $42 billion. Gaming companies in the aggregate are delivering content to such a degree that Netflix views them as more direct competition than other streaming services.
As recently as 2010, when fewer substitutes existed, television was the primary screen for Americans to consume entertainment. We were paying $50+ per month and spending an average of 5 hours per day watching TV. Computer games were sold as a product and needed a console that limited accessibility and adoption. A decade later games are an experience. Gamers have access to online distribution, better connections, growing ease of sampling new games through all-you-can-eat subscription access, and greater choice. The increasing demand for multiplayer games is driving demand for online games, facilitating in-game communication, and improving the overall entertainment experience. All these factors lead to gaming commanding the attention of more of us than ever before.
Among the advantages gaming has over the content creation cycle of television is a tighter feedback loop, used to gather audience data and rapidly improve content decisions. Better feedback loops are a driving force behind media company investments to establish direct-to-consumer content delivery. For example, Netflix uses data to improve the titles it recommends to viewers or discontinue programming earlier than ever in order to focus resources on more productive content.
Gaming has had this in place for years because game design is more about the player than the storyteller. Through better connectivity, gaming content is constantly updated through improvements based upon user data. Everything is tracked to ensure the best possible experience for the average player, which is all designed to keep players engaged. Extended engagement, in turn, is the objective for both gamers seeking fun, community and connection, and game designers seeking ways to monetize their content across multiple channels. Both support the evolving idea of the metaverse, a term we will be hearing more about where elements of the expanding digital universe merge with physical reality.
Finally, consider how gamers spend their screen time as shown in the graphic from Activate Consulting. For a growing number, screen time consists of watching others play games on platforms like YouTube. According to Nielson, 48% of YouTube gamers say they spend more time watching gaming videos on YouTube than playing games themselves, pointing to reasons such as seeking community, inclusion, and learning new skills.
Consider too the growth of esports which have been adopted widely enough to support related leagues and tournaments. Younger age groups spend a greater portion of their weekly screen time favoring esports and other gaming activities over traditional sports viewing. In a defensive response, traditional sports are now asking gamers to help reshape their viewer experience.
If content is king in entertainment, where do you think the future is going? Gaming is big business and getting bigger.
* Any reference to a specific company does not constitute a recommendation to buy or sell that company.