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How GameTech is the Next Big Market

By Gina Clarke

Gaming is the new growth industry, driven by lucrative loot boxes and in-game items that players are paying over the odds to be seen with.

While the retail industry is worth over $3.5 trillion worldwide, the video game market hopes to carve out a small slice, around $300 billion by 2025. Instead of games with finite endings – virtual, multiplayer games such as Apex Legends are becoming more popular.

A virtual identity is beginning to hold more sway, and brands such as Louis Vuitton are already capitalizing on how merchandise and accessories are in demand. A partnership with Riot Games has already widened their audience to millions of 18-24 years old, and the brand has announced that it will be launching a unique capsule creation alongside Riot later this year.

While the model behind free-to-play games may seem to miss the mark, it has instead been a big hit for players wanting to improve their look, sound and identity within the game. Moreover, they are happy to pay to do so. Games such as Fortnite and Apex Legends have proved popular with a younger audience who are spend their disposable income on such items. Fortnite on its own generated $2.4bn of revenue in 2018, while experts predict that they will make more this year through in-game items, season passes and subscriptions. 

Interestingly the most popular in-game items appear to be weapons, cars or character outfits and other skins. It’s perhaps no surprise that a whole industry of tech is now supporting this passion, including new-gen marketplaces. Like eBay for gaming, trading outlets such as DMarket are helping match player wants for trades or swaps. The players can instantly exchange items across the games and even make bids for skins that haven’t been put on sale yet. With no pressure to sell, the platform allows the seller to negotiate with a potential buyer to produce a sale on their terms.

It’s perhaps no surprise that a whole industry of tech is now supporting this passion, including new-gen marketplaces.

However, there are some problems in the technology lagging behind. “FinTech has coupled with gaming to produce a new cost effective industry. Indeed, a skins-based game economy is the gaming industry’s most lucrative model, but 88% of developers can’t access this multi-billion-dollar market because they lack the tools to build an in-game item economy.” says Vlad Panchenko, CEO and Founder of DMarket. 

While only a handful of games at the moment are built on platforms that allow users to swap their inventory, with the onset of cloud-based items this could increase. 

New subscription services such as Google Stadia and Apple Arcade will support a huge boom in this technology where access to titles will become much smoother. With gamers spending on average 7.1 hours a week playing their titles, this figure is set to double by 2021 with the development of cloud gaming. It’s no wonder why cloud gaming is eager to erase the borders between games. 

The market for rare in-game items is growing, DMarket has already seen a sale of $61,000 for a sniper rifle skin and a unique Formula 1 race car trade for $113,000. Once named brands like Louis Vuitton, Moschino and Nike jump on board for apparel, soon users could be spending more on a virtual outfit than what they do in the real world, stimulating the birth of the third party apps and outlets for gamers. 

Another quirk of the GameTech industry is the ability for players to monetize their games. From the well-known Twitch live stream to FirstBlood, a leading gaming platform that allows amateur esports players to earn rewards for playing video games. Both types of models conform to the view that the more invested a player is, the more rewards they can reap.

Joe Zhou, Co-Founder and CEO of FirstBlood, believes that the future of GameTech is in this in-game item and subscription model. He compared it to the same leaps that Spotify took with music streaming, allowing for more consistent a non-seasonal revenue for the industry. He added, “The way to drive continued industry growth is to provide gamers with a game-agnostic way to transfer points, in-game currencies, and in-game items among the titles they play, either through a secondary market or by allowing them to consume these digital items in competitive matches or tournaments, similarly to what we are doing at FirstBlood.

“I think cloud gaming will inevitably revolutionize how game IPs will be distributed, deployed or even built. In the near future, we will probably see one of the cloud platforms releasing tools that would empower game developers to build on with one-click deployment into the cloud infrastructure without having to worry about the latency, optimization and DevOps problems related to it. It will probably also further cut costs and time before a game is ready for the public.”

And with the foundations of this industry underpinned by cloud technology, AI and the blockchain, GameTech could quickly become the next big market for cloud based and FinTech applications.

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