The Next Frontier of Gaming: the Creator Economy

Play-To-Earn model currently attracts a lot of attention. Some Metaverse platforms allow users to not only interact with other players, but also to be rewarded with digital tokens convertible in real money.

Meta is building a creator economy on Horizon Worlds, a free VR platform, online video games developed by Meta for Oculus. On Horizon creators make money thanks to their own skills: Players use the platform’s tools to build custom VR spaces and play games together with coworkers and other players. Creators are basically VR world designers that create digital assets thanks to their technical skills and own the intellectual property rights to the content they create (NFTs). Today the gaming platform is only accessible via VR headsets, but because users monetize based on how much other players engage with the game content, Meta is planning to allow users to also access the platform via web in order to attract more gamers.

Another popular platform is Axie Infinity, a Metaverse game experience created on the Ethereum blockchain where users can purchase NFTs of their favorite monster and pit them against each other in battles. With the “play-to-earn” approach, creators are rewarded with crypto tokens - called Smooth Love Potion (SLP) – each time they sell their items. Moreover, they can also loan their NFTs to other players to use and earn with, and profits are divided between the parties. As of February, Axie Infinity had more than 1.8 million DAU and NFT sales volume of $4 billion. There’s no way to play the game without buying the three Axie NFTs needed to create your first team: If you win, you’re rewarded with SLP and you can convert your token into Ethereum, and then into dollars. That’s how users make money playing the game.

Compared with traditional gaming experiences, in Metaverse users are immersed in an environment where they can create, interact, explore, and participate in a wide variety of experiences.

In the Metaverse, most of the content users spend time with, is created by other users. Content creators are incentivized and rewarded based on how much time other users spend engaging with the platform, therefore, to increase profits it is crucial to continuously improve the user experience first, developing the underlying technology, then integrating new tokens in the platform.

It does not come as a surprise that gaming could become the entry portal for the Metaverse, because gaming is a fun and globally adopted activity, and is also extremely advanced technologically. The market opportunity for monetization through the gaming industry is massive, for both platforms and players: Today out of about 8 billion world population, 5 billion people are internet users, 4.6 billion are social media users, and 3 billion are video gamers ripe for potential conversion into Metaverse users.

In summary, gaming is still at the early stage of development in the Metaverse, but the rapid growth of its user base and the increased attention from big companies represents a huge opportunity to invest in the market. Moving from an independent virtual world to an integrated “digital twin of the real world” with better technology and experiences, will bring a wider audience of users and more per-users spending.

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The information in this article should not be regarded as a description of services provided by Delian Partners SA. The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. The views reflected in this article are subject to change at any time without notice.

Live Streaming is Replacing Traditional Media

Even if live streaming has been around for many years, it experienced a tremendous acceleration during the pandemic as people spent on average 30% more time engaging with their smartphones and media devices.

As technology and media consumption remains higher than pre-covid levels, the success of Live Streaming is growing on a global scale. One of the sectors in which it has been more successful is e-commerce: E-commerce consumption accelerated by three years during the pandemic, and the increased competition in the virtual space worked as a catalyst, pushing companies to improve their users’ online experience and catch their attention.

Chinese tech giant Alibaba was the pioneer of Live Streaming in e-commerce. Through the Live Streaming platform Taobao, Alibaba created a new personalized shopping experience, connecting companies with roughly 800 million monthly users who visit Alibaba’s e-commerce site. Taobao’s range of products available in live streaming has been growing massively and the platform is expanding its offer to those categories previously available only offline, such as cars and large appliances.

Live streaming has also become a key feature in the social media landscape. With 2.6 billion downloads, 1.6 billion worldwide users (including Duoyin), and 800 million monthly active users, TikTok is one of the fastest-growing social media platforms ever. What makes TikTok unique is its AI algorithm. Once a video is uploaded on the platform, the AI algorithm uses Natural Language Processing (NLP) to analyze and categorize the video – including audio, hashtag, and images, which allows TikTok to provide users with highly targeted content that they find most interesting. In this way, TikTok’ content can engage its new users for up to 10 minutes, which is three times the capability of Instagram.

