Dreams Born, Records Broken: A 2016 Esports Retrospective

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ESports is at an all-time high, showing the world that it is anything but a passing fad. In 2016, eSports shattered records for viewership, prize pools and revenue—attracting high-dollar sponsorships, high-profile acquisitions and turning gamers into superstars. With over 213.8 million viewers and earning nearly a billion dollars in revenue, 2016 was an eSports year to remember.

Records Are Made To Be Broken

Activision Blizzard’s acquisition of Major League Gaming (MLG) last December has proven to be a smart move—the publisher’s Counter-Strike: Global Offensive Major Championship (CS:GO Major) generated new viewership records during its March 30 to April 3 broadcast from Columbus, Ohio, with audiences generating 71 million video views and watching an incredible, record-breaking 45 million hours of live broadcast. CS:GO Major also set a new record of 1.6 million concurrent viewers across over-the-top (OTT), web, mobile and in-game streaming formats. The previous CS:GO Major record was 34 million hours viewed and 1.3 million concurrent viewers, which occurred at the 2015 CS:GO Major in Cologne, Germany. This year’s was the first CS:GO Major held in North America, with gamers competing for a $1 million prize pool.

Dota 2‘s The International 2016 held in Seattle, Washington from August 3 to 13 boasted the largest prize pool to date—a whopping $20.8 million. This year’s champions, Wings Gaming, took home the lion’s share of $9,139,002.00 proving that yes, Mom, playing video games is a real job. The next-highest eSports payout this year was for League of Legends at $5.1 million, while Smite and Heroes of the Storm both hosted tournaments to the tune of $1 million each.

Wings Gaming took home over $9 million for the International 2016 Dota 2 competition. Source: Valve
Wings Gaming took home over $9 million for the International 2016 Dota 2 competition. Source: Valve

Calling All Hopefuls

Also launched this past December—EA’s new Competitive Games Division focuses not just on the best of the best, but those still climbing the championship ladder. “Our vision for competitive gaming is pretty unique,” EA’s chief competition officer, Peter Moore told Venturebeat. “We want to make stars out of all our players. Competitive gaming is a pyramid. At the very top of that there are several hundred players who make a full-time living playing games like DOTA 2, League of Legends, or Counter-Strike. In our case, Madden and FIFA have full-time professional players, as well as a few Battlefield players but our real focus is going to be further down that pyramid—not just the top professionals.”

Activision Blizzard surprised fans worldwide by announcing its Overwatch League during BlizzCon—creating opportunities across the country for hopefuls to compete for spots on professional teams complete with contracts, salaries and all the dreams they can muster.

Move Over For Mobile

While consoles and PC may be the eSports platform of choice for now, mobile has been creeping up as an accessible, popular and profitable method, as well. Video game developers like Supercell (Clash Royale) and third-party companies such as Mobcrush, Skillz and Super Evil Megacorp are extending the idea of competition from young men in a large stadium to anyone, anywhere.

“Mobile will ultimately be the platform over the next five to ten years that truly enables eSports to become mass market,” Kristian Segerstrale, COO and executive director at Super Evil Megacorp, developer of Vainglory, told [a]listdaily. “It’s going to be steady growth behind the scenes. . . it gets stronger and stronger and then one day you look back at it and say, ‘Wow, I didn’t see that coming.'”

A majority of this year’s eSports revenue came from Asia, at $328.6 million, according to SuperData, as did viewership. The analyst firm further predicts that eSports revenue will continue to grow steadily over the next few years, reaching $1.4 billion by 2019, but brands should not try to capture that excitement haphazardly.

“Gaming is increasingly popular because it offers a different type of entertainment experience,” Superdata CEO, Joost van Druenen told [a]listdaily. “With its success over the last few years, a host of newcomers to the industry seek to capture some of its magic. But merely stickering a celebrity or brand on a mediocre game is naive. When companies tell me they’re ‘doing eSports’ I cringe, because it tells me they are clueless with regards to building up a fanbase and a degree of authenticity in the experience. Precisely because games are interactive and establish a dialogue between game makers and players, there is a degree of authenticity that, in my opinion, is largely missing from many of the traditional forms of entertainment. You can’t fake it as easily in games.”

Learn everything you need to know to invest in today’s fastest-growing media channel—Competitive Gaming and eSports on 2.16.17 in Los Angeles. Go to alistsummit.com for more info.

By The Numbers: Gen Z Consumer Trends For 2016

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While millennials make up 27 percent of the US population, the following generation (Gen Z) is right behind them at 25 percent and growing. This emerging demographic is made up of small children, teenagers and young adults entering the workforce, but don’t let their youth fool you—Gen Z accounts for 25 percent of all consumer spending, and within the next decade, it’ll be responsible for 40 percent, according to a report by Universum. Gen Z doesn’t remember the events of 9/11 or a time when the world wasn’t connected via the internet. Since digital makes up most of their reality, these statistics should be telling, but not surprising.

