According to IDC, the video game market is up by 20 percent to $179.7 billion in revenues during 2020, which means it has revenues higher than the music and film industries. Some of that revenue will be on new consoles and hardware, but a lot will be on in-game purchases and as-a-service payments. Iain Chidgey, VP EMEA of Sumo Logic, takes a look at how the past 12-months in Fintech have had a big impact on gaming.
Supporting the increase in the video game market requires payment processing and other financial services. Games developers don’t want to build that themselves. They can partner and bring in third-party processors to handle that service in their own apps where they can, but most likely they will rely on the big game stores like XBox Live, Google Play or the Apple Store to do it for them. This approach makes it easier to buy additional downloads or cosmetic items in games, and it should make it safer for players to make purchases.
Was this an expected relationship or has this always been a partnership that would benefit both sectors?
There is a battle taking place between game publishers and app stores. The revenue share for these companies is 70 percent for the publisher and 30 percent for the app store. For the game producers, they see this as them taking too much of the overall spend compared to the value they receive. This will be a big issue for the foreseeable future, and it could open up the market for fintech companies if the games publishers get their way.
How are gaming companies really leveraging Fintech to transform in-game purchases and customer experiences?
On the customer experience side, live in-game advertising is one area that is interesting. Providing gamers with the chance to purchase things from adverts in games is something that has been discussed for a while, but it looks like the whole approach is getting more seamless over time.
Companies in both sectors work in real-time industries, and they can learn a lot from each other in terms of operations and security best practices. Applying continuous intelligence to your operations can help reduce security risks and spot areas where changes have improved business results too.
What are some of the upcoming trends in this space, what do you predict lies in the future?
Streaming and games is a combination that is growing. Amazon bought the game streaming service Twitch in 2014 for $950million, and that looks like an incredibly prescient buy today.
Watching someone else play games and provide commentary is popular, whether it is someone on YouTube going through a game that is newly out on the market or covering more team sports and competition. Games can be expensive, so watching someone else play can be a way to sample the experience without paying out for something that you don’t like. This can then provide opportunities for monetisation around the videos over time.
The eSports market is developing as people have been at home and they want entertainment too. Watching teams take part in competitions has grown as a pastime, and there are betting and payments companies that are either directly involved in those competitions or sponsor them. According to Perforce’s research report The State of Game Development Report 2020 & Beyond, the eSports market is growing to be a multi-million dollar industry, so payments and fintech companies can definitely grow there.
How can Fintech and gaming deepen their collaboration to create even more synergy?
Making experiences seamless can help both gaming companies and fintech providers. Once you are on a platform and committed to it, anything that can remove friction from the payment process can help both companies to serve customers better and improve their own profitability. At the same time, adding more simple parental controls over spending levels can help encourage more people to support their Children in using these services and avoid expensive mistakes or overspending.
Companies in both sectors can definitely learn from each other around areas like security. Running a Security Operations Centre and applying analytics to keep cloud infrastructure secure is something that large games companies have had to adopt as their games have moved to cloud, and fintech companies are following the same routes to keep their IT and cloud services secure, too.