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Record Gaming Engagement Will Continue Post-COVID

Record Gaming Engagement Will Continue Post-COVID

Over the past two months, game publishers have seen record engagement from their users. A few highlights:

  • Activision Blizzard – Call of Duty: Modern Warfare has sold more units life-to-date than any prior Call of Duty title at this point after its release. In addition, it’s free-to-play Call of Duty: Warzone has reached over 60 million players since its March 10th launch.
  • EA – Madden NFL 20 has reached the highest engagement levels in franchise history. While pre-COVID, Apex Legends was the most downloaded free-to-play game on the PlayStation 4 in CY19, beating out Fortnite.
  • Take-Two – Take-Two expects NBA2K20 to have the highest lifetime units sold, recurrent consumer spending, and net bookings of any 2K Sports title. Epic Games Store is giving away GTA V for free, causing the store to crash on the first day. The influx of players led to GTA’s online services going down due to “extremely high player volumes.” There’s also the alien battle on GTA that has partly taken over Tik Tok.
  • Ubisoft – Rainbow Six Siege had record engagement in each of the first three months of the year. Assassin’s Creed Odyssey sell-thru, engagement, and player recurring investment (PRI) is higher than its previous version, Origins. Looking forward, the next installment in the series, Assassin’s Creed Valhalla, saw 100 million trailer views in 10 days, a record for a Ubisoft game announcement.

The question is: what happens to gaming engagement when we return to normal and people are spending less time in their homes?

We think about engagement in two ways: total time spent and active users. Total time spent is the aggregate hours a game is played, or content is watched in a given period. Active users are the number of players who play a game or tune into Netflix in that period. Both streaming and gaming are benefitting from people staying at home, as engagement overall is higher.

As restrictions are lifted, it seems a given that time spent for both gaming and streaming will recede from record highs. People will eventually spend more time away from home, meaning they will have less free time available to game or stream. With less free time, we’ll inevitably consume less content.

The real difference in gaming vs content streaming coming out of the pandemic will be in active users. We think it is likely that gaming will maintain the surge in active users despite overall time spend decreasing, while streaming may have a harder time hanging on to new users that came on from the pandemic. The core reason is that gaming incorporates a powerful social element that streaming does not. Games have become a place to play with friends, meet new people, and otherwise engage with the world. Gaming provides community and interactivity, something that people will always desire and obtain in various ways in life. As the world is slow to return to large gatherings and events, gaming provides a strong substitute. Streaming, on the other hand, is more solitary by nature. It can be done with friends in a room, but not with huge communities or crowds.

For publishers, it’s important to support the social elements of gaming and to encourage players to play with their friends. Whether that’s in-game or ad-hoc tournaments, new downloadable content, or specific changes to battle passes to encourage playing with teammates, keeping content fresh will keep the active user count high, despite a likely reduction in time spent after restrictions are lifted.


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Zuckerberg Is Going to Be Right on VR

Zuckerberg Is Going to Be Right on VR

Many investors have written off VR as a niche platform destined to a similar failed outcome as 3D television. Conversely, Zuckerberg has been steadfast in his belief in the transformative power of VR, as evidenced by Facebook’s continued investments into the theme. Our view is that Zuckerberg will be proved right, as VR slowly becomes a cornerstone of how we play, work, and socialize. As a result, Facebook will likely emerge as the winner of a significant VR opportunity over the long term.

VR usage steps up during pandemic

Not surprisingly, we are seeing an increase in VR usage over the past two months as consumers pursue out of home experiences. On the hardware side, Oculus can’t keep up with demand. We’ve observed that since last November, Facebook sells out of Oculus Quest (the flagship headset) within hours of getting them back in stock. Current lead-times have now extended to 3-5 weeks on Amazon.

Zuckerberg’s next computing platform view now makes more sense

Facebook’s support of VR comes from the top. At last September’s OC6 conference, Zuckerberg laid out that VR will be a platform for powerful social and work use cases in addition to gaming. In January, for example, Zuckerberg hinted at a future of work where companies will have offices in VR, no longer bound by geographic expenses and talent access limitations. We see VR as a key component to enable work from home and allow companies to build and maintain culture.

Headset adoption nascent and growing

There is limited data on the number of VR headsets that have been sold. Sony has announced they have shipped 5m+ PSVRs since 2016, and Oculus does not report numbers. This compares to an installed base of gaming consoles of about 200m worldwide (PlayStation at 110m, Nintendo Switch at 50m and Xbox at 40m). Bloomberg has reported Oculus is developing a new Quest HMD that could arrive sometime in the next 12 months. We believe that the current Oculus Quest is just a few steps away in form-factor, performance, and content from unlocking material growth in VR adoption. If Oculus can solve for these variables, particularly content, in its next generation of HMDs, we expect an uptick in investor and big tech attention to VR as a viable and important platform to be playing in.