Gen Z is:

Connected

According to Deep Focus, Gen Z spends an average of 10 hours per week online. Fifty-one percent of tweens have a social media account and 70 percent regularly use their smartphones to send photos, text and emails. Eighty-four percent of respondents browse an internet-connected device while watching TV and 14 percent of the respondents admitted to having made a purchase within an app-based game.

The same study revealed that 55 percent of Gen Zs will stop and watch an ad if it is humorous. Furthermore, 45 percent will also pay attention if an ad has great music, and 33 percent will value an ad if it is inspiring. Like their story-loving parents, 67 percent of the respondents said that they are more interested in narratives and content that have realistic endings. They are also nearly twice as likely to want to see “real people,” rather than celebrities, endorse products and brands.

Wikia’s findings also reflect a generation that embraces technology in everything they do. In fact, only 43 percent of Generation Z value the time when they’re unplugged and 47 percent said they were more actively connected than a few months prior to the survey. Seventy-six percent agree that their experience with technology will help them reach their goals and 66 percent say technology makes them feel like anything is possible. The study also found that Gen Z is actively connected throughout the day, with 25 percent checking email and messages within five minutes of waking up and 73 percent connecting within the hour. 

gen-z

Social

Gen Z may be connected digitally, but this demographic also values in-person interaction more than their parents. According to a recent study by Fluent, 61 percent would rather connect with someone in real life. While you’re enjoying time together, the Gen Z across from you is most likely plugged in at the same time, however. Forty-eight percent said they logged into Facebook multiple times a day.

A report from eMarketer estimates that 17.5 million social network users between the ages of 12 and 17 will use a social network at least once per month in 2016, with that number growing to 18.2 million by 2020.

Heavily Influenced By Video

When it comes to consuming video content, Fluent’s study found that 80 percent head to YouTube, but Facebook is a close second at 79 percent. Additionally, 32 percent watched video for at least an hour a day, while 30 percent view for two hours and 21 percent view for three hours. Gen Z feels more connected to YouTube stars than traditional celebrities. Research from November 2014 by Defy Media revealed that 54 percent of teens surveyed followed YouTubers on social platforms, compared to 42 percent who followed TV and movie stars.

YouTube isn’t the only place where this generation consumes its entertainment. Seventy-one percent of Gen Z has a Netflix subscription—more than any other generation, according to a report by VisionCritical, while only 45 percent of them watch cable TV on a television.

Discerning Shoppers

In the same study, Gen Z respondents named “aesthetic” as the number one thing they look for in the products they buy. Fashionable design matters to 67 percent, as well—more than any other generation. When it comes to food products, 73 percent of Gen Z look for prices and promotions more than any other feature, followed by nutritional content at 67 percent.

This young generation is confident, tech-savvy and careful with spending. Eighty-nine percent are confident that they will be able to buy a house and bequeath their estate—more than any other generation surveyed. Following that trend, Gen Z is confident they will be able to buy whatever they want (within reason) and travel the world. Bad news for Airbnb, though, as 86 percent say they’d rather stay at a hotel compared to just 12 percent with the couch-surfing and experience service.

With youth and money comes a bit of naïveté, however—73 percent said they trust financial institutions “very much” or “somewhat.” According to a Stanford University study of 7,804 students from middle school through college, an incredible 82 percent of middle-schoolers couldn’t distinguish between an ad labeled “sponsored content” and a real news story on a website. Nearly 4 in 10 high school students believed, based on the headline, that a photo of deformed daisies on a photo-sharing site provided strong evidence of toxic conditions near the Fukushima Daiichi nuclear plant in Japan, even though no source or location was given for the photo.

Let’s hope that with age comes a bit of wisdom with all that buying power.

Unilever Explains Axe Hair ESports Marketing Initiative

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Unilever has entered the eSports arena to market its Axe Hair products through some of the top Counter-Strike: Global Offensive (CS:GO) players in the world. The company has partnered with pro gamers Kevin “Hauntzer” Yarnell, Vincent “Biofrost” Wang, Jake “Stewie2k” Yip and Timothy “Autimatic” Ta from Team SoloMid and Cloud9 to promote grooming tips to eSports fans through social media photos and video content.

Rob Candelino, vice president of marketing and general manager of haircare at Unilever, told [a]listdaily that eSports is an international gaming phenomenon that is rapidly growing with millions of fans and a large following of young guys.

“Best of all, many of the eSports players have great hair and everyday style their fans want to emulate,” Candelino said. “These players understand the importance of looking their best whether playing in an international tournament or practicing at home in the team house. Partnering with eSports players is a great opportunity for Axe Hair to speak to fans about how easy everyday styling can be through the voice of the flourishing eSports community.”

Unilever is the latest non-endemic brand to enter into eSports to chase the global audience of dedicated gamers. Candelino said the digital campaign explores how these pros’ game day styling routine positively impacts their confidence and performance inside and outside the arena. “It’s exciting for us to be partnering with an iconic brand whose styling products make it simple and easy to style every day,” Ta told [a]listdaily. “Styling is an important part of our everyday routine, so the partnership is great for Cloud9.”

