How the Rise of Metaverses Will Impact the Entertainment Industry
An exciting emerging channel for immersive storytelling, world-building, and unlocking fan creativity
It’s been almost a year since Fortnite’s exclusive Star Wars: The Rise of Skywalker event, where fans got a sneak peek at the movie, played with lightsabers, and danced with director J.J. Abrams’ avatar, all inside the massively popular online game. Reviews of the event were a mixed bag, with some applauding it as a bold step towards the future of interactive entertainment while others finding it underwhelming and blatantly promotional. Regardless, no one could deny that Fortnite and Disney were onto something in their innovative collaboration.
Since then, Fortnite has doubled down by hosting a series of buzzy virtual concerts, including the reality-bending Travis Scott show in April that was viewed by 45 million players, as well as the season-ending Galactus event that took place earlier this week and introduced the relatively obscure Marvel comic character to a record 15.3 million concurrent players. In April, it also launched Party Royale — a separate, fighting-free island within Fortnite that features both a concert stage and a theater space for virtual events.
Of course, Fortnite isn’t the only digital venue owner that’s open for business. Other popular massively multiplayer online games, or MMO games for short, such as Roblox and Minecraft, have also been exploring the potential of evolving beyond its gameplay and becoming a digital third place for people to socialize online and participate in virtual live events together. And these games are already huge platforms: Fortnite reported more than 350 million registered players in May, Minecraft surpassed 131 million in October, and Roblox has 150 million as of July. Notably, more than half of U.S. kids and teens under the age of 16 now play Roblox, and viral star Lil Nas X’s recent live shows in Roblox amassed 33 million views over two days.
Together, these virtual events herald the emergence of a metaverse — a continuous and persistent virtual space in which users are free to explore, create, and interact with the environment and each other. A digital third place on steroids, if you will. Although the MMO games cited above are still just “protoverses” and we are still years away before any of them would evolve into a true metaverse, it is interesting to think ahead and start considering the wide-ranging and zeitgeist-shifting implications of such a new platform. This is especially pertinent for entertainment brands, given the platform’s enormous potential for immersive storytelling and interactive world-building.
2020 has been a difficult year for most entertainment brands. The film and television industry is looking at an estimated $160 billion loss over the next 5 years, according to market research firm Ampere Analysis. Numerous sporting events and concerts have been postponed or outright canceled. Disney said the pandemic cost its parks, experiences and products segment around $2.4 billion in lost operating income during Q4. Even with promising vaccines on the horizon, recovery could still be spotty and winding, especially for the theatrical sector where audience behavior may have changed for good.
One bright spot may be the growth of streaming service usage, as the lack of live sports earlier this year pushed some households to turn to streaming services. But according to expert estimations, the OTT-dominant model may be a less profitable way to monetize content than the conventional pay-TV model. So there will be a need to figure out new revenue streams to supplement the profitability gap while the industry undergoes a business model shakeup. That’s where the developing metaverse comes in.
As a beneficiary of the stay-at-home orders, gaming saw a major pandemic boost in terms of time spent and revenues, as many turned to the virtual worlds of video games for escapism during these trying times. According to a recent report by the NPD Group, U.S. gamers average 14 hours per week playing video games this year, up from the 12 hours per week in 2018. Among them, “heavy players” spend over 15 hours per week on gaming and make up 29% of U.S. gamers, a 6% increase over 2018. The global games market will generate revenues of $159.3 billion in 2020, per Newzoo’s estimation, marking a healthy year-over-year growth of 9.3%. Naturally, the increased consumer attention on gaming helped familiarize a sizable audience segment with the aforementioned virtual events being held in protoverse environments. People hosted virtual birthday parties, weddings, and runway shows in games like Roblox and Animal Crossing: New Horizon.
Besides, the rise of non-gaming virtual events also contributed to the normalization of moving conventionally offline entertainment experiences to online channels. Dua Lipa’s live virtual concert ”Studio 2054,” for example, garnered over 5 million views on its debut night, breaking the global livestream record, netting at least $60 million in ticket sales. Besides music-related content, live experiences also extend to many other vectors such as cooking, fitness, education, and even travel, forming the foundation for the “Zoom economy.”
Although the rise of gaming and virtual experiences theoretically compete with the entertainment brands for the same finite pool of audience attention, it would be short-sighted to see them as new competitors. Instead, players in the entertainment industry need to recognize that these new virtual experiences play a crucial role in shifting consumer expectations and behaviors, preparing the mainstream audience for more immersive experiences in future metaverses. Rather than treating it as an existential threat, entertainment should be actively embracing this attention shift and working to co-opt it as a customer acquisition and engagement channel.
Entertainment in Metaverses
Entertainment is a sprawling industry that covers a wide range of sectors. Overall, the industry’s offering could be divided into two broad categories: content and experiences. The content side of the business, regardless of format, has been shifting towards digital channels for two decades, whereas the experiences are only starting to shift from offline, out-of-home channels to virtual spaces.
