Coronavirus & Gaming: Crisis & Opportunity 😷

The coronavirus pandemic has without a doubt wrecked havoc in almost every industry globally: retail, transportation, hospitality, restaurants, etc. Stock markets are down ~40% from their peak just last month, and pundits are predicting unemployment rates to reach as high as 30%. In a world bombarded with more pessimistic news each day, can there be any silver lining to this epidemic?

Fortunately for us, unlike most other spaces, the gaming industry has not only remained insulated, but also benefited significantly from government-mandated “shelter-in-place” orders. Video game engagement has skyrocketed in recent weeks, as reported by numerous publications across multiple platforms:

• App Annie: The Impact of Coronavirus on the Mobile Economy
• Verizon: U.S. Gaming Usage Up 75% Amid Coronavirus Outbreak
• SteamDB: Record number of 20M Steam users online during coronavirus outbreak
• Xbox Live shut down twice this week as people play more games in self-isolation
• CNN: Gaming in China surged during a coronavirus-stricken Lunar New Year

As the late president JFK astutely remarked, “The Chinese use two brush strokes to write the word ‘crisis’ [危机]. One brush stroke stands for danger [危]; the other for opportunity [机]. In a crisis, be aware of the danger — but recognize the opportunity.”

In this week’s feature, our deep dive focuses on three key questions:

1. Why is gaming the best form of entertainment during a sustained lockdown?
2. Who will be the biggest winners in the space?
3. How do the conclusions drawn vary by region?

1. Gaming is the best form of entertainment during the COVID-19 pandemic

First, let us define “best,” as a more precise explanation should help defuse disagreement. As increasingly more people around the world become mandated to “shelter in place” for an indeterminate (but likely prolonged) period of time, we define “best” under this scenario to mean the form of media with the most cost-efficient $/hour ratio for consumers.

While services like Netflix, Disney+, and other such services unlock their entire content libraries to customers for a fixed monthly subscription fee, rarely are TV shows and films worth rewatching, and a good series will likely at most only captivate an audience for tens of hours. For games, and especially online multiplayer ones, the level of engagement per user can often be a whole order of magnitude or two greater, with loyal players sometimes investing hundreds if not thousands of hours over years.

Many of the most successful titles to enjoy such enduring player lifetimes are free-to-play, so there isn’t even an upfront paywall to enjoy the content. (More discussion to follow about this category of games, but let’s sidestep for now.) Even pay-to-play games have seen their $/hour entertainment value proposition to customers increase over decades because developers have been unable to break gamers’ psychological aversion to paying above a $60 price ceiling per boxed product.

In 2018, renowned designer Raph Koster published this phenomenon in his essay, The cost of games, and though his visualization displays revenue and cost on a per megabyte instead of per hour basis, the same takeaway holds true: gaming content provides unparalleled bang for the buck.

2. Winner winner, chicken dinner

A common line of thinking to follow is that, because games are so “cheap,” they translate into “bad” (i.e., financially unoptimized) businesses. While that perspective may be true for some games, it is not a rule for all. In fact, Netflix, Disney+, etc. share similar problems of capped upside pricing potential because their business models revolve around fixed subscription fees. In other words, it doesn’t matter if you watch 1 or 1,000 hours of Netflix, you still pay $9–16/month.

However, for free-to-play games like League of Legends, what we discovered at Riot is that a user’s average monthly game hours is strongly correlated with that user’s average monthly spend, and this correlation is much stronger than the classic industry benchmarks of MAU and ARPU. In other words, the more time you invest in the virtual world of League of Legends, the more you will likely spend to unlock content within that virtual world. It doesn’t matter if the space is IRL or digital: humans all want to be different, and that’s what makes us all the same.

An important disclaimer to note thogh is what may work in one game may not necessarily hold true in another. For League, the reason why this correlation is so strong is because the game does not erect any artificial barriers that stop or dissuade its users from playing. In contrast, many mobile games have strategically tuned their metagame and monetization systems to keep users returning periodically for bite-sized chunks of playtime. These tactics may have worked well in a pre-coronavirus world, but now in an environment of mass “shelter in place,” these games are grossly outmatched by the higher quality experience PC/console game alternatives offer in general. (In our newsletter’s following featured section, Jeff expounds upon this topic in more detail.)

3. Same symptoms, different treatments: West vs. China

Narrow analyses of mobile-only data in the West suggest that “gaming hasn’t been the primary beneficiary” of the coronavirus pandemic, a conclusion this blog draws, for example. However, if we broaden our perspective to include other platforms, we believe the data would corroborate that PC and console games are likely the biggest winners in the West. Though public non-mobile data is limited, the exhibit on the left from Nielsen’s 2018 U.S. Games 360 Report suggests this would be true.

Furthermore, the below App Annie exhibit helps paint a more complete global picture. Of all the listed countries impacted by the coronavirus pandemic, China’s population is the most mobile-centric, as hundreds of millions of users leapfrogged PC adoption, and bans on console sales were only recently lifted several years ago.

Chinese and Western gamers alike each prefer to play on their respective primary devices; the only difference is which device each group considers to be their primary. For the Chinese, it’s their smartphone; for Westerners, it’s their PC/console.

Though the coronavirus pandemic has been affecting us all the same globally, our self-medicating “treatments” for social isolation vary regionally.

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About Us

• Kenny Liu: Product Lead at Snackpass. ex-Riot & ex-Goldman alum. @kliuless
• Joseph Kim: Deconstructor of Fun podcast host. GameMakers YouTuber. @jokim1
• Jeff Witt: Founder of Funzio & Storm8. Mobile F2P game design consultant. @jwittsf