“Looking good and being confident is important to us, especially since we are role models to our fans,” Yip told [a]listdaily. “I want to inspire them to look and feel their best too and partnering with Axe helps to promote this message.”

Candelino said Axe Hair speaks to young guys (18-26) about confidence, attraction and the importance of daily styling. “The Axe guy has a variety of different interests and passions, one of which is gaming,” Candelino said. “This partnership is an important way for the brand to authentically connect with him.”

Social media and livestreaming has opened up a 24/7 window into the lives of pro gamers, which brands can tap into. “These professional gamers are constantly interacting with their fan bases online and on mobile,” Candelino said. “They livestream practice for hours each day and have direct access and communication to their fans and followers. They get questions both about gaming and about their lifestyle.”

Ta said his fans ask him about his hair all the time. “It’s important for us to look our best for them every day, whether we’re in the arena or not,” he said. “I like my hair to look natural, so the softening cream is my go-to and it takes me less than five minutes to do every day.”

Axe filmed Cloud9 and Team SoloMid on a behind-the-scenes tour of the Cloud9 Team House to show fans how they live, practice, prepare and style every day.

“ESports is a community of really passionate gamers who have a lot of heart for what they do,” Candelino said. “It is important for Axe to ensure that we are talking to our consumers in the most authentic way. These players are guys that the Axe target looks up to and respects, and they can genuinely talk about their daily styling routines and how it impacts their confidence and overall gaming performance.”

Learn everything you need to know to invest in today’s fastest-growing media channel—Competitive Gaming and eSports on 2.16.17 in Los Angeles. Go to alistsummit.com for more info.

Evil Bots, Friendly AI And Other Must-Read Marketing Stats

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This week, we examine the effects of bad mobile advertising, the importance of interacting with your audience and why digital advertisers are really mad at some Russian hackers.

Quality Of Mobile Ads Matters More Than You Think

Does your brand understand what mobile consumers want and are you sure you’re targeting the right people? A recent study by Forrester revealed that 55 percent of companies surveyed ranked audience targeting as the number one area where they are putting strategic attention. When asked what their key objectives were for mobile advertising, 52 percent of respondents said “increasing brand awareness,” 47 percent said “increasing brand engagement,” and 42 percent said “driving customer loyalty.” However, the study found that only 27 percent of the ads consumers see in a typical day are creating a positive experience for their users—30 percent elicit a negative response, while 43 percent elicit no emotional response at all.

Forrester surveyed 1,000 consumers and 100 advertising professionals with companies of 10,000 employees or more. What the company found was that advertisers are wasting millions of dollars on ad spend each year due to poor consumer experiences with mobile ads. In the figure below, Forrester exposes a difference in priorities between brands and consumers when it comes to advertising effectiveness.

Source: Forrester
Source: Forrester

Are You Ready For AI? Marketers Say “Yes”

Seventy-nine percent of US senior-level marketers believe that consumers are prepared for AI, according to November 2016 research from Boxever. Just 15 percent of marketers felt that consumers weren’t ready for AI, and 6 percent weren’t sure.

Wear Today, Gone Tomorrow

While wearing your heart on one’s sleeve may never go out of style, wearable tech like Apple Watches and Fitbit aren’t quite as popular as originally forecasted. According to a new report from eMarketer, wearables were expected to grow more than 60 percent year-over-year from 2015 to 2016. However, the firm is now cutting that estimate down to just 25 percent growth this year.

“Before Apple launched its Watch, fitness trackers dominated the wearables space, and consumer surveys consistently found that tracking health and fitness was the main reason people were interested in wearables,” said eMarketer analyst Cathy Boyle. “They also reported high price-sensitivity. Without a clear use case for smart watches—which have more features than fitness trackers, but significant overlap with smartphone functionality—the more sophisticated, expensive devices have not caught on as quickly as expected.”

wearable-emarketer

In Russia, Methbot Smokes You

It siphons $3 to $5 million in video ad revenue from premium publishers every day and is the subject of a new report by digital advertising fraud security firm, White Ops. This new variation of the botnet hails from Russia and utilizes a network of 800 to 1,200 dedicated servers in the US and the Netherlands. Spoofing real publishers, the hackers sell digital ads for sites such as ESPN, Vogue and Fortune all while creating fake impressions and therefore hiking up the price of CPMs.

White Ops has partnered with The Trustworthy Accountability Group (TAG) to help disseminate information and data including the list of known IP addresses, falsified domains and URLs used by Methbot to track and stop these cyber thieves.

“As scores of additional companies join the initial group of participants approved earlier this month to TAG’s Certified Against Fraud Program, TAG will continue to build a unified defense against the criminals who steal from our industry, said TAG CEO, Mike Zaneis in a statement. “We deeply appreciate White Ops’ leadership in sharing this intelligence with the broader digital advertising community.”

HTML5 Is ALIVE

Is HTML5 better than Flash for video? Steve Jobs thought so, and the IAB Technology Laboratory says brands should transition to HTML5 by this upcoming July. Why? HTML5 offers mobile abilities Flash does not and IAB’s research indicates that it has been shown to contribute to a 29.5 percent brand lift. Converting Flash to the new format won’t be easy, but to help, IAB has released “Transitioning Video Ads from Flash to HTML5/JS,” a guide for migrating digital video advertisements to HTML5 and JavaScript.