The additive value the metaverse can create for entertainment brands essentially boils down to three main functions: immersive storytelling, world-building, and unlocking fan creativity. Each of these three features complements the franchise-building process and enhances audience engagement, two top priorities for any modern entertainment brand.
Storytelling forms the basis for the content business, regardless of its format or distribution channel. Metaverses supercharge the storytelling capability with deep immersion and interactivity, gamifying the narratives to aid the suspension of disbelief and build affinity. Instead of passively consuming a piece of content, viewers are to become spectators or even active participants in the narrative, leading to a heightened sense of agency and emotional investment. The line between entertainment content and experience would be a rather blurred one in metaverses.
Interactive content is nothing new at this point. From Netflix’s intriguing attempts at creating choose-your-own-adventure episodes, to HBO’s more elaborate attempt at non-linear content with Mosaic, content creators have been experimenting with new formats to boost viewer engagement. However, 2D interactive content lacks the kind of immersion that a 3D interactive experience can offer. Today, video games often produce some of the most engrossing fictional narratives that the entertainment industry has to offer, and the rise of metaverse will make that more evident, forcing content creators to contend with the power of immersive storytelling.
Virtual reality content has been applauded by many for the total immersion it enables, and there is a far-off version of the metaverse that will be accessible via VR. However, the reach of VR content will remain limited until VR hardware adoption picks up. So the discussion around the metaverse tends to concentrate on gaming environments for now.
For experience-based entertainment, the metaverse provides an immersive channel to scale audience reach beyond venue capacity and geographic barriers. It can be co-opted as an extension of the offline events and experiences to entice customers who could not have otherwise attended in person, or positioned as a lower-cost alternative to upsell prospective customers of in-person experiences. The biggest hurdle to success here remains the quality of virtual events. Just broadcasting the offline event on a 2D screen in a virtual environment won’t be enough; the digital experience will need to be a close replica of the offline experience, granting virtual participants similar degrees of interactivity and agency as an in-person attendee would have.
Metaverses will also enable experience-oriented entertainment brands to test out virtual venues that transcend the limitations of physical venues and unlock new types of experiences. Everyone can get a front row seat in the metaverse, but the real fun will stem from things that would be possible in virtual environments but difficult to implement in the offline world. For instance, attending Coachella in metaverses would provide unobstructed views and queue-less access to merchandise without losing the rush of raving with fellow attendees. Instead of the kind of flattened 2D experience that live streams provide, attendees get an immersive simulation of the real-world event. Interestingly, Fortnite is already hoping that its Party Royale island would become a regular tour stop for artists, completed with a plug-and-play production studio to bring performers onto its virtual stages in a standardized yet customizable fashion.
If theme parks are the 20th century solution for immersive storytelling, then the metaverse will be the 21 century answer. Given how long we have been prohibited from attending big offline events this year, and the cultural shift towards in-person events this pandemic has triggered, more and more entertainment brands will look to the development of the metaverse for new ways to engage with their audiences.
Good stories often create an interesting fictional world people want to spend time in. Fantastical or historical, these unique environments are often replicated via theme parks to allow visitors to step into the story they love. The newly opened Star Wars: Galaxy’s Edge in Disneyland is often cited as the current pinnacle of immersive storytelling in out-of-home entertainment. Visitors can ride the Millennium Falcon, attend a workshop to build customized lightsabers, and partake in an epic battle between the First Order and the Resistance. However, it’s also a costly billion-dollar exercise in world-building — the park features themed shops, restaurants, and entertainment offerings, and Disney is also opening a themed hotel designed like the Galactic Starcruiser to make lodging part of the immersive LARPing experience, extending immersion beyond the park itself. But not every entertainment brand would have the resource to recreate a fictional world like that. Metaverses could offer an interesting opportunity to do so at a much lower cost with more flexibility.
The world-building potential of metaverses also lends well to experiential marketing. For example, Netflix and the Brooklyn Museum recently curated a virtual-only immersive experience that allowed users to virtually walk through the museum and look at the costumes from Netflix hits The Crown and The Queen’s Gambit. In a post-Covid world, such experiences won’t need to be virtual-only, but they could be upgraded from a virtual exhibition to a more interactive experience that enables visitors’ digital avatars to try on their favorite costumes from the shows and document the experience to share via social channels — something that an offline experience would not be able to pull off.
Ultimately, the metaverse’s greatest potential in world-building lies in its potential in merging different fictional worlds and absorbing characters and IP across all sectors of pop culture. If you think the Avenger movies are exciting crossover events, wait till you see Iron Man standing next to Superman holding a Pikachu in the great hall of Hogwarts. Fortnite is already leaning towards this direction, most recently with the addition of Kratos from Gods of War, a video game franchise. Sure, copyright issues will inevitably rise, but once a common metaverse is established, no entertainment brand will be able to afford to make their IPs absent from these platforms, for absence in future metaverses will be value destructive and lead to oblivion.
