Video gaming has hit a bit of a snag over the past couple of years, mainly due to the COVID epidemic. And while some developments have caught up, the incoming issues with inflation could very well lead to the first decline of video game revenue in seven years. We wanted to look further into the subject, so we sat down with X1 eSports CEO Mark Elfenbein to get his remarks, including an outlook on gaming in general, as well as all things competitive gaming.
The video game industry seems to already be recovering from one big problem, with the COVID-19 pandemic. Combining that with what’s happening with inflation, how much more challenging will things become?
Mark: The video game industry had a historic user increase during the pandemic with annual revenues growing from $120B prior to $180B in 2021. The primary driving force is that the video game industry overperformed as a share of people's time while staying at home vs other industries. In fact, what may have been traditionally a younger demographic past-time now has extended across all age demographics as a result.
We are seeing very minimal impact in 2022 with a flat year to perhaps a very slight decrease however coming off a historical past two years in video game industry revenue increases. If we look at inflation which is impacting gas prices and perhaps meaning that people take less car trips, that could potentially beneficially impact the video game industry as well.
Do you believe game companies will find a way to make gaming more affordable to those economically challenged by inflation? Like what Microsoft is doing with Xbox Game Pass, perhaps
Mark: The primary growth area for the video game industry in 2022 is subscription-based revenue services where users can subscribe to a service and receive unlimited gameplay (very similar to a Netflix or Spotify service). These services provide tremendous value for the consumer and long- time stickiness in terms of value.
How much has changed in the esports realm over the past couple of years with the pandemic and inflation? We’re still seeing big tournaments, but not as many as we usually do.
Mark: In comparison to other industries, the esports industry has advanced rapidly during the pandemic due to staying at home and individuals being off work. This has bought many more players online for specific titles and even provided opportunity among the pandemic for people to push themselves in competitive esports. We've seen the introduction of more organizations and more tournaments making the industry more accessible for even more people.
Controversy also seems to play a part with some esports events, such as EVO and Overwatch League. How do you see these continuing on in the future?
Mark: Controversy will be something that becomes more apparent in the industry as there are guidelines and protocols missing due to the industries infancy. The main focal point will be how the world adapts and learns when things have light shed on them, and hopefully move towards a more structured and professional atmosphere that people are building careers in.
What kind of effects can you see from esports in general moving forward, especially in the face of inflation and post-COVID? Do you believe lesser cash prizes will be offered? Or something else?
Mark: Due to the increase in player base and organizations during the pandemic, it's quite common to see oversaturation in terms of tournaments which can then lead to lesser prize pools. As an industry it's value is constantly increasing but with that costs of operations tend to follow suit.
The most likely outcome is that we will see organizations and brands struggle with costs due to the competitive nature of the market.
Do you think some companies will be hesitant about hosting or promoting esports events in the future? Or will they simply find more creative means?
Mark: The entire goal of the industry is to do things creatively and differently due to how many people are striving for the same thing. Esports events have the ability to fully sell out stadiums in minutes; which is now possible due to coming out the other side of the pandemic. With the ability to monetize eSport events through sponsorship and viewership I still think we'll see a steady flow of events increasing in size.
Gaming seems to be far off from the “video game crash of ’83” that affected the market for a little while there. Do you believe there should be optimism when it comes to the future of gaming? Or concern? Or maybe both?
Mark: The video game crash of the early 80's was caused due to over manufacturing of obsolete technology video game cartridges from Atari. At that point the vision of how quickly the user experience was going to change was not seen by many. The one thing about the video industry is that it constantly re-invents itself with better user experiences off of better technology platforms.
Let’s take VR for example, you can now meet up with your friends anywhere across the world and play together in a virtual reality experience that blurs the lines between what is real and what
is not. The realism of VR effectively puts you directly into the game and is something that could have never previously been imagined. This is the beginnings of the metaverse which started in a 2D setting years ago with titles such as Roblox, Fortnite, and Minecraft. Now, you are effectively a character inside the world of these games from a visual and communication perspective which opens up revenue streams previously never introduced.