TV Time For Brands

November upfront revenues for the 2016 to 2017 TV season are up 9 percent versus November 2015, and broadcast revenues are 5 percent higher than last year. Similarly, cable networks saw an increase of 13 percent in upfront revenues, according to Standard Media Index (SMI). Direct-response advertising from big scatter TV marketers weren’t as impressive, however, dropping 26 percent in November. Meanwhile, broadcast networks saw a 60 percent decline and cable TV dropped 23 percent.

Interaction Matters

A new study by the Chief Marketing Officer (CMO) Council reveals that one of the biggest challenges for marketers in 2017 will be understanding the connected customer journey across all touch points and how best to interact on a more personal level.

Thirty-eight percent of marketers surveyed feel that digital strategies have delivered mixed results to date, while 49 percent stated that alignment between physical and digital is selective at best.

“Savvy CMOs don’t see digital as a destination for transformation but instead see the digital experience as a constantly moving evolution for both engagements and operations,” noted Liz Miller, senior vice president of marketing for the CMO Council. “The year ahead will represent a real turning point in the customer experience as marketers plan to turn their sights toward connecting, streamlining and measuring the entire journey.”

marketing-study

Miramax CEO Exits; Black Sea Games Reopens Doors

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As 2016 comes to an end, here are some of the people who are looking toward fresh opportunities in the New Year.

Miramax CEO Steven Schoch announced that he is leaving the company this month. He has been at the post since being promoted from CFO in 2012. Nasser Al-Khelaifi will act as interim CEO in addition to being chairman while the film company searches for a replacement.

Happiness and wellness channel, Z Living, has named Karen Bressner as its new SVP of advertising sales. Bressner has over 25 years of experience and will lead the network’s East Coast sales group to grow new sales, marketing initiatives and partnerships.

Spike TV has named Red Fabbri as its VP of fan engagement and editorial. In this role, Fabbri will manage a multiplatform audience, grow engagement and content consumption, and oversee original content across platforms.

Game studio Crytek recently announced that it was closing a number of studios in Budapest, Sofia, Seoul and Shanghai. However, its Sofia team has risen again to become Black Sea Games. The new developer is led by Vesselin Handjiev, who was the original founder of Black Sea Studios before it was sold to Crytek in 2008 and rebranded Crytek Black Sea.

Have a new hire tip? Let us know at editorial@alistdaily.com.

Shooters And Surprises: The Top 5 Console And PC Games of 2016

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Bringing in $35.8 billion and $6.6 billion respectively, PC and console gaming closed out a fairly strong year for the interactive entertainment industry. While a majority of this year’s top-grossing titles were from years past, there are a some new additions that made a lasting impact. From eSports surprises to brutal wars and adorable creatures, here are the top five console and PC video games of 2016.

Overwatch

Activision Blizzard’s fast-paced shooter took the world by storm in 2016—captivating audiences and becoming the top-grossing PC game of the year at $585.6 million. The game also revealed some surprising trends in the Chinese market, proving that players are willing to pay for games upfront—something once believed this lucrative demographic wouldn’t do. “China’s games market may be dominated by free-to-play MMO and mobile titles, but Overwatch’s success indicates the potential for premium games in the country is growing,” said SuperData Research CEO, Joost van Druenen in a report for August video game sales.

A major contributing factor to the game’s success can also be attributed to the way in which Activision Blizzard gets its fans excited for the next update or character introduction. Such was the case with Sombra, a new character that had been teased over the summer with a month-long alternate reality game that Blizzard began in the announcement video for Ana in July. Blizzard proceeded to leave a detailed trail of coded messages, encrypted images and a three-month-long countdown timer leading up to BlizzCon when Sombra, herself “hacked” Blizzard’s keynote for her big reveal.

The announcement of Overwatch League has continued fan the flame of excitement as fans dream of becoming professional eSports players. “The Overwatch League represents not only the pinnacle of Overwatch competition, but also a genuine career opportunity for the most-skilled Overwatch players,” Blizzard CEO, Mike Morhaime, said on stage at the opening ceremony. “We’re building a league that’s accessible to players and fans, sustainable and exciting for everyone involved.”

Pokémon Sun And Moon

Celebrating the franchise’s 20th anniversary, Nintendo enjoyed a record-breaking release of Sun and Moon, hot on the heels of Pokémon GO fever. In fact, Pokémon Sun and Moon debuted at numbers 3 and 4 on revenue charts for the month of November and proved to be the franchise’s most pre-ordered and fastest-selling titles in US history.

Although Nintendo focused almost exclusively on The Legend of Zelda: Breath of the Wild during this year’s E3, a livestream demo of Pokémon Sun got fans excited with its new battle interface, setting, features and of course, over 800 Pokémon to collect and train. Since then, a special demo of the game was released exclusively for the 3DS, allowing fans to explore the new Alola region and earn rewards that can be transferred over to the full game. Shortly after the game’s release, the Pokémon Company announced a new anime series called Pokémon The Series: Sun and Moon, debuting on Disney XD next year.

