Section 2: The future of the industry and Trends
What Does the Future look like?
The Video game industry is a powerhouse, its market value of 184 billion dollars alone stands to speak for itself (Mintel, 2023). Mobile gaming is the most popular platform and makes up for nearly 50% of the overall revenue the industry generates (Mintel, 2023). But where do we go now? what are the current trends and issues?
Artificial Intelligence
What do we mean by this? Artificial Intelligence relates to the technology from which allows computers and machines to simulate human thought (Harper and Watt et al,. 2020). This in turn allows for computers to access data and make informed decisions based on the information provided (Harper and Watt et al, 2020). Artificial intelligence also has the ability to continuously learn, the more data fed into machine learning the further improved accuracy and reliability of the concluding action (Harper and Watt et al., 2020).
But what does this mean for the video game industry? Why is this relevant?
Introducing Bethesda Game Studios and Replica Studios Smart AI
In order to show its potential and current impact on the video game industry, its beneficial to break it down to a smaller scale, in this case the case study will be Bethesda Game Studios and Replica Studios latest project Smart AI (Smart NPCs demo below)
Why is this relevant?
Consumer Demand for Highly Immersive Experiences
Up until recently, video game developers have manually written thousands of lines of dialogue. In fact Bethesdas latest projects Skyrim and Fallout 4 totalled more than 111,000 lines of written and voice acted lines (Bethesda, 2015). Now with projects like Smart AI, consumers can expect limitless personalised and immersive experiences based on the user themselves. This in turn will lead to high levels of emotive and cognitive experiences (Hoyer and Kroschke al,. 2020).
According to Lanier and Hampton (2016), when customers are emotively and cognitively engaged, there exist an increased chance to create a memorable experience. This memorable experience in turn may create loyal customers (Lanier and Hampton, 2016). In turn this willl influence consumer purchase behaviour, and make them more likely to shop frequently with an organisation they have had a memorable and positive experience with (Lanier and Hampton, 2016).
The advancements of AI however have not only just begun (Mintel, 2024), if we examine at Nintendos Golden Eye (1997) We can observe that the non-playable characters (NPCs) have set pathing in the locations they go to, and once discovering the player, will follow them for a predetermined set time. (See video below)
When we compare Gameplay from Goldeneye 1997, to Sony Interactives The Last of Us Part 2, we can see a huge leap in how the NPCs react to the player and the environment (See video below)
The bar to satisfy consumers expectations in the video game industry has never been higher, and this can be attributed to a couple reasons...
- Consumers expect rich and immersive worlds from game developers.
As consumers expectations rise, so must the quality of the product they receive (Zackariasson and Wilson, 2012). This has peaked since the development of Unreal Engine 5, and consumers are searching for higher quality products, this can be observed by viewing the top reviewed video games according to metacritic (2024).
The first 3 video games in the list are all classed as Role-Playing games, and all of their worlds are considered immersive and high quality (Zackariasson and Wilson, 2012). This genre allows players to tailor their own character and story (Zachariasson and Wilson, 2012). While the 4th reached similar ratings due to its stunning world, gameplay and story telling.
The Risks and Benefits on Mental Health
On the other side of things, the increased demand for realistic and immersive environments amongst consumers could be attributed to the need for escapism (Jouhki, 2022).
Escapism tends to result from a need to take a break from everyday struggles and the anxious and troubling realities consumers may face (Jouhki, 2022). Since Covid-19, the World Health Organisation (WHO) have reported a global 25% increase in anxiety and depression (WHO, 2023).
Individuals in turn who feel they are falling short of their own personal standards may begin to decline in health, this is known as escape theory (Jouhki, 2022). This in conclusion could attribute for the need of an immersive world, allowing consumers to suppress their situation and thoughts for that period of time (Jouhki, 2022).
It is important however to acknowledge the impact that video games has on the consumer, and just because one may be playing a game for "Escapism" purposes, does not necessarily mean that this will cause further negative effect. In fact, the Power of Play Report published in 2023, shows that video games help with consumers anxiety and feelings of loneliness. This can be attributed to the break video games provide from everyday life, and the interaction and experiences consumers have with each other when playing online
See Power of Play Report Attached: Power of Play Report)
Brand Equity and Loyalty
Brand loyalty is another area of the industry which has had its controversies due to product quality. This area of marketing is relevant because when consumers are loyal to a brand, then they are more likely to consider the brand when making a relevant purchase, and tend to be much more responsive to marketing communications (Heyword, 2022).
