Netflix recently released a video series, High Score, covering the history of the video games industry. Although not the focus of the series, the documentary covered some of the iconic innovations from the industry’s past.
Each of the major innovations covered dramatically increased the size of the video games market.
What are some trends we can take away in analyzing the innovations covered by the series? Are there any implications for the next big innovations that will drive the current video game market size even higher?
30 years from now, what will be the New High Score?
Innovations From the Past
As an intellectual exercise, I thought it would be interesting to look at some of the key innovations described from the series, look at recent innovations, and try to extrapolate to the future.
From the series, I’ve highlighted some of the key innovations below. In addition to the specific innovation, I’ve categorized the innovation into a broader category (innovation type).
Key Innovations Covered in High Score:
A few key takeaways from the above:
- Platform Expansion: We saw the introduction of 3 gaming platforms: Arcade cabinets, home game consoles, and PCs
- Genre Expansion: Most of the innovations seem to have come from a new game genre hitting the market and expanding the available player base
- Technology Enablement: New game genres were often enabled by a technology advance e.g., cartridges, graphics, networking, etc.
- Diverse Competition: Innovations were highly distributed amongst many different companies
In this past age of the video games industry, we can broadly describe this age as defined by enablement: new genres and new capabilities largely powered by advancing technology.
To advance this intellectual exercise, I now present some of my own thoughts on major innovations that have dramatically increased the size of the video games market more recently below.
In looking at recent innovations, a few key takeaways:
- Platform Expansion: We saw 1 new platform emerge but it was a huge one that now eclipses the other platforms: mobile
- Genre Expansion: We continue to see genre expansion and as before likely powered by technology enablement (e.g., MOBAs by better networking infrastructure). However, at this point it’s very likely that expansion to more players is limited. Many genres now exist that serve a lot of players who want to play games.
- Monetization Models: Unlike past High Score innovations, many recent innovations are characterized by new kinds of monetization and delivery models
In this recent age of the video games industry, we can broadly describe this age as defined by player expansion. Almost everyone in the world is now a game player fueled by mobility, new monetization models, and a shift to F2P.
More broadly, in this current age of gaming, the mobilization of games on mobile devices in addition to the F2P model have made games accessible and attractive (free is a great price point) to everyone.
What Will The Future Bring?
While we have experienced dramatic market growth in the first 2 ages of the Video Games industry. Do we really believe this can continue into a third age of explosive growth?
First Age: Technology Enablement:
- Technology enabled new video game capabilities and the discovery of new game play genres
Second Age: Player Expansion
- Mobile platforms dramatically increased player accessibility and F2P monetization models expanded game play usage while also creating significant revenue models for game suppliers
Third Age: ?
- The New High Score to be determined
In order to understand both the past and potential future of the video games industry, I asked Trip Hawkins about his thoughts on the coming Third Age of the Video Games Industry.
A broader interview is here below:https://cdn.embedly.com/widgets/media.html?src=https%3A%2F%2Fwww.youtube.com%2Fembed%2F5egTSQ6AiRA%3Ffeature%3Doembed&display_name=YouTube&url=https%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3D5egTSQ6AiRA&image=https%3A%2F%2Fi.ytimg.com%2Fvi%2F5egTSQ6AiRA%2Fhqdefault.jpg&key=a19fcc184b9711e1b4764040d3dc5c07&type=text%2Fhtml&schema=youtubeTrip Hawkins on the Past and Future of Video Games
Here are Trip’s comments on his view of 3 big new innovations coming that could be the New High Score:
- Games as Social Media
- Cloud Gaming
Q&A With Trip Hawkins on The New High Score:
JK: Trip you’ve been in the industry for a long time, when you look at some of the current innovations and some of the things happening in the market… And let’ say in 20 years or 30 years from now if they were making a New High Score for the current industry, what has the potential to become the next big innovation for the video games market?
I think there’s a few of them. One marketplace that’s already really dynamic and active and growing, it’s certainly by annual business volume of over a billion dollars a year. That’s eSports. And it makes perfect sense to me because I have four children. I’ve watched how they’ve grown up around all of media and their connections with brands and game brands. It’s very different than mine. So when I was a kid, it was pretty easy to fall in love with traditional sports because that’s kind of all we had.
And, some of my kids care about certain real sports, but their biggest brands are video games. And it makes perfect sense to me that video game fans would like to see the best players play the games that they love and to watch that kind of elite level of competition. So there’s obviously a huge broadcast audience and broadcast fee for that, led by Twitch and now many others. There’s quite a few conventional broadcasters that are involved. And then you have the audiences for the superstar streamers like Ninja and others like PewDiePie that post a lot of content on YouTube. These guys have like a hundred million or more followers. That’s a really exciting trend.