Battlefield 1

Launched at the end of October, EA’s bloody tale of World War I debuted at number one in console video game sales and in its first week in the UK, Battlefield 1 outsold the combined week one sales of Battlefield 4 and Hardline. Prior to launch, the game’s open beta drew in over 13.2 million total players, making it the biggest in EA’s history.

Anticipation for the title was reinforced by an E3 presentation at the first ever EA Play public event, which showed the three main pillars of exciting gameplay. Following the presentation with a livestreamed 64-player multiplayer match, featuring celebrities Jamie Foxx and Zack Efron alongside prominent YouTube and Twitch streamers must have also helped the game’s popularity.

Tom Clancy’s The Division

Ubisoft debuted its brand-new franchise in March with as much marketing fervor as we’ve come to expect from the publisher. Tom Clancy’s The Division was no exception, touting a disturbing map of how fast diseases spread, a live-action miniseries on Amazon Prime and a movie deal with Jake Gyllenhaal attached to star.

As a result of a strong marketing campaign and positive critic reviews, Tom Clancy’s The Division was the fourth top-grossing video game for consoles in 2016 bringing in $261.8 million.

Destiny: The Rise of Iron

Destiny may not have launched this year, but its expansion, The Rise of Iron helped launch Bungie’s MMO to number five on the premium console revenue charts, fetching a cool $214.1 million in 2016.

“Destiny highlights the importance of additional content releases for AAA titles,” noted SuperData CEO, Joost van Dreunen in the company’s August game industry report. Bungie released a trailer for its Destiny: Rise of Iron expansion over Snapchat in June by accident—ahead of the official announcement—but the trailer worked to get fans that much more excited.

Learn everything you need to know to invest in today’s fastest-growing media channel—Competitive Gaming and eSports on 2.16.17 in Los Angeles. Go to alistsummit.com for more info.

Kojima Productions Hires New President; Netmarble Acquires Kabam Vancouver Studio

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An ironic new president and numerous acquisitions mark this week in job moves.

Kojima Productions, founded by Metal Gear game designer, Hideo Kojima after departing Konami under difficult circumstances, announced a fun twist. The company has appointed Shinji Hirano, who was president of Konami’s North and South America operations, as its president. The company is currently developing Death Stranding, featuring actors Norman Reedus (The Walking Dead) and Mads Mikkelsen (Doctor Strange; Rogue One: A Star Wars Story).

Dovetail Games, which specializes in simulation games such as Train Simulator and Microsoft Flight Simulator, has hired two former EA executives—Lizzie Wilding and Simon Bull—to its senior management team. Wildling is taking the role of VP of publishing while Bull will oversee Dovetail’s flight franchises as flight business director.

Glu Mobile has formally acquired Quiz Up developer, Plain Vanilla, and the studio’s CEO, Nick Earl will join Glu’s board. Glu invested $7.5 million in the company earlier this year, and part of the deal was that then Glu CEO, Niccolo de Masi was to join the studio’s board of directors. Additionally, Glu was given the option to acquire Plain Vanilla after 15 months, which was obviously shortened.

Asian game company, Netmarble announced that it has acquired Kabam’s Vancouver studio, gaining it the highly successful game, Marvel Contest of Champions and Transformers: Forged to Fight, which is expected to launch next year. In a statement given to GamesIndustry.biz, Kabam said that it was exploring the option of selling the remainder of its studios, including its Los Angeles, San Francisco and Beijing locations, to Netmarble.

Atlus, which was acquired by Sega earlier this year, announced that it was expanding by opening Studio Zero. Led by Katsura Hashino, the previous director of the game, Persona 5.

Swedish mobile game publisher, MAG Interactive, has named Magnus Wiklander as the company’s chief financial officer. After working with Widespace, the mobile advertising expert, for five years, Wiklander will use his knowledge and experience to optimize the company’s internal operations and achieve the ongoing global growth.

Starbreeze, makers of the Payday games and John Wick Chronicles, has agreed to acquire 90.5 percent of Dhruva Interactive—one of the biggest game companies in India, specializing in art production. Some of Dhruva’s recent work includes art production for numerous Xbox One games, including Halo 5: Guardians, Forza Horizon 3, Quantum Break and the upcoming Sea of Thieves. Dhruva will continue to operate under its own brand and is free to work with other clients while doing the art production for Starbreeze’s projects such as Overkill’s The Walking Dead. Additionally, Starbreeze will offer Dhruva’s services to its publishing partners.

Twitter’s CTO, Adam Messinger is leaving the social media company after almost four years in the role. Additionally, the company’s VP of product, Josh McFarland, also announced that he will be leaving to join venture capital firm, Greylock Partners.

Amazon Studios revealed that it has hired former Tribeca Film Festival director, Genna Terranova for its virtual reality initiative. However, the company has not commented on what Terranova’s role will be or what its VR plans are.