This while generally a positive thing for both consumers and organisations, has recently left consumers feeling cheated, with countless high profile video game releases, being completely incomparable to the advertised product (See the Video Game Spider of Shame)
There are many reasons that one of these titles may end up in the Spider of Shame, but what they all have in common is a product that was not as advertised on release (See examples of each controversy in wakelet links).
This could be put down to the repeated term "Crunch", in which refers to the phase from which development teams are forced to meet deadlines, in a last ditch effort to finish it up for release (Cote and Harris, 2021).. The employees who are working on this "crunch time" tend to work long and unreasonable hours in order to meet unrealistic deadlines (Cote and Harris, 2021). This occurs due to many cases, in Cyberpunks 2077s case (As shown above) this as due to a desire to meet unrealistic demands and maximise potential for sales BBC Article on Cyberpunks Situation
How does this relate to customer loyalty and industry trends?
As prior mentioned, the heightened expectations from consumers for a highly immersive product, each raising the bar over the last. This has caused video game developers to communicate their high ambitions in their marketing communications, however in these cases, were unable to deliver (Cote and Harris, 2021).
It was reported that CD Project Red spent 142 million dollars marketing the game, 40% of the overall budget). Nearly 13 million copies of Cyberpunk 2077 on launch day, which made it the highest grossing video game of all time.
While this first appeared to be a massive accomplishment, when the consumers finally got their hands on the released product, it led to the biggest upset in the video game industry in the last decade. This in turn has made loyal consumers wary of CD Project Reds future releases, and alongside EA's Anthem (another mispromised release) consumers are more and more aware of the risks pre-ordering a video game, and now wait until the reviews are out.
Live Service and Subscription Sevices
This does not start nor end with Cyperpunk or Anthem. There has been a shift in industry practises in the AAA game lifecycle, which is now known as "Live Service" (Rissanen, 2021). Live service games allow an organisation to release a video game full price (£50- £100+) with the promise of future content throughout its lifecycle, in order to keep audience retention (Rissanen, 2021). This however is unpopular amongst consumers due to the unstable value proposition it promotes.
The key factor for developers here is audience retention, which is achieved in the form of drip feeding (Riassanen, 2021). Drip feeding is a term from which developers release short "drips" of content over fixed periods of time, in order to keep their audience returning (Riassanen, 2021).
Once of the most popular methods of ensuring audience retention relates to the industry practice involving FOMO (Li and Liu et al,. 2021). FOMO otherwise known as fear of missing out, is a practise which developers release paid season passes, in the form of paid content, that expires if players do not earn all the rewards in the fixed period of time (Riassanen, 2021). The content here consists of in-game items, events, cosmetics, gameplay story and more (Riassanen, 2021).
Electronic Arts and Live Service
The biggest investor in live service games is EA, reports claim that EAs revenues exceeds 7 billion dollars. It is claimed by a midiaresearch report that EA recieve 74% of revenue from their live service, and only 24% of revenue from their game sales (See Mediaresearch report on Wakelet)
The potential risk with this industry trend, implies that the "finished" product now holds less value for money, as most of the content will come in the form of in-game purchases (Marchand and Henna, 2013). This coincides with Free-To-Play games and mobile games. Which in turn do not require a a cost to play, and in-game purchases are optional.
As projected in Section 1, free-to-play interest is on the rise, especially within the mobile gaming industry. It is likely that unless organisations are able to ensure a high quality product, for a reasonable price, while ensuring their in-game purchase model is truly optional, then the industry could expect to see a loss in the consumer retention they initially cashed in to receive.
Furthermore, the Mintel 2023 report (As linked in section 1 and Wakelet) indicates that users are spending less on in-game purchases, this could be due to the rising inflation experienced since the Covid-19 Pandemic.
