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The coronavirus crisis: A double-edged sword for the gaming industry

business-articles The coronavirus crisis: A double-edged sword for the gaming industry
At a time when people have been forced to spend more time indoors and face-to-face social interactions have been limited, gaming offers a perfect distraction – and it's no surprise so many people turned to video games during lockdown.

However, while it has certainly fared better than most, the video game industry is far from immune from the impact of the coronavirus pandemic, and the uncertainty of the crisis casts a long shadow over the whole sector at a time when the industry is gearing up for a new generation of consoles.

So what are some of the challenges now facing the gaming industry, and what opportunities can be found during this time of great social and economic upheaval?
 

Gaming booms during lockdown

Gaming flourished during lockdown as people used video games for escapism and as a way to stay connected with friends at a time when they were largely confined indoors.

In the UK, with approximately 37 million gamers, the time spent playing video games reportedly rose 24% after coronavirus restrictions were put in place.

This, in turn, fuelled a massive sales boom, with games such as Nintendo’s Animal Crossing breaking sales records and over 50 million players flocking to the free-to-play Call of Duty: Warzone in its first month.

Mat Piscatella, an analyst at the N.P.D. Group, stated:

‘Gaming is one of those areas that people are diverting to from other activities that they would have done in a normal world. The game sales that are coming out are breaking franchise records.’

Streaming platform Twitch has also reported a massive surge directly attributed to the coronavirus, with the number of hours watched surging 50% between March and April this year.
 

Traditional sports fans turn to esports

One of the biggest casualties of the lockdown was live sporting events, with social distancing measures effectively shutting down every major sport.

This thrust esports into the mainstream as athletes, teams, and sporting bodies turned to gaming to help find content to fill the gap.

A great example has been F1 Racing, which launched its ‘Virtual Grand Prix’ in place of the 2020 Formula One World Championship.

Professional drivers raced against games and celebrities, with the races broadcast live to over 30 million viewers across YouTube, Twitch and traditional TV platforms.

Julian Tan, F1 head of digital business initiatives and esports, spoke of the success of the Virtual Grand Prix:

‘Now the series has come to an end, it gives us a chance to reflect on the huge success that it has been, which is reflected in the very impressive viewing figures and engagement stats.’

During the pandemic we have also seen other industries waking up to the potential of esports, with the legalisation of betting on competitive gaming just two weeks into the US lockdown.

This convergence of esports and traditional sports has created the perfect opportunity for the often-insular gaming community to welcome new faces.

However, it will be key for esports organisations to continue engaging with mainstream audiences if they want to convert new players into life-long fans.
 

New hardware sales are likely to be slow this year

2020 is set to be a pivotal year for the gaming industry with the release of the new Xbox and PlayStation consoles.

With the current consoles nearing the end of their life cycles, the new consoles are set to re-energise flagging hardware sales and usher in a whole host of next-gen games to excite consumers.

However, massive layoffs and wage cuts as a result of the coronavirus crisis has taken a heavy financial toll on many families and this could see the new consoles get off to a slow start.

Phil Spencer, Head of Xbox and Vice-President of Gaming at Microsoft is acutely aware that the purchase of a brand-new games console is not going to be the top priority for many families this year.

In an interview with the BBC Spencer said:

‘It looks like we're moving into a period of massive economic uncertainty. We see the impact of people getting furloughed and layoffs. It's tough.

‘And we are a leisure activity. We're not a requirement. We're not food. We're not shelter.’

Spencer, remains optimistic about the launch of the new Xbox console given the gaming industry's  resilience during the previous recession, but admits his team is more focused on offering customers value through Xbox’s monthly game subscription service than on hardware sales numbers this year.

Spencer adds:

‘Even when we went back and looked at 2008-09, in that recession, to see what the impact was on gaming - gaming did OK. It was durable.

‘If this is not the year when a family wants to make a decision to buy a new Xbox, that's OK. Our strategy does not revolve around how many Xboxes I sell this year.

‘We want to make sure we're providing the right value to customers. We're focused on delivering services through Xbox Game Pass, which allows people to build their library for a monthly fee.’

Ensuring consumers are getting value for money looks to be a key theme for the gaming industry through the second half of 2020.
 

Game delays are inevitable

As is the case for many creative industries, the coronavirus crisis is having an impact on gaming production. However unlike the TV and Film sectors – which came to a total standstill due to lockdown – the digital nature of the gaming industry means work is continuing, albeit in a slightly reduced capacity.

Swen Vincke, the chief executive at Larian (the studio behind the upcoming Baldur’s Gate 3) has spoken of some of the teething problems his team has faced in transitioning to working from home.

‘We started seeing more stress on the leads in terms of communication. We’d spend all of our days just communicating — trying to solve problems, organize things, give direction. Development is proceeding, we’re just slowed down.’

Despite these challenges, Vinke is still confident his studio is on track to launch Baldur’s Gate 3 into beta later this year.

However it’s the releases for 2021 and beyond which are now in doubt.

Things like motion capture, voice acting or other collaborative projects which require specialist equipment are currently unfeasible due to social distancing restrictions, something which is a major bottleneck for games which are earlier in development.

Asked by Business Insider about the coronavirus’ impact on future games development, Xbox head Spencer warned of potential setbacks:

‘I'm bullish on what this means in the long run for games, even if there's a certain impact to a certain launch window for certain titles that we might see.

‘If you're waiting for a lot of either large audio work — when it's with symphonies and other things — or mocap, you're held up right now.’

On the other hand, as such delays are likely to disproportionately impact the bigger AAA releases, 2021 may result in more visibility for indie games, with their smaller, more agile teams better able to adapt to a post-Covid landscape.
 

Marketing has been turned on its head

While development can continue, other sectors of the video game industry have felt a more direct impact, most notably in the marketing departments.

Major trade shows like E3 and Gamescom have been cancelled and while both Sony and Microsoft are confident their new consoles will release on time this year, the launches look to be a far more muted affair than previous releases. According to Spencer:

‘From the kind of pomp and circumstance around launches, you might find a time where there's some impact.’

While there may be less emphasis on the marketing for actual games and consoles this year, the increased engagement with video games during the coronavirus crisis has put a renewed focus on in-game advertising.

For instance, the latest trailer for Christopher Nolan’s upcoming blockbuster, Tenet debuted in Epic Game’s widely popular Fortnite back in May, while Dirt Rally 2.0 was among the games which carried social distancing advice from the UK government through in game-ads.

Itamar Benedy, Co-Founder & CEO at Anzu.io, comments:

‘The current situation, which is encouraging more video gaming than ever before, may be the turning point for in-game advertising and a big step towards becoming a distinguished advertising channel and a new ad category.’

While in game adverts have the potential to open up lucrative new revenue streams for publishers, care must be taken to ensure that any ads are incorporated in a manner fitting with the game so as to avoid backlash from consumers.

The video gaming industry has once again shown its remarkable resilience during the coronavirus crisis, and looks to come out the other side of the pandemic in many ways stronger than it went in.

But while the popularity of video games is here to stay, a difficult macroeconomic environment presents challenges to those firms unable to adapt to their customers' needs.

 
If your business has FX requirements we can help you maximise your returns and protect your profit. Get in touch with our team on Business@currenciesdirect.com or call +44 (0) 20 7847 9400.
 
 
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