Penske Media Corp promoted Deadline publisher Stacey Farish to the role of chief revenue officer and general manager of Deadline and its sister sites, TVLine and Gold Derby.

The head of Maker Studios, Courtney Holt, has stepped down to assume the role of EVP of media and strategy at Disney. Andrew Sugerman, the EVP of the division’s Content and Media area, will now oversee the studio. Maker, which was moved to Disney’s consumer products and interactive media (DCPI) division last year, was recently shifted to a different area of the division.

Have a new hire tip? Let us know at editorial@alistdaily.com.

Analysts Look At Console Gaming And Digital Game Sale Trends

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Virtual reality may have been a little slow to take off this year, even with the launch of PlayStation VR, but 2016 saw some huge console gaming announcements. Microsoft formally announced two high-end Xbox One consoles at E3 this year, while Sony launched the PlayStation Pro to take advantage of the growing adoption of 4K televisions.

Meanwhile, digital sales of full games have steadily grown over the past few years. This year, NPD launched its Digital Game Tracking Service in partnership with major publishers Activision Blizzard, Electronic Arts, Ubisoft, Take-Two Interactive, Square Enix, Capcom, Deep Silver and Warner Bros. Interactive Entertainment to get a better picture of this significant part of the market.

To better understand some of the major console gaming trends from the past year, particularly the growth of digital, [a]listdaily spoke to industry analysts Joost van Dreunen, CEO of SuperData Research; Peter Warman, CEO of Newzoo; and Patrick Walker, VP of insights and analytics at EEDAR, which was acquired by NPD in August. They share their insights about current trends and what may be in store for next year.

What were the most significant console gaming developments to come out of 2016?

[van Dreunen]: In 2016, we saw the adoption of full game downloads on consoles accelerate. This season the percentage of games sold this way is roughly five times greater than it was in 2012. More so, Sony has done really well with diversifying its content offering with the PlayStation Vue, for instance. Combined with its VR effort, we expect to see more like this.”

[Warman]: Console developers are slowly, but steadily, breaking down the platform’s paid model in favor of alternative approaches. By introducing different ways of selling and monetizing games, console developers are hoping to drive up revenues which, according to our own research, now lags behind PC and mobile. The first way companies are doing this is by exploring free-to-play options. Soccer games have led the way in this sector, with Konami releasing a free-to-play console version of Pro Evolution Soccer in an effort to get players into the card-acquiring myClub mode. Meanwhile, Psyonix’s Rocket League was free [for PlayStation Plus subscribers] on PS4 for its first month to get a user base. Becoming a compelling word-of-mouth success, Psyonix recently announced that the game generated $111 million in its first year, selling an impressive number of copies and themed DLC, such as the Dawn of Justice inspired Batmobile, to an engaged player base.

The other way to do this is through season passes—convincing players to buy a full version of a game as well as all scheduled DLC and some notional updates at launch day. Season passes tie players to the game longer by forcing them to make an initial investment. However, there is little financial evidence of how well season passes monetize, due partly to how well console developers conceal return on investment. But the season pass model has been used by developers of Fallout 4, Call of Duty, Batman: Arkham Knight, Star Wars Battlefront and many other leading titles, showing its appeal.

In short, console developers are slowly breaking away from the traditional “pay once and you’re in” model, though it’s proving to be slow going. Many console players have reacted negatively to the development of these models, due to their familiarity and satisfaction with the pre-existing model. With console needing to find its place in a market where PC and mobile are on the march, expect more developers to try new monetization tactics to pry the free-to-play door open.

[Walker]: The biggest change in console gaming this year was actually a sign of things to come. The launch of the PlayStation 4 Pro didn’t dramatically shake up the console landscape, but it suggests the industry is entering a new era in which the platform holders update the power of the console much more often. This will probably be the last year that the term “console generation” is appropriate.

How have digital game sales grown in 2016?

[van Dreunen]: We’re seeing healthy year-over-year growth across all digital categories. Mobile is up 18 percent YoY, digital console 15 percent and PC seven percent.

[Warman]: The digital games market generated $83.1 billion in 2016, representing 83 percent of the total $99.6 billion market. This is eight percent more than the $73.1 billion generated in 2015 and in the coming years digital revenues will continue to grow towards $110.1 billion in 2019.

[Walker]: Digital sales have grown consistently year-over-year for the past five years, and 2016 was no exception. There is an interesting seasonal relationship, where physical sales are 5-10 percent higher during the holiday, when more consumers are shopping in retail locations, but the overall trend has been steady growth in digital. There are also a lot of nuances in how different types of titles perform digitally, but at this point, we can expect that at least a quarter of a big AAA title’s sales will be digital.

Given the significant growth of digital sales, will retail remain relevant in 2017?

[van Dreunen]: Absolutely. The notion that in a few years all of gaming will be exclusively digital is naive. People will continue to go to stores to try things out and learn about content and devices. But the role of retail will shift and its dominance in the ecosystem will decline. To put it in clear terms, there’s no way that big publishers like Activision Blizzard, Electronic Arts, Ubisoft and Take-Two are going to create a channel conflict with GameStop.

