Instead of two people jamming away on a shared home console, millions of people are starting to log into games simultaneously. Mobile gaming continues to take off. Livestreaming and esports are on the rise.
That means Nintendo, PlayStation, Xbox and the retailers they work with must adapt.
“The sale of games in a physical form is fading fast, with most video games now sold digitally,” said EY’s global media and entertainment lead John Harrison. Instead of offline, single-player consoles, gaming has become a service, he said. “Game developers are creating ‘live,’ long-term games.”
Free-to-play games like “Fortnite” and “World of Warcraft” have a leg up on traditional video games, because they generate revenue long after a customer downloads the game: They make money off of microtransactions such as a new look for a weapon or digital outfits.
“Microtransactions and battle passes have proven more profitable than single price-point games,” said Laine Nooney, assistant professor and historian of video games at New York University.
How traditional video game companies are adapting
“The purpose of our mobile business is to expand the number of people who have access to our Nintendo IP,” Nintendo told CNN Business in a statement. “We are always exploring new ways to bring our franchises and characters into the mobile space in ways that fit that type of gaming experience.”
Nintendo also launched its own digital subscription service in September 2018, which costs $3.99 for a single month or $19.99 for 12 months. Players must pay for the service to play games together online, including the latest Pokémon titles.
Marketing has also gone digital, and video game publishers have ventured into influencer deals and hosting splashy esports tournaments and glitzy annual video game conferences. People who play and discuss video games on Amazon-owned platform Twitch drive much of the conversation about new games.
“Livestreamers on Twitch and YouTube are the gatekeepers and the tastemakers, and so that extensively changes how publishers reach their target audiences,” said Dreunen.
“Social media is also becoming a vital marketing tool,” said Scott Porter, EY’s west coast head of media and entertainment advisory services. He added that companies are creating dedicated fan sites with newsletters, forums and game previews to engage gamers.
GameStop’s survival plan
GameStop chief merchandising officer Chris Homeister pointed out that the company was able to boost sales in early November through a Fortnite promotion. Although the game is free, retailers such as GameStop, Amazon and Target sold merchandise and gave away codes to the virtual “Fortnite Minty Pickaxe,” attracting customers who collect in-game cosmetics.
Companies are also trying to make physical copies worth buying, similar to how CDs these days may include a fan poster to boost sales. Physical copies of games can be decked out with exclusive merchandise and retail for higher than the usual price of $59.99.
And physical sales are far from done. People are still buying video game consoles. Nintendo reported December 4 that it sold over 830,000 units of the Switch and Switch Lite combined over Thanksgiving weekend, which is its “single best week of US sales in Nintendo Switch history” since its launch in March 2017.