#2. Games as Social Media
And one of the ways I look at games that… Games have become a vertical market for social media platforms. I think that was a big change. Really encouraged more than anything by Fortnite. Basically looking at the shooter genre, where you’re supposed to kill people. And they instead say, well, we’re just going to turn it into a big party and we’re going to do dance moves and have emotes and that attracted, of course, a much larger audience.
It kind of reminds me when I was a kid, I was a big fan of James Bond and I thought that was what spies really did. I didn’t find out until much later that it’s a parody. And that’s how I think about Fortnite. It’s kind of a parody and everybody is having a lot of fun running around and a 10 foot tall pink bunny outfit or having a weapon that looks like a great white shark. I mean, it’s just they’re having a good time with it and they’re going into these games to meet up with their friends as squads. And again, that plays right into eSports. ESports is long term, it’ll be driven by games that involves squad play and team work and so on. So eSports is a big deal.
#3. Cloud Gaming
There’s another really big theme that is kind of related because as an overall statement about technology today, the cloud is everything. We’ve already seen it in a number of examples of things that are fundamental services that we use every day that have moved to the cloud. But it’s going to become more and more and more of that and led by the Internet companies that are operating a lot of the back-end cloud services.
And it’s a great thing for the game industry, because there are all these value added services now that as a game developer allow you to focus on the creativity around your game idea. And then bring in things like payment, cloud services, and your content data network and all of the other kinds of services… your 3D engine, you can basically outsource a lot of things. And it’s enabling all kinds of players all over the world to have a chance to play games earlier in life, having access to devices and screens, to fall in love with games as something they want to do for the rest of their lives. And for many of them to end up becoming professionals in the game industry or professional athletes in eSports. And that’s all going to get really big.
But as we talk about things going to the cloud, we are going to get to a point where you can have the hardware in the cloud do all the calculations about the game you’re playing and just have your joystick sending instructions to the cloud, as your opponents are also doing, and basically be cloud streaming the game. And then you don’t actually have to buy customized hardware and you can just basically play your session on a screen that you happen to have your standardized joystick and play against other players.
It’s sort of a way to get sort of platform independence and even a greater level of convenience. And convenience is a really big theme that has been driving the game industry for a while. We don’t have to go to stores or we don’t have to really wait. Whether going through the wireless cell phone network or you’re in front of a screen that’s attached to the Internet. And we can try things for free. We can try them right now. A lot of things are are designed so that it’s easy for all kinds of people to be into them smoothly and quickly. And the audience is exploding and we’re moving up towards having three billion gamers.
And it just goes to show that games are really mainstream now. It’s not the kind of activity that it used to be where you were embarrassed to admit that you played games. and it was something where you’d go down to your basement to play Grand Theft Auto for 50 hours. So it’s exciting to look forward to these kinds of cloud services. It’ll be a little bit like trying to be the Netflix of games. And I think you’re going to end up seeing a big battle between some really big companies fighting over that business model. And it will probably result in some of the biggest acquisitions in the history of the industry.
JK: In terms of cloud gaming do you think it is Google’s Stadia or do you think it will be something else?
Trip: You have to have a back catalog. And in addition to a back catalog, which helps me as a potential subscriber feel like, well, there’s always something to do. So you have to have some studio capacity. You have to have some exclusives and you have to have a depth.
And it’s a little bit how Netflix kind of positions with what they have to offer. You turn it on, you start looking at it and realize, well, look at all this stuff. The funny thing is they kind of obscure the fact that they don’t have the new movie releases because as of a few years ago, the movie companies decided they wanted to run their own services and compete with Netflix. So they’re sure as heck not going to just easily give permission to Netflix. And Netflix occasionally gets something for a limited time period by paying a lot to have access to it. But Netflix doesn’t have everything.
Now, they’re kind of the evidence that you can actually be successful without having everything. But you better have something. So Google doesn’t have much of anything at the moment. You know, the guys that have big catalogs are guys like Sony and Microsoft, and they have good first party games for PlayStation and Xbox. But they also have their license agreements with their third party licenses that have made games for their platforms. And basically, if they want to restrict those from going on to say Stadia for X box games or a Google Stadia for PlayStation games, they can easily do that. Well, what’s easier for Google to do and for any developer to do is to put their P.C. version on a service like Google Stadia. But even there, maybe a medium size or larger independent companies like Electronic Arts and Activision, maybe they’d rather run their own service or maybe if they talked to Google Stadia, they’re not satisfied that Google’s offering them enough money. But again, I think this at some point would cause Google to decide whether it should acquire some of these companies.