Another example is the Amazon-owned platform Twitch, which hosts 91% of all video game streaming and provides the content of more than 4 million broadcasters, monthly. In a high-competitive video games landscape, Twitch differs for the “Just Chatting” category: Streamers can engage with the community and talk to viewers even when they are not playing any game. To understand the impressive growth of the platform, consider that Twitch peaked at around 1.7 billion hours watched in November 2020, versus Facebook’s all-time-high of 250 million in September.

The live streaming market can become the largest entertainment medium. As reported by TechJury, the global live streaming market is surpassing the traditional media ecosystem - such as TV or social media- and it is expected to be worth over $247B by 2027. The growth trajectory is supported by a secular shift in consumer habits, considering that 63% of people aged 18-34 watch live streaming content regularly.

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The information in this article should not be regarded as a description of services provided by Delian Partners SA. The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. The views reflected in this article are subject to change at any time without notice.

From the Console to the Cloud: The Disruption of the Gaming Industry

With restrictions on travel and social interactions, people have started spending even more time in front of screens, seeking alternative forms of entertainment: A clear beneficiary is the Video Gaming Industry which reached $159.3 Billion during 2020, increasing by 9.3% from 2019 - Video Game Statistics.

This unprecedented boom in the Gaming industry was supported mainly by Cloud Gaming technology, a kind of "Netflix for gaming" which allows users to play a wide range of games which would usually require specific high-powered hardware. Thanks to the Cloud, users can play games remotely just by subscribing to the service, avoiding the need to download files into their devices or purchasing expensive consoles. This new business model is called Game-as-a-Service (GaaS) and it is completely changing how video games are consumed.

Video game company Activision Blizzard is one of the first major pioneers of this model. Its great success came from the blockbuster “Call of Duty” franchise: Whether the user is playing on a PS5, Xbox, PC, or smartphone, he can access the entire video game saga and engage with other players from any device just by subscribing to it. 2020 was a record year for Call of Duty, with more than 100 million monthly active players engaging with its free-to-play experience.

Another successful example is Epic Games and its popular video game Fortnite. Fortnite is a multi-platform and no-cost game whose first source of monetization comes from micro-transactions. Everyone can access the basic game experience, and monetization happens when gamers decided to buy additional features such as new costumes, weapons, and even special missions.

GaaS has been around for several years, but the growth and the engagement of users has been accelerated in recent years by the live streaming. Amazon-owned platform Twitch is a game streaming platform where people can truly live the social side of gaming. Through Twitch, top video game players can make money broadcasting games and monetizing fans’ views: In March 2018, Fortnite reached about 630,000 viewers, while in 2019 another event hosted by Fortnite attracted more than 7 million viewers. In 2020, Twitch had about 26.5 million daily users and 6.9 million streamers creators each month, and these numbers are continuously rising – Twitch Traker.

In 2020 Google has entered a media partnership with Activision to show the online format of The Call of Duty League through its own video-platform YouTube. The online event was the most watched CoD e-sports match in the game’s history: The Call of Duty League reached 1.1 million subscribers on YouTube, with a peak of 331,000 viewers - Forbes.

The GaaS business model is disrupting the game industry as never before: The main difference from traditional forms of gaming is that through the Cloud, games are streamed and not sold at once. Instead to purchasing a product, users must pay for a subscription service, and that is why game developers cannot stop updating their services: By introducing exclusive new content, users become more willing to spend money to enhance their gaming experience, generating a potentially unlimited stream of revenues. To maintain a competitive edge, Game developers must communicate and cooperate with users to generate a virtuous cycle of revenues and achieve a win-win situation.

As reported by Statista, the Video Games industry will reach more than $150 billion in 2021, attracting companies outside the gaming sector: The evolution of Cloud services, combined with advancements in 5G network globally, allow big technology companies such as Amazon, Google, and Tencent, to heavily invest in network infrastructures and technology innovation to be part of the future expansion of the industry.

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The information in this article should not be regarded as a description of services provided by Delian Partners SA. The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. The views reflected in this article are subject to change at any time without notice.