Just last year (2019), the gaming Industry has earned almost $135 billion dollars. Whether its from the games itself, the different platforms we play on (such as Xbox, PlayStation, Nintendo Switch etc), or the merchandise made of popular game characters and items, the gaming industry has been booming and is bigger than the film, music, NBA industry combined. Some say it is the most grossing entertainment product in history.
The gaming industry is hypothesized to be growing on all fronts. According to new researched data from Newzoo, it is predicted that the global games market will generate revenues of more than $160 billion, which is around 7%. From new consoles such as the Xbox Series X, to clound gaming services such as the Project XCloud, subscription gaming (xBox GamePass) to new VR games, these are just some of the reasons why the gaming industry is growing so fast. But I still think that one of the major factors pulling in new gamers everyday and keeping old gamers playing the game is the Virtual Economy.
What is the Virtual economy and what are virtual items?
Virtual items refers to the items inside a game, that could be a cosmetic item that can change how you look in the game, or it could be something that genuinely helps you progress in the game. It could be a sword that does more damage, or a car that is faster. When these items were introduced into the game, companies realized that they could make money off of virtual items. So they decided on selling exclusive items that could only be gained through spending real money. This is known as the virtual economy (in the gaming industry). This soon caught on, and major companies such as Epic Games (owns Fortnite), Valve (owns CS:GO), and Riot Games (owns LoL) have created free games, enticing them to play, and then offering in-app purchases for exclusive skins. I have personally also fallen into this trap several times (but I can’t help it, they look so fricking cool!).
I think that it was a smart move by the gaming companies and their profits are skyrocketing from these market schemes. It brings in players who are attracted to the “free” game and keeps them spending money on the game. It also brings in new “jobs” for artists and designers to create more skins. Personally, I would invest into the cosmetic department of gaming, as I believe that people won’t get bored of looking cool in games anytime soon, just like people spending money for clothing and accessories.
What does this mean for Stakeholders?
The gaming industry is improving at a scary pace and it is not stopping anytime soon. I believe that the stocks for gaming will increase at a higher rate than of any others in the Entertainment Industry and that unless some major incident occurs people should invest more into the gaming industry.
However, this does leave some questions:
- What are the gaming companies going to about third party transactions between players and a middleman?
- Will virtual items and virtual currency rise up to eventually becoming 1:1 compared to real currency?
Year 11 MHS Economics 2020 