Three major business disruptions are upon the game industry: spectating, subscriptions, and connective communications channels like social media. Spectating involves watching games rather than playing and could account for 10-20% of game consumption. Subscriptions provide access to games for a monthly fee but have yet to succeed at scale in games. Connective channels like Facebook and Twitch influence player relationships and interactions more than individual game developers. To succeed, developers must prioritize managing player relationships across these channels rather than focusing solely on their own games.

1. Game Changers:Game Changers:
Three Business DisruptionsThree Business Disruptions
Upon UsUpon Us
Eric GoldbergEric Goldberg
Casual Connect EuropeCasual Connect Europe
29 May 201929 May 2019

2. ContextContext
Developed for and worked with game-industryDeveloped for and worked with game-industry
state changers for >35 yearsstate changers for >35 years
 From consumer online services to Internet to mobileFrom consumer online services to Internet to mobile
to F2P to social media to conversational AIto F2P to social media to conversational AI
Both business- and venture-sideBoth business- and venture-side
 Ran three start-upsRan three start-ups
 Advisor or board member to >50 companies, majorityAdvisor or board member to >50 companies, majority
early-stage; >50% game-relatedearly-stage; >50% game-related
Analysis and takeaways in consultation withAnalysis and takeaways in consultation with
game developers, executives, VCs operating atgame developers, executives, VCs operating at
leading / bleeding edge of these disruptionsleading / bleeding edge of these disruptions

3. A troika of disruptors…A troika of disruptors…
Connective tissueConnective tissue
 Communications channels are intrinsicCommunications channels are intrinsic
 Game-focused & general social media are pervasiveGame-focused & general social media are pervasive
SpectatingSpectating
 eSports (leading with highest-level competitioneSports (leading with highest-level competition
around world’s most popular games)around world’s most popular games)
 Watching – exclusively, temporarily, variablyWatching – exclusively, temporarily, variably
 Linear consumption (so not interacting / “playing”)Linear consumption (so not interacting / “playing”)
SubscriptionsSubscriptions
 Access to games for a single base priceAccess to games for a single base price
 Generally metered by unit of time (e.g., month)Generally metered by unit of time (e.g., month)

4. ……and the points of inflectionand the points of inflection
DesignDesign
BusinessBusiness
Service operationsService operations
Industry focus has been on AI, machine learning &Industry focus has been on AI, machine learning &
cloud gaming, which change the way games arecloud gaming, which change the way games are
developed. (Service ops, too, with clouddeveloped. (Service ops, too, with cloud
gaming.)gaming.)
AI and ML chiefly disrupt how games areAI and ML chiefly disrupt how games are builtbuilt, in, in
contrast tocontrast to chosenchosen andand consumedconsumed..

5. Here, there & everywhereHere, there & everywhere
HereHere: Spectating: Spectating
 Estimated 10%-20% of Western game consumption,Estimated 10%-20% of Western game consumption,
accelerating growth in both core and older demosaccelerating growth in both core and older demos
 Highest among 6-24 age demographicHighest among 6-24 age demographic
 More established in East Asia, in part because ofMore established in East Asia, in part because of
ecosystem (with limited correspondence in the West)ecosystem (with limited correspondence in the West)
ThereThere: Subscriptions: Subscriptions
 Major subscription services poised to enter marketMajor subscription services poised to enter market
 Niche successes across long-tail games, MMOs, etc.Niche successes across long-tail games, MMOs, etc.
EverywhereEverywhere: Communications & social media: Communications & social media
 Facebook, YouTube, Twitch. ‘Nuff said.Facebook, YouTube, Twitch. ‘Nuff said.

6. Connective tissue: who controlsConnective tissue: who controls
the player relationship?the player relationship?
Multiple intermediaries have broader and deeperMultiple intermediaries have broader and deeper
relationships with players of a game than therelationships with players of a game than the
developers and publishers havedevelopers and publishers have
 These relationships are considerably harder to breakThese relationships are considerably harder to break
than the connections to individual gamesthan the connections to individual games
One or more of these intermediaries can touchOne or more of these intermediaries can touch
every player interaction external to a gameevery player interaction external to a game
 ……and a number of interactions within gameand a number of interactions within game
Management of a game’s connective ‘partners’Management of a game’s connective ‘partners’
is an existential and increasing requirementis an existential and increasing requirement

7. Connective tissue: classesConnective tissue: classes
Social media giants (FB service, Google)Social media giants (FB service, Google)
General video services (YouTube)General video services (YouTube)
Game video services (Twitch)Game video services (Twitch)
Game chat service (Discord)Game chat service (Discord)
Messaging (Twitter, WeChat)Messaging (Twitter, WeChat)
StreamersStreamers
……and a slew of contenders & pretendersand a slew of contenders & pretenders
to serve gamer wants and needsto serve gamer wants and needs