Unlocking Fan Creativity
Last but certainly not the least, the rise of metaverse will enable fans to create their own narratives out of existing IP, taking things like fan fiction and fan edits to a logical next stage of their evolution. The open-world-ness of the metaverse naturally encourages users to create new characters and stories, but it also invites users to engage with existing IP via interactions or even roleplaying, authorized or not.
Collaborating with fans can be a tricky task, given the need to moderate user-generated content, and most entertainment brands today understandably want to protect their franchises and brands. However, the nature of content creation has been shifting. With the rise of democratized digital creativity, the most popular content could come from anywhere — professional content studios and TikTok stars are placed on a leveled playing field to compete for audience attention, both at the mercy of algorithmic feeds and recommendations. Recently, TikTok users came together to create a crowdsourced musical based on Pixar’s Ratatouille. Similar initiatives will inevitably pop up in the metaverse, whether the IP-owners like it or not.
Therefore, it may become a fool’s errand trying to stamp out unauthorized fan creations in future metaverses. To withhold from tapping into this growing source of creativity may be a big missed opportunity. Brands can choose to refrain from monetizing user-generated content for brand safety reasons, but it might be a better approach to engage the fandoms and grant access to IP assets, and leverage said access to moderate user-generated content and experiences in the metaverse.
These collaborative principles apply to other sectors of the entertainment business as well. Allowing sports fans to run their own live commentary of a game to their followers or create their own highlight clips from multiple viewing angles would boost engagement and build fan communities. For virtual concert-goers, being able to submit their own merchandise designs or choreography routine, and receive a cut of the resulting sales would be a game-changer in how music events engage with fans.
What Entertainment Brands Can do Today
Although there is still a way to go before the protoverse of today can develop into a fully-fledged metaverse, it does not mean that entertainment brands can just table this and circle back later. The metaverse is a fast-growing innovation territory that smart brands should try to get in at the ground level, before it’s flush with entertainment IP and events. To prepare for this fast-approaching future, here are three things that entertainment brands should consider today.
Experiment with virtual events
Today, most branded virtual events tend to happen on live streaming platforms. While tools like Instagram Live offer a great starting point for entertainment brands to try their hand at producing live events, they will need to get better at creating virtual experiences in MMO games too. One of the keys to success is to incorporate content with in-game experiences, emphasizing the interactivity and immersion of the experiences, rather than the IP-led content itself. Incorporating fan creations when appropriate can also help enrich the virtual experience.
Incorporating real-time data
Another key piece of the virtual event puzzle is real-time data. For example, the NFL is working with Amazon on an analytics tool called Next Gen Stats, which provides teams with detailed player data to analyze trends and player performance. It is also being used to enhance the fans’ experience in-stadium, online and during game telecasts. In a way, the Madden NFL 21 game developed by EA Sports represents an early implementation of Next Gen Stats in gaming today. In the future, if the NFL were to create a metaverse match based on the data from Next Gen Stats, it could map virtual players to their real-life counterparts based on historical performance data and create a realistic match. This could even be used to virtually bring back retired star players in the future, unlocking new possibilities for virtual sports matches.
Try out the existing toolchains
To embrace the world-building potential of the metaverse, entertainment brands will need to rethink their production process from the ground up. 3D assets will be needed for MMO, AR activations, and digital merchandise, so it is time to get those in order with each new production.
More importantly, entertainment brands should consider a digital-native approach to designing their sets and props and costumes by adopting the existing toolchain for creating complex virtual experiences. For example, Disney is already using Epic Games’ Unreal Engine to power the production of its hit show The Mandalorian, rendering sets of alien landscapes in real-time and allowing cameras to shoot from all angles. Because the show is already produced on Unreal Engine — the same game engine that powers Fortnite and many other popular online games — it would be easy to replicate the world of The Mandalorian in Fortnite, should Disney ever choose to do so.
Invest in gaming as a strategic channel
Gaming is part of the entertainment business by definition, and it is emerging as a key future growth driver for the entertainment ecosystem. Yet, more often than not, it is still a blind spot for many entertainment brands. Even Disney couldn’t quite figure out how to incorporate video games into its sprawling IP flywheel and conceded that “licensing is the best model for Disney” in gaming. In contrast, Netflix announced that it would team up with game publisher Ubisoft to develop content based on the Assassin’s Creed franchise. As gaming continues to grow its cultural influence and generate bankable franchises, entertainment brands will have to reconsider their strategy and start investing in gaming as a strategic distribution and engagement channel. The testing and learning in the gaming space today will be important in figuring out how to integrate into the metaverses of the future.