This would coincide with the reports conclusion that consumers are choosing to spend their money on necessities, as opposed to luxuries, this correlates with supply/demand (Achille and Zipser, 2020). This is because as prices rise, consumers will focus on necessities and basic essentials (Achille and Zipser, 2020). In turn consumers may seek cheaper alternatives for example Free-to-Play games or mobile games, hence a potential explanation of the rise in popularity of these products as mentioned in Section 1.
Representation and Diversity
According to a report by NewZoo (Attached in Wakelet), 64% of consumers feel that diversity and inclusion is of great importance in the video game industry, this is on the rise with each generation.
This is not exclusive to the video game industry, and has been taking the world by storm, to se the global scene
- 6% of all Fortune 500 companies have women CEOs Fortune 500 Article
- 78& of participants of a Harvard business review study indicated that work in organsiations that lack women in leadership roles Harvard Business Review Article
- 69% of executives according to Glass Door Report feel inclusion and diversity is an important issue, a 37% rise from the 2017 consensus
Note: It is important to note that Diversity and Inclusion is much grander in scale than this blog sets out, however in order to keep the aim of analysing trends in this industry, it is important to redirect back towards this.
When examining the top 100 best selling video games, it can be observed that the majority of main characters are male (80%) and around 55% of characters are white. For some, this leads to the belief that video game developers need to do further work, on narrowing this statistic. This could be due to the fact that there is nearly a 50% split in female and male gamers, in turn showing an untapped market of readily available and interested consumers.
This relates to the Mintel report, that reported that female gamers feel the industry caters to male gamers the majority of the time, when in reality there is a massive female market. A Survey by GAME, was able to extract the top female protagonists.
Firstly was Lara Croft, from Sonys Tomb Raider Series
Followed by Alloy from Sony Entertainments Horizon Zero Dawn
Third, was Ellie, from Sonys The Last of Us
This in turn indicates a trend, that the top known female protagonists in the industry, all hail from the same video game developer Sony. This is no surprise, considering that Sony came out on top for both most trustworthy and worth paying a premium for in the Mintel 20023 Report. Sony has received great praise for their inclusivity and diversity amongst consumers, and in turn has helped curate their brand image.
In turn, this has shifted the potential directions and branding that Sony and its competitors have chosen.
Microsoft have chosen to pursue a subscription and service base portfolio (Xbox Gamepass), while Sony has chosen to continue pursuing their console game releases. It is to be noted though, that 31% of consumes feel that cloud gaming and subscription services will be the way of the future, and while Sony have their own subscription based model, Xbox Gamepass offers day 1 releases and has sought great success and praise in their model.
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While Sony have chosen a more personal approach in handling their consumers and organisation outputs. Sony has chosen to focus on its consumers wants and needs, while considering the larger macro factors such as culture and social trends
In the future, a balance of both these avenues would be advantageous to an organisation (Muriel and Crawford, 2017). In turn increasing their levels of trust and respect amongst their consumers, and further increases in revenue due to their high quality products (Muriel and Crawford, 2017). Sonys work on inclusion and diversity, especially as consumers are becoming further aware of its importance, may reflect on Sonys brand image positively, in turn generating or retaining existing or new consumers. increasing its perceived brand reputation.
Augmented Reality
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| From Left to Right: Virtual Reality, Augmented Reality, Mixed Reality |
Definitions
1. Virtual Reality immerses the user in the digital world.
2. Augmented Reality overlays the digital world through the users camera into their world.
3. Mixed Reality combines both, and seemly creates an immersive interactable digital word, in the users real world.
Extended Reality presently can can create a fully immersive experience, in which the user can engage and interact with the environment and its characters and objects (See Half Life Alex video below)
The technology required order to experience this however is early in design, and largely expensive, with the latest technology Meta Quest 3 totalling £459. This does not include the hardware required to run games like this.
As reported in Section 1, a large minority of users actually own the means to engage in Virtual reality, however there is a great interest in its potential. The reasons for this come down to its high cost of entry and reports of the headsets being undesirable due to design and size. (See early models below)
In the future, we are seeing a movement of smaller headsets, lighter and more appealing in design, specifically with Apples newest product the Vision Pros
While apple are working the design issues, the barrier for entry has never been higher, with their latest model retailing at around £2700 Apple Vision Pro Price.