[Warman]: The growth of digitally generated revenues comes not only from the fully digital mobile segment, but also from increasing digital revenues from PC and console gaming. In 2017, boxed retail games will still be very relevant with a global market estimated at $14 billion (-13 percent YoY), mainly consisting of console game revenues. However, this is 24 percent of the total revenues generated by the PC and console segments (29 percent in 2016). In the coming years, this digital transition will continue and result in boxed retail game sales of approximately $8.5 billion worldwide in 2019, or rather 14 percent of the total PC/console market and seven percent of the total global games market.

[Walker]: Absolutely. Retail sales are not only relevant, they are still hugely important. I think the shift to digital gets a lot of attention because there are recent examples of whole industries—such as music—that have switched to an almost entirely digital distribution model, and the effect on the major companies in those industries has been huge. However, the shift to digital in games has thus far been a linear trend, and holiday AAA releases from major publishers can still expect the majority of their revenue to come from retail sales. The steady growth of digital suggests that this will change eventually, but it is unlikely to change in 2017.

How do you think new hardware such as Xbox One S, PlayStation 4 Pro, Project Scorpio and Nintendo Switch will impact console game sales next year?

[Walker]: Next year is a major year in determining the shape of the next several years of the console landscape. Nintendo is betting that the market will respond to a hybrid between a console and handheld, and is riding a six-month marketing surge from Pokémon GO, the NES Classic, and Super Mario Run. The success or failure of the Nintendo Switch will have a major impact on what types of games publishers are making and the trend of physical versus digital sales. Also, Scorpio gives Microsoft an opportunity to get back into the current console race with Sony. The Scorpio’s power is necessary for high-end 4K and VR gaming, and Microsoft’s dominance in OS market share gives it an avenue to blur the lines between console and the rapidly growing PC market through cross-platform initiatives. This may give gamers a reason to jump back into the Microsoft ecosystem.

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Lumyer App Makes Selfies Sing

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Millennials never grow tired of taking selfies to commemorate the moment. . . any moment. Los Angeles tech startup, Lumyer has banked on consumers’ never-ending infatuation with themselves through its app, which allows users to augment reality by adding video and audio effects to both selfies and videos on Android and iOS devices. Lumyer placed second in Google Play’s recent “Top Trending Apps of 2016” list.

In its first year, consumers have downloaded the Lumyer app more than 10 million times and created over 30 million Lumys. The app has 2.5 million monthly unique users creating over 5 million Lumys each month. Once created, users can share these Lumys across all existing social media channels and messaging platforms.

Those numbers have caught the attention of Universal Pictures, which first partnered with the company to promote the Halloween theatrical release of Ouija: Origin of Evil and has reteamed with Lumyer for Illumination Entertainment’s newsest computer-animated movie, Sing.

Lumyer co-founder Diego Mortillaro told [a]listdaily that more than 95 percent of Lumys created using the Ouija effect, which allowed users to place themselves inside a scene from the horror film, were shared by users during the Halloween campaign.

“We saw a high interaction time with the five Ouija effects of one to two minutes on average,” Mortillaro said. “Our format seems to work really well. People can find something that’s a digital experience but connects with them on a very emotional level.”

The Sing campaign, which runs through January 2, allows users to incorporate special video and audio effects of characters like Buster Moon, Rosita, Gunter and Meena into photos and videos as if the characters are right in the photo or video.

Founded in 2015, Lumyer began as a tool for users to bring characters to their images through a variety of fun effects. The app has quickly become one of the most popular photo and video enhancement tools available and is now grabbing the attention of brand marketers thanks to its interactive capabilities.

While users can purchase an assortment of effects from the app’s store, Hollywood marketing campaigns offer access to exclusive limited-time effects that are free. And once downloaded, those effects can be used long after the movie or brand campaign has completed. “Working with Hollywood is quite natural in our promotional activities because we do video effects and they produce videos,” Mortillaro said.

One opportunity that hasn’t been explored yet is the home video release of these films. “Our users are very loyal and still today we’re receiving emails asking us to put Ouija back into the application,” Mortillaro said. “Marketing a recall campaign could be very successful.”

Lumyer also collects a lot of data on its customers and can provide its partners with useful information for marketing campaigns and future events. “We’re now entering the beauty industry because Lumys are used on your face, and the larger beauty companies are asking us to create specific effects. We’re also getting requests from the car industry. We don’t see any specific industry that couldn’t benefit from what we do.”

Mortillaro points to the music industry as a great potential avenue of exploration, which could bring the interaction between the singer and the user to the next level. “There are apps that people use to play back specific songs,” Mortillaro said. “Think about being closer to the singer and singing with him or her in augmented reality. That increases the engagement.”

Nearly 70 percent of Lumyer’s audience are millennials with slightly more female than male users. The app has a six-minute average session length, compared to Instagram’s two minute and Snapchat’s 84 seconds. “People perceive Lumyer as a tool to have fun with and entertain themselves,” Mortillaro said. “We see a lot of comments where people take a break from work and relax and play with Lumyer.”

