High Growth Media Markets & the Metaverse

How is the Nature of Digital Media Consumption Changing?

Julia Xu
Julia Xu
Nov 16, 2021 · 8 min read
Photo by Kelvin Han on Unsplash

The last two years have certainly been strange. A global pandemic upended the status quo in the media and entertainment industry and accelerated major changes in consumer behavior. Hot new buzzwords like Metaverse, NFTs, Web3, etc. are flooding the industry vernacular. Ariana Grande recently performed a concert inside the video game Fortnite where among other things, users’ avatars floated around in giant bubbles while following her winged avatar through candy colored space. The way we consume digital media seems to be evolving, shifting towards a more interactive, hands-on experience.

How do we make sense of all this? Let’s start by looking at some of the high growth media verticals at the center of the transformation. Gaming, the creator economy, and digital assets (NFTs, crypto tokens, etc.) are sectors that are leading the charge in driving, adapting to, and enabling these shifts in consumer behavior.

Gaming is the New Cool Kid on the Block

Gaming has always been one of the most interactive formats of digital media, and it has emerged as one of the winners of COVID-19, if you can really declare anyone to be winning during a global health crisis. With lockdowns slamming the brakes on in-person gatherings, many turned to gaming as a source of entertainment and social stimulation. Game revenues increased over 20% from 2019 to 2020. Lest we think this is a short-lived phenomenon that will reverse itself once “normal life” resumes, data suggests a good chunk of these new gamers plan to stick around.

Source: Newzoo 2021 Global Games Market Report

Beyond the pandemic surge, another key trend has long been underway. Gaming has become a critical social and cultural nexus for today’s youth. According to Newzoo, gaming now accounts for a larger share of Gen Z and Millennial leisure time than any other media. 81% of Gen Z are gamers, and they spend an average of 7 hours and 20 minutes per week gaming. Millennials are not far behind at 77%, spending an average of 6 hours and 50 hours per week on games. Sean Monahan from The Guardian wrote that “video games have replaced music as the most important aspect of youth culture.”

One factor behind this is that contrary to outdated negative stereotypes, gaming is often a highly social experience. It’s not uncommon for players to log in to a game primarily to hang out and socialize. Game companies are taking note and adding features to accommodate and support these experiences. Fortnite added the more laid-back Party Royale mode in 2020. It features no fighting, activities to explore with others, and a dedicated area for in-game concerts, movies, etc. We’ve seen major artists like Ariana Grande, Travis Scott, Lil Nas X, Ava Max and more perform concerts or hold album release parties in Fortnite and Roblox. In the face of lockdowns, some even held weddings and conferences in Animal Crossing.

Artists aren’t the only ones jumping on the gaming bandwagon. Netflix, a market leader in the more passively consumed video streaming world, is making its first foray into gaming. Louis Vuitton collaborated with League of Legends for the 2019 World Championship Finals. Vans recently launched a virtual playground within Roblox. Biden and Harris even turned to Animal Crossing for an outreach campaign featuring in-game yard signs. Brands need to go where the consumers are, and for younger consumers, the medium of choice is increasingly gaming. Gaming has undeniably entered mainstream and will continue to be a big driving force in youth culture.

The Rise of the Creator Economy: From Passive Consumer to Active Participant

It has never been easier to create content. Previously, you needed expensive equipment and/or knowledge of complicated software to enter the content creation game. New tools and platforms have drastically lowered the barrier to entry, making content creation accessible for the average user. Today, teenagers can create and edit videos directly from their smartphones via TikTok or other apps. Roblox consists entirely of games created by its users, most of whom are under the age of 16. It offers a game creation tool simple enough for its young userbase to create games without needing to know how to code. Apps like Boomy allow any user to create and share original music with the assistance of AI.

Creating content is one thing. Platforms today also offer ways for creators to reach an audience and monetize their work. Roblox anticipates paying out nearly $500M to its creators this year. Twitch shares a portion of ad revenue with creators and also allows viewers to directly support their favorite streamers via subscriptions and tips. Twitter, Clubhouse, and other platforms have been experimenting with new ways to allow influencers to monetize. Content creation is more accessible than ever, and for some, is now a viable full-time career.

