The games industry, with the potential to become the world’s largest media and entertainment sector by revenue, is undergoing profound transformation.
The consolidation of major developers is a response to a revenue model pivoting toward subscription, with direct consequences for those already in the subscription space: film, TV and music.
A technology-led creative medium, with an audience approaching three billion gamers, is seeing its franchises become more valuable and useful than ever.
Broadcaster decline accelerated in 2022, with record drops in reach and time spent. This was primarily driven by the lightest and youngest viewers leaving broadcast television while over-65s also reduced their viewing for the first time.
Loss of lighter viewers threatens the future viewing base of broadcasters and relevance to a new generation. Further, broadcaster status as the home of mass audiences becomes compromised.
However, retention of lighter viewers is not yet a lost cause. They are amongst the heaviest Netflix viewers, and the very lightest are spending more time in front of the TV set than previously—suggesting enduring appetite for TV-like content.
Microsoft and Google are both incorporating AI-powered chatbots into their core search offering. This will create a better user experience for some search categories earlier in the customer journey.
Search is a huge prize, bigger than TV advertising, and AI represents the biggest potential shakeup to that market since the rise of mobile. With ~95% market share outside China, Google's risk is to the downside.
Search is an early, but not the most natural, home for conversational AI: Microsoft and Google have also announced integrations into productivity software. Expect a wide range of services to be transformed by AI integrations as startups and tech giants alike seek share in newly contestable markets.
Consumer tech revenue growth ground to a halt by the end of 2022.
Changes in technology and user behaviour are creating risks for incumbents.
Shareholder pressure is driving efficiencies, but high costs are an inevitable response to growing challenges.
Microsoft’s planned acquisition of Activision Blizzard is in trouble. US, UK, and European regulators may make the deal impossible for Microsoft—and a disaster for Activision and the wider industry.
Sony’s late improvement in PlayStation 5 sales is only just enough to reach its target numbers for the year. It needs a more dynamic approach to a rapidly changing industry, and a less dogmatic message to consumers and regulators.
Netflix Games is more than a trial—it’s on track to become a major games platform.
A combination of factors drove the worst quarter ever for big tech growth, though the secular shift online of the economy and society will continue.
Advertising demand is down, reflected in lower prices. Ads did better the closer they are to transactions, with variability by category.
Efficiencies and AI are the investor-soothing buzzwords going into 2023.
Sports orgs are looking for ways to engage their total, global fanbase, leading them to explore virtual interactive sports experiences.
Sport is well-placed to overcome many of the obstacles in the way of the metaverse. In particular, many of the asset development and experience design issues are much closer to being solved than in other verticals.
There are different routes to a true sports metaverse, with the most promising being expanding existing sports simulation games. Crypto, NFTs, and social gaming platforms are largely distractions.
With viewing to traditional broadcast TV continuing to shrink rapidly, especially among under-45s, our latest forecasts revise a new low for broadcasters’ audiences: falling to just half of all video viewing in 2027, down from 63% today
Long-form, broadcast-quality content will increasingly be viewed on SVOD-first services (e.g. Netflix, Amazon, Disney+) as online habits solidify, especially among older audiences. Platforms offering different content (e.g. YouTube, Twitch, TikTok) will continue to grow their share and will also expand total watch-time
We forecast that under-35s will spend just a tenth to a fifth of their video time with broadcasters’ traditional long-form content five years from now, versus a third to a half for 35-54s and 85% for over-65s
With major studios arguably over-indexed on SVOD, the stickier experiences of interactive entertainment and the metaverse will eventually form a critical pillar of studio D2C strategy, boosting subscription services and tying in closely with consumer products and theme parks.
Disney’s appointment of a Chief Metaverse Officer is good first step, demonstrating a strategic interest in the space. But other major studios remain cautious and distracted, with limited capability beyond licensing to engage in the metaverse for the next 24 months and possibly longer.
Meta will need to provide a strong guiding hand creatively and technically to ensure its new partnership with NBCUniversal is a success, and to evangelise the metaverse and its revenue model across the Hollywood studio content space.
Advertisers are rushing to create immersive virtual experiences to promote their brands, particularly on social gaming platforms with large built-in audiences. The interest shows no sign of waning.
We are in the very early days of metaverse marketing: formats are bespoke, costs are high and the data provided by platforms is rudimentary. Not all product categories are suited to a virtual incarnation.
The long-term promise is tantalising: advertising that is better than its real-world counterpart, that forges new relationships with customers, and that forms part of the product offering rather than just promotional activity.