Lumyer has risen at the same time that traditional advertising formats are having a hard time connecting with young users.

“They’re used to skipping ads, especially when the ads come out of the blue and aren’t perceived as an added value,” Mortillaro said. “We realize that people are using AR in an active and practical way. They’re becoming active distributors in the ad message. It’s simple to use and people see our effects as an added value because they’re consistent with the message they want to provide to their social content.”

2016 In Review: Mobile Gaming Reaches New Heights

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This has been an exceptional year for mobile gaming, as it brought in $41 billion in revenue, surpassing both PC and console earnings for the year. We asked industry insiders and analysts about what they thought were some of the year’s biggest mobile gaming events that helped the industry soar. Hint: everyone is wild about Pokémon GO and can’t get enough Clash Royale.

“Mobile games had another great year in 2016. Analysts projected mobile game revenues at nearly $40 billion in revenue to surpass PC and console earnings for the first time, marking a new milestone in market strength and potential. The release of several consumer VR headsets sparked growth in VR gaming and made mass adoption not just possible, but inevitable. Supercell showed their magic once again by launching the megahit Clash Royale. Pokémon GO broke through and became a global cultural phenomenon that catapulted mobile games back into the spotlight as a massive market opportunity. And finally, we saw a rewind in history with Facebook experimenting with HTML5 games on its Messenger platform.” – Terence Fung, chief strategy officer, Storm8

“As I look back on 2016, two mobile games stand out as particularly groundbreaking: Clash Royale and Pokémon GO.

“Clash Royale showed the world that eSports can work on mobile in a meaningful way. In addition, the title illustrated for the first time that real-time PVP (player-vs-player) can drive a #1 top-grossing hit. Prior to Clash Royale‘s launch, the mobile ecosystem was largely ignoring the viability of eSports and defaulting to asynchronous PVP as the go-to structure for social competition in mobile gaming.

“There’s no denying Pokémon GO was a tremendous phenomenon, and groundbreaking in various ways. Like Clash Royale, it established a mega hit in a space that was largely being ignored: location-based gaming. Many studios had previously tried to deliver a location-based mobile game and failed. This led the industry to move away from exploring real world locations in game design.

“Although Pokémon GO‘s success is unlikely to be replicated by future location-based titles due to how perfectly the IP fit the concept and captured the cultural zeitgeist, I believe it played an important role in introducing a completely new form of interactive entertainment that lays a foundation for future location-based titles to succeed now that consumers are familiar with the mechanics involved.” – Chris Akhavan, chief revenue officer, Glu Mobile

“It has to be Pokémon GO and the wide consumer adoption of a data-driven game. Just looking at the revenues, it would be hard to cite anything that has had nearly as much impact.” – Stuart Duncan, CEO and founder, icejam

“A lot has happened in mobile gaming, as one can imagine. Mobile gaming has become a lot more focused on midcore, hardcore and strategy games than the Candy Crushes of the world. From a customer affinity standpoint and taste perspective, we have moved on from Candy Crush to more sophisticated games.

“From a user acquisition standpoint, mobile video is at the center stage for how gaming companies are acquiring the right kinds of users. That has happened a lot more this year, and I’m sure we’re going to see a lot more going forward.” – Piyush Shah, chief product officer, InMobi

“After years of stagnation, the smart implementation of megabrands provided a jolt to mobile in 2016. Pokémon GO smartly integrated a broadly appealing brand into location-based gaming, the power of the Clash IP helped turn Clash Royale into an instant hit, and Super Mario Run is already at the top of the free and grossing charts. Next year will see even more companies trying to use their brands in mobile.” – Patrick Walker, VP of insights and analytics, EEDAR

“China overtook the US as the world’s largest mobile game market, reaching $10.0 billion in 2016. In the first 80 days after its launch, Pokémon GO had already made over $470 million in gross revenues. This was one of the only new entries in the top 10 grossing game rankings all year. Mobile game developer, Supercell was valued at $10.2 billion following its investment by Tencent. Super Mario Run, Nintendo’s first true mobile game, released on iOS.” Peter Warman, CEO, Newzoo

“Pokémon GO earned $788 million, just under the top-5-titles despite launching mid-year. Its success showed the persistent potential of mobile games as promotional tools: sales of older Pokémon titles and 3Ds hardware picked up, and new 3DS titles Pokémon Sun and Moon enjoyed record-breaking sales at launch in November. Additionally, the mobile game helped Nintendo see the potential for mobile, and the company’s first true mobile game, Super Mario Run, features its flagship character.

“Clash Royale’s addictive gameplay borrows from both MOBAs and collectible card games and cementing Supercell’s reputation as the premiere mobile hitmaker. Shortly after the game’s launch, Tencent purchased a controlling stake in Supercell from former owner SoftBank. The deal gave Supercell greater access to the Chinese mobile market, where it is virtually impossible for even the largest Western publishers to succeed without a local partner. The investment helped it become the second title in 2016 to earn over $1 billion for Supercell.” – Joost van Dreunen, CEO, SuperData Research