For gaming companies, the Covid-19 lockdown has definitely posed challenges in terms of production, but also created a huge revenue opportunity. In April 2020, the number of subscribers to Microsoft’s Xbox Game Pass (it’s first foray into the subscription world for gaming) broke 10 million, with a 130% increase in multiplayer engagement in March and April. In May, Nintendo announced that sales of its Switch console were up 24% year-on-year, while its famous lockdown game “Animal Crossing: New Horizons” had sold 13.5 million copies since its release in late March. As the pandemic spread across the globe, gamers flocked to an imaginary island where the worst thing that could happen was for a cute avatar to be stung by angry wasps. In the UK as a whole, digital downloads of all videogames rose by 67% week-on-week during March, and before strict lockdown was enforced physical sales jumped by 218%.
The key challenge now for the gaming industry will be how to maintain this historic level of engagement with customers. How can gaming companies continue to be a source of inspiration and entertainment, particularly with the warmer months arriving in the Northern Hemisphere and a yearning by many to resume “normal life”?
1) Continue to invest in developing and promoting compelling digital content
With more gamers digitally engaged than ever before, there is an opportunity to monetise content for those additional players. Though the pool of players and their time spent have both increased, so has the noise around which game they should spend their time playing. Gaming companies need to compete to win gamers’ loyalty like never before, and one of the key ways to do this is to continuously drip-feed new and compelling content. Gaming content has a notoriously short product lifecycle, and so providing new features and content regularly to keep a game “fresh” is important to retaining eyeballs and controllers in such a competitive market. In addition, making sure gaming companies’ audiences are aware of the investment that is being made on their behalf to create innovative and engaging experiences has a positive brand uplift overall, as we’ll explore further below.
2) Grow and maintain a strong D2C relationship
With an increasingly fragmented supply chain due to the pandemic, gaming companies must build a two-way conversation with their players like never before. Following examples set by companies such as Activision Blizzard, who employ a host of fan engagement levers through game forums and social media platforms to garner feedback and modify content and introduce new features accordingly, gaming companies are increasingly trying to hear the unfiltered voices of their players. This serves not only as a way to improve, tailor and personalise content for their audience, but also to ensure they have access to those players’ wallets at times where partners are increasingly seeking greater margins and putting pressure on the industry’s already stretched bottom line.
3) Price innovatively
With customers’ wallets undoubtedly being affected by the pandemic, it is important that gaming companies provide flexibility in terms of pricing models moving forward. Pricing content in innovative ways, such as exploring freemium to drive engagement and cross-selling, as well as micro-transactions and flexible subscription models will be critical to ensuring customers stay engaged over the next 12 months. Traditionally confined to mobile gaming (revenues from in-app purchases form 70%-80% of the $10bn in iOS revenue each year), we are increasingly seeing so-called triple A games employing similar tactics, such as Activision Blizzard with the release of Warzone, as well as the continuation of the age-old Call of Duty Season Pass monetisation approach.
In summary, the next 12 months poses a diverse set of challenges for gaming companies across the ecosystem to overcome, but the opportunity through applying the right content strategy, building meaningful direct-to-consumer relationships and looking at pricing in a dynamic and innovative way all mean that growth after the pandemic isn’t game over.
About the author: Sammi Marwan is a Principal at FT Strategies. With over 7 years’ experience consulting in the media and entertainment sector across Europe, North America and Asia, he is an avid gamer with a passion for the art form. Currently he is playing the Last of Us Part II and Warzone!
FT Strategies is a data and strategy consulting firm from the Financial Times that helps organisations innovate, strengthen customer engagement and build sustainable digital businesses. Using the strategies we refined for over a decade to transform our own business, FT Strategies has helped companies around the world future-proof their organizations - and we can do the same for you. Please contact firstname.lastname@example.org for more information.