The Virtual Reality experience creates high levels of immersion, and can be enjoyed with friends and others in the multiplayer world, however the creates in own set of challenges.
Data Protection and Privacy
According to an article by Embryo, there are a large portion of consumers concerned with data protection and mistrust of misuse.
When users interact with VR, a large portion of data is collected, such as their heart rate, activity levels, height and ways in which they communicate right down to their movement. This in turn will require organisations to ensure there are reinforced security measures in place, to prevent a breach of data, and a regulator ensuing that the video games sold on the market are conducting themselves ethically and not misusing user data.
Harassment
As Virtual Reality becomes more advanced, so does the realism. Users can and have experiences harassment in all forms, and while it is in the virtual world, the experiences of the users are real, and so are their reactions and experiences. *Articles included in Wakelet*
This is a very real and complex issue, which in turn will require clear rules and regulations regarding user behaviour and user experiences. In regard to section 1, users may play video games in order to remove themselves from the realities of their world. However, in the world of VR, users may in turn further be harmed and exposed to immoral scenarios, furthering the concern for user mental health. These issues in turn contributed to the further awareness of metas tool safe zone, which in turn prevents users from interacting with you in voice or touch (MT Tech Review, 2023).
While these topics are starting to appear in the early developments of VR, the experience is only going to become further immersive, further real. This creates a real need for caution and moderation.
Aside from the risks of Virtual Reality, its important to consider the positive future prospects also.
The use of Virtual Reality in Bethesda's video game Skyrim, has allowed users to become a part of the world, and explore the 7000 steps to the throat of the mountain, or explore abandoned crypts, complete with its own physics system (See Video Below).
Or further example being, Blade and Sorcery's advanced combat VR game. Blade and Sorcery sold 1 million units on PC, 550,000 on IOS, this concluded an estimated 30 million dollars in revenue (Venturebeat, 2023).
This indicates as shown in section 1, that there is a large market for VR, and with Blade and Sorcery selling over 1.5 million units, when VR ownership is currently at a low (7%), the potential for growth as these devices become more accessible may increase drastically. This is again, due to the trend that users are seeking further more immersive experiences.
These emotive and cognitive experiences will in turn, lead to greater audience retention and solve the issues of value creation (Marchand and Henna, 2013).
Reference list
Achille, A. and Zipser, D., 2020. A perspective for the luxury-goods industry during—and after—coronavirus. McKinsey & Company, 1.
Bethesda., 2015, X,. available at:https://twitter.com/BethesdaStudios/status/639485780805578752 (Accessed 15/04/24).
Cote, A.C. and Harris, B.C., 2021. ‘Weekends became something other people did’: Understanding and intervening in the habitus of video game crunch. Convergence.
Du‐Harpur, X., Watt, F.M., Luscombe, N.M. and Lynch, M.D., 2020. What is AI? Applications of artificial intelligence to dermatology. British Journal of Dermatology.
Heyward, E. (2020) Building a Brand People Love From Day One, 1st edition, New
Hoyer, W.D., Kroschke, M., Schmitt, B., Kraume, K. and Shankar, V., 2020. Transforming the customer experience through new technologies. Journal of interactive marketing.
Jouhki, PmcArticle, 2023, Avaliable at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9565969/ (Accessed 15/04/24).
Lanier, C.D. and Hampton, R.D., 2016. Experiential marketing: understanding the logic of memorable customer experiences. In Memorable Customer Experiences. Routledge.
Marchand, A. and Hennig-Thurau, T., 2013. Value creation in the video game industry: Industry economics, consumer benefits, and research opportunities. Journal of interactive marketing.
Mintel, 2024, FutureofVideoGames,. Available At: https://www.mintel.com/insights/sports-gaming-and-entertainment/the-future-of-video-gaming-and-consumer-expectations/ (Accessed, 18/04/2024)
Who, 2023, Covid-19Health,. Available at: COVID-19 pandemic triggers 25% increase in prevalence ...World Health Organization (WHO)https://www.who.int › News › item (Accessed 15/04.24)
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