Author: Sönke Brinker

 

Since the beginning of humanity, games have played an essential role in social life and since the introduction of computer technology, video games have grown to one of the biggest entertainment industries in the world. Still, video gaming is a promising investment with worldwide revenues of $78.61 bil. in 2017. China is leading to become the biggest video gaming market with estimated revenues of $27.55 bil. in 2017. China is followed by the United States with overall revenues of $25.06 bil. Other important countries are Japan, Germany, United Kingdom, South Korea and France. One of the reasons for the strong growth of the gaming industry is the success of social gaming like social network games or multiplayer games, where real people play together or against each other. More and more games are played on mobile devices like smart phones and tablets. Online gaming has a worldwide revenue grew of 18% from 2015 to 2016 and is therefore a promising investment, too. The next big thing is virtual reality gaming. From 2017 to 2019 this market is predicted to double to a market value of $5 bil. worldwide.

 

The biggest game developers are Tencent, Sony and Activision Bizzard and in the social gaming industry Zygna, Wooga and 5 minutes are the largest developers. One of the most successful multiplayer games are League of Legends or World of Warcraft with over 12 Mil. subscribers. The question is, why is social gaming so popular? It is quite obvious, that games must be fun and provide intrinsic value. If the players enjoy a game, the game will spread like a virus through shares in social media and recommendation of friends. Social games can easier reach a bigger audience than offline games. This happens especially, when the games are connected to social networks like Candy Crush with WeChat.

 

Social games have mostly a shorter life-cycle and the content is much more up-to-date and strengthens the connection with the player. Another reason for the success is, that they are easy to play with no long introductions and a lot of games provide free content. It is not a big deal for customers to try out new games. Social games are also much easier to improve, because they provide up-to-date data about the customers. Developers can evaluate the performance in real-time and can see, what is working and what isn’t working. Developers have the ability and flexibility to make changes in the game.

 

There are two currencies for the gaming businesses; money (real or digital) and data. In this industry exist basically three business models in order to make money. The first one is, that the customer just have to pay once for the game in order to download it. The business model in games like World of Warcarft is a subscription model, where the customers have to pay a monthly amount in order to play it. The third model is called “freemium”. In most cases the download of the game is for free, but in order to play the game successfully the player must pay for special upgrades like special tools or weapons. This business model is used by the game League of Legends.

 

Game developers must decide which business model fits to the game in order to be successful on the market. So a subscription model may not make sense for a simple online game, which can be copied easily. Companies have to make further decisions about the type of the game. Right now online games and social gaming are the most promising investments in this industry and for the future virtual reality can be a promising segment.

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