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Sustaining Growth in the Gaming Industry: Key Factors

July 31, 2024

Note: We reveal investment insights through the quotes of top business leaders.

Key Takeaways

  • Evolving consumer behavior in gaming is driving deeper engagement, increased digital purchases, and demand for immersive experiences, prompting companies to enhance direct sales and live services.
  • Monetization strategies leverage high engagement and player sentiment, with companies sharing successful schemes and optimizing programmatic advertising.
  • Esports significantly contributes to gaming growth by building global online communities, deepening engagement, and scaling live services.

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Evolving Consumer Behavior in Gaming

Consumer behavior in gaming is evolving with deeper engagement in games, increased digital purchases, and demand for immersive experiences. Companies like TTWO and EA are adapting by enhancing direct sales and live services, while advancements in technology, such as object detection, further optimize user experiences.

"It is fantastic. So we’ve seen significant growth there. So again, I think we will have momentum just as we transition to Gen 9 and as people continue to engage more deeply in the game, we’re going to continue to see very strong RCS growth." --- (TTWO, earning call, 2024/Q4)

"Increases in consumer adoption of digital purchase of games combined with increases in our live services revenue generally results in expansion of our gross margin, as costs associated with selling a game digitally is generally less than selling the same game through traditional retail and distribution channels." --- (EA, sec filing, 2024/Q4)

"With better object detection and visual information systems, advertisers can more effectively analyze consumer behavior and optimize their campaigns, while game developers can craft more engaging and immersive user experiences." --- (GOOG, press release, 2024/06/13)

"Also the ability for us to sell directly to the consumer. So these are all compelling things for us, and we'll continue to develop and support the PC platform as long as the gamer is there." --- (TTWO, earning call, 2024/Q4)

"Stuart Canfield: Thanks, Andrew, and good afternoon, everyone. As Andrew spoke to earlier, we've been on a journey to transform our business to meet the needs of an evolving industry landscape, which has seen players develop new engagement behaviors and demands." --- (EA, earning call, 2024/Q4)

Monetization Strategies in Gaming

Monetization strategies in gaming involve leveraging high engagement, as seen with GTA on PC, while maintaining strong player sentiment, as EA has achieved. Sharing successful schemes within companies like TTWO and optimizing programmatic advertising through platforms like Zynga's Chartboost are also key tactics.

"I'm curious if you guys would talk about the broader PC strategy. I know that there's just tons and tons of engagement, particularly for GTA on PC, not all of that gets monetized." --- (TTWO, earning call, 2024/Q4)

"As the quarter progressed, monetization returned to prior norms while player sentiment and engagement remained strong." --- (EA, earning call, 2024/Q4)

"But, we share information and we cooperate. So for example, when one label has success on a monetization scheme, that information would be shared with another label." --- (TTWO, conference, 2024/05/30)

"Is this going to be the case for these monetizing games as well? Or is it a plan to have a longer life cycle." --- (TTWO, earning call, 2024/Q4)

"Zynga is also an industry-leading next-generation platform with the ability to optimize programmatic advertising and yields at scale with Chartboost, a leading mobile advertising and monetization platform." --- (TTWO, press release, 2024/06/04)

Role of Esports in Gaming Growth

Esports has been pivotal in gaming growth, with leaders like EA's CEO pioneering the esports revolution and focusing on building global online communities and deepening engagement through interactive storytelling and live services.

"Earlier in his career, he pioneered the esports revolution as the President and CEO of Major League Gaming." --- (EA, press release, 2024/05/01)

"We are focusing on building games and experiences that grow the global online communities around our key franchises; deepening engagement through connecting interactive storytelling to key intellectual property; and building re-occurring revenue from scaling our live services and growth in our annualized sports franchises, our console, PC and mobile catalog titles." --- (EA, sec filing, 2024/Q4)

See also