8. Connective tissue: potential,Connective tissue: potential,
with emphasis on ‘potent’with emphasis on ‘potent’
DistractionDistraction
 Offers of other services, diversionsOffers of other services, diversions
 Game-related breadcrumbs (e.g., text comments)Game-related breadcrumbs (e.g., text comments)
InfluenceInfluence
 Purchases including, of course, gamesPurchases including, of course, games
 InterestsInterests
CaptureCapture
 ““All your players belong to us”All your players belong to us”
Re-capture (e.g., streamer feedback loop)Re-capture (e.g., streamer feedback loop)
Sustained developer success flows from greaterSustained developer success flows from greater
control of the player relationshipcontrol of the player relationship

9. Spectating: games peopleSpectating: games people
play… except when they don’tplay… except when they don’t
Interaction has been a fundamental assumptionInteraction has been a fundamental assumption
of the game business, designers and playersof the game business, designers and players
Emergent spectating behaviorsEmergent spectating behaviors
 Top-level competitionTop-level competition
 Passive entertainmentPassive entertainment
 PersonalitiesPersonalities
 Game highlightsGame highlights
 Social activity with friends & acquaintancesSocial activity with friends & acquaintances
A developing spectrum of player consumptionA developing spectrum of player consumption
between watching and playingbetween watching and playing

10. Spectating:Spectating:
business consequencesbusiness consequences
Challenges current dominant business modelsChallenges current dominant business models
 Decimates premium salesDecimates premium sales
 Does not play nice with ‘traditional’ F2P…Does not play nice with ‘traditional’ F2P…
 ……but can create performance incentives, promotingbut can create performance incentives, promoting
purchases and giftingpurchases and gifting
Linear entertainment business models mostly aLinear entertainment business models mostly a
poor fit for gamespoor fit for games
 AdvertisingAdvertising
 Long tailLong tail
Revenues depend on a broader set ofRevenues depend on a broader set of
connections to and touchpoints with spectatorsconnections to and touchpoints with spectators

11. Games for spectatorsGames for spectators
Play patterns map to consumptionPlay patterns map to consumption
 PassivePassive
 LinearLinear
 IntermodalIntermodal
““Schrodinger’s spectator”Schrodinger’s spectator”
 Alternate among watch, low interaction, and playAlternate among watch, low interaction, and play
 When is a spectator not a spectator? (When is aWhen is a spectator not a spectator? (When is a
player not a player?)player not a player?)
Demographics is destinyDemographics is destiny
 When do we cross the 50% spectating threshold?When do we cross the 50% spectating threshold?

12. Subscriptions meet gamesSubscriptions meet games
Subscriptions are comingSubscriptions are coming
 Value proposition attractive to customers…Value proposition attractive to customers…
 ……though the games business has yet to crack thethough the games business has yet to crack the
mass subscription codemass subscription code
Not exactly a “Netflix for games”Not exactly a “Netflix for games”
 Unlike video, games are often consumed repeatedlyUnlike video, games are often consumed repeatedly
 No long tail… and an abbreviated medium tailNo long tail… and an abbreviated medium tail
Not exactly as the industry wishcasts itNot exactly as the industry wishcasts it
 Consumers mostly don’t buy by label or even byConsumers mostly don’t buy by label or even by
platformplatform
 The IP owner/service dynamic flips with critical massThe IP owner/service dynamic flips with critical mass

13. Subscription businessSubscription business
considerationsconsiderations
Renewal is the end-all and be-allRenewal is the end-all and be-all
 A game with 10K fanatic followers is more valuableA game with 10K fanatic followers is more valuable
than another with 2MM ‘nice to haves’than another with 2MM ‘nice to haves’
As steep a success pyramid as mobileAs steep a success pyramid as mobile
 Relatively few winnersRelatively few winners
 Smaller opportunity than mobile for foreseeable futureSmaller opportunity than mobile for foreseeable future
The developer-friendly hierarchyThe developer-friendly hierarchy
 License fees; revenue shareLicense fees; revenue share
 EpisodicEpisodic
 EngagementEngagement
 Component revenue maximizersComponent revenue maximizers

14. Several key takeawaysSeveral key takeaways
Continually invest in the player relationshipContinually invest in the player relationship
 Find: where? frequency? relative strength?Find: where? frequency? relative strength?
 Build: at the atomic level & specific to the gameBuild: at the atomic level & specific to the game
 Improve: accentuate the positive, fend off negativeImprove: accentuate the positive, fend off negative
Then overinvest againThen overinvest again
 Distributed: competing on size is a losing gameDistributed: competing on size is a losing game
 The (player) tribe should be the game, not the guildThe (player) tribe should be the game, not the guild
Cultivate the local ecosystemCultivate the local ecosystem
 Shape the interface with third-party channelsShape the interface with third-party channels
 Your own channels: ‘velvet ropes’, distinguishersYour own channels: ‘velvet ropes’, distinguishers
Play with the strengths of connected games (don’tPlay with the strengths of connected games (don’t
compete directly with celebrity, social media)compete directly with celebrity, social media)

15. Thank you!Thank you!
egoldberg@crossover.com
[See also:
http://europe.casualconnect.org/cont
ent.html?speaker=ericgoldberg]