Apple’s VR ambitions less clear

This week Apple confirmed their purchase of NextVR, a 360-degree broadcasting and sports producer for content to be viewed on mobile phones and head-mounted displays (HMD) including PlayStation VR and Oculus Rift. Our belief is Apple paid less than $50m, compared to the $115m the company raised since it started in 2009. We believe Apple purchased NextVR for its partnerships, talent, and IP related to video capture. While Apple orbits around the VR theme, the substance of the company’s next computing platform efforts continues to be behind AR.


Facebook, Virtual Reality
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Why Quibi Is Losing the Attention Game

Why Quibi Is Losing the Attention Game

Quibi is off to a rough start and it’s the fault of coronavirus, so says the company. To date, Quibi only has 3.5 million downloads and 1.3 million active users a little over a month after launch, but the problem isn’t coronavirus, it’s how the company is playing the attention game.

The attention game is more crowded than ever by big companies like Netflix, Disney Plus, HBO, YouTube, Fortnite, Facebook, Twitter, Instagram, Snapchat, etc. Even though each offer vastly different products, they all compete for our finite leisure attention, as does Quibi.

We see two ways to win the attention game: 1) Fill consumer time that isn’t being filled. 2) Make your content more compelling than everyone else’s.

And the cardinal rule: Once you have the consumer’s attention, keep it.

Fill Unfilled Time

In fairness to Quibi’s management team, the reason they believe coronavirus is to blame for the slow start is that it eliminated many “in-between moments,” which the company built its strategy around. An in-between moment could be standing in line, commuting, walking to the office, etc. It would appear that Quibi thought it could fill some unfulfilled time with seven-minute TV shows; however, I’d argue the problem isn’t that those moments have disappeared, it’s that they were already spoken for.

People may not be able to watch Netflix during an in-between moment, but they can watch Instagram, YouTube, Twitter, etc. A seven-minute in-between moment is just a string of seven-second views of content on social media for many people and, given how much short content is available, particularly social video content, that time is well served. No comment on whether that time is well spent.

If we step back in history briefly, attempting to fill unfulfilled time has been a good strategy when time is truly unfulfilled. The emergence of iPhone and Android let us fill the many bits of downtime in our day — like waiting in line — when we used to have to rely on books or newspapers or just doing nothing. I believe one of the biggest underappreciated reasons for Facebook’s success over the past decade is that it coincided with the proliferation of the smartphone. The smartphone let us fill those in-between moments with bits of social media and, as we got addicted to social media, many moments beyond the in-between. Social media was the original Quibi.

We’ve previously estimated that we spend about 70% of our waking hours engaged somehow with information. Many of us might be engaged closer to 100% of the time with podcasts, audiobooks, and music filling time when we can’t look at a screen. There is very little unfulfilled time now for attention game participants to fill, so they have to rely on making their content more compelling than everyone else’s.

Compelling Content

Given the demands on our time, we pay attention to new things that elicit some emotion. Things that bore us elicit no emotion, and we ignore those things. Things that excite us elicit emotion, and we often share those things.

Modern content creates an emotional response in three ways:

  1. Richness, which is a measure of information density. Video games like Fortnite are richer through their interactivity. Emojis are richer than text. AR lenses are richer than just videos on Snapchat. Epic shows like Game of Thrones or Westworld create richness through vast worlds and depth of story.
  2. Extremity, which is a measure of information intensity. Politics, social media content, news media all use extremity to generate emotion which generates attention.
  3. Relevance, which is a measure of information intimacy. Social media is compelling because it often involves people we know, or it involves influencers who we feel like we know, even if we’ve never met them. Content with a built-in fanbase is also naturally relevant (Star Wars, Marvel, etc.).

As a rule, the bar for what is compelling is always increasing, thus the demand for rich, extreme, and/or relevant content is always increasing.

Quibis may be mildly richer in terms of how they tell stories through smaller components, but it isn’t that much different than chopping up a movie into pieces. Quibi hasn’t really attempted extremity or relevance. While Hollywood stars carry cache with broad audiences, few have the kind of relationships with fans that influencers have with smaller audiences.

Quibi’s content isn’t bad, it’s perfectly fine. It’s just hard to get the attention of a new audience without very compelling content. Platforms like Netflix can get away with fine, at least for a little while, because they already have attention mindshare. To take attention mindshare, content needs to be compelling, and when you do get that attention, you have to keep it.

When You Have Them, Keep Them

Quibi’s final mistake is that even when they do get a share of someone’s attention, they release episodes daily instead of all at once. When an attention game player gets someone’s attention, they should keep it as long as possible to create an attachment between the user and the platform.

An advantage Netflix that exploits over traditional TV is that it releases episodes of original content all at once, and users can binge. When users binge, they build trust in Netflix and come back for some other content to binge again. Episodic releases discourage binging, and platforms that use those types of releases have to hope that users are sufficiently interested in to remember to come back and watch again the next day or week. That model may have worked with traditional TV, but it’s much tougher when that attention time is under constant pressure from every other platform listed above.

Keeping attention means you need to have a rich base of content. Social media platforms get users to create this for them. Streaming platforms need to build a big and broad enough library on their own where, again, Netflix has a large advantage.

We can question the ethics of the necessity of attention hoarding that every attention platform must do, but this post is about winning the attention game, not about whether the game is morally good or not.


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