On the demand side, engagement with user generated content is on the rise. Consumers seem happy to consume content made by their peers rather than exclusively polished corporate material. TikTok was the most downloaded app in 2020. Twitch saw a 60+% jump in total hours watched on its platform from Q1 to Q2 2020, and has continued to grow from there. Some of the most popular forms of entertainment for today’s youth — TikTok, Twitch, Roblox, Minecraft, etc. — involve either creating their own content or engaging in content created by peers. Today’s youth do not just passively consume content. They actively participate in and create it, as user generated content blurs the line between creators and fans.

Digital Assets and Crypto Tokens: More than Just a Fad

NFTs exploded onto the scene this past year, growing from just $13.7M in sales in H1 2020 to a whopping $2.5B in H1 2021. With some NFTs reaching eye popping million-dollar valuations, it’s natural to wonder if we’re caught up in a wave of hype and overspeculation. We believe that beyond the hype, NFTs represent a great first use case for blockchain in the media and creative world.

For the uninitiated, NFTs or non-fungible tokens are unique digital assets that live on the blockchain. Because they are blockchain native, they can be programmed with smart contracts, digital contracts which are built into the asset itself and can automatically execute. This opens up a host of interesting use cases for digital media, including possibilities for more direct relationships and interactions between creators and fans.

Financially, NFTs offer a new revenue stream for creatives, and unlike physical assets, it can be programmed directly into the smart contract that creators keep a cut of every secondary market sale. Artists can also reward NFT holders with exclusive access to merch, events, or communities. NFT tickets have the potential to mitigate problems like scalping or serve as a digital version of a fan’s ticket stub collection.

Because the popularity and buzz around NFTs has reached the mainstream, we’re now waking up to serious examples of blockchain’s utility beyond the world of cryptocurrencies and finance. With the floodgates open, new innovations will continue to evolve. Beyond NFTs, other developments in crypto such as social tokens or Decentralized Autonomous Organizations (DAOs) also introduce new models for ownership, engagement, and community. We are still in the early days of innovation, with much more to come that could revolutionize the way we participate in digital media.

Bringing it all Together: What is the Metaverse?

Interactive media like gaming is gaining steam, young users are creating content like it’s second nature, and innovations such as NFTs are spicing up the world of digital assets. Where is this all headed? Cue one of the most overused words this year: Metaverse.

It’s nearly impossible to avoid the term these days. Metaverse hype is everywhere, but what does it truly mean? If it feels difficult to define and understand, that’s because the Metaverse is not a single product, feature, or experience. Think of it as the next evolution of the Internet, an interconnected universe of virtual worlds where people will play, create, and work. It is still being built and we are definitely not there yet, but there is general consensus around the key properties the Metaverse should have. It should be persistent, synchronous, real-time, interoperable, content rich, and support a healthy economy. For a deeper dive into the topic, Matthew Ball wrote a comprehensive 9-part Metaverse primer that provides a solid foundation of understanding.

So how do gaming, the creator economy, and digital assets tie into all this? We believe each of these verticals will play a significant role in building out the Metaverse. As one of the most interactive forms of media today that already supports synchronous multiplayer experiences, gaming has led and will continue to drive key innovation and breakthroughs. Tools that support user generated content will contribute to a healthy creator economy which will ensure a content rich Metaverse. Crypto tokens and digital assets will enable creators and fans to connect, collaborate, and participate in a thriving economy.

As consumers gravitate towards more interactive, immersive digital experiences, digital media will continue to increase in volume and complexity. We also expect to see an uptick in multimedia digital assets that include music, video, etc. As a data focused company, Verifi believes the ability to accurately track, verify, and manage rights and metadata associated with digital media assets is key to ensuring an interoperable and healthy Metaverse, and we look forward to contributing to this brave new digital world.

Verifi Media

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