Platform Competition Game in Town: Twitch video Live Streaming Disruption

A deeper understanding of the hidden consumer behavior trends and disruptions caused by Twitch’s video game live streaming can help executives across the gaming industry make better strategic decisions while increasing their market share.

The mobile industry generated nearly $3 Trillion in 2014equivalent to 4% of the global gross domestic product (GDP). Video data accounted for 50% of mobile traffic in 2018 through LTE networks. LTE, for now, remains the most dominant mobile access technology, with subscriptions topping 4.6 billion globally, according to Ericsson. Video traffic in 2020 accounts for over 67% of all mobile data traffic, while smartphones are operating over 94% of the traffic. Moreover, globally, the average monthly data traffic was 9.4 gigabytes in 2020.

Since its 2011 launch, Twitch has been the entertainment mecca for over 540,000 streamers visiting the site daily. Recently (in 2018), the site received over 2 million viewers during its big events.

Indeed, Twitch combines plenty of media features in a single platform. Unlike traditional TV, Twitch allows streamers and consumers to interact, differentiating the streaming experiences while taking them to a level unlike any other across the gaming industry. This Amazon-owned digital game live-streaming platform provides the infrastructure for the streaming experiences for the sake of governance. It deploys monitoring systems for players’ comments, which enable interactions with the streamers, the spectators (audience), and others via chat.

The site has many superlatives and accolades. In 2018, it was ranked among the top 33 visited websites by daily visitors and pageviews, while the viewing duration on the platform hit the 436 billion minutes milestone. Moreover, in 2019, over one million people watched video games live stream at any given time. Furthermore, the number of streamers on the platform jumped by 50% from 2017 to three million at the end of 2018.

Twitch doubles down on investments in an AI-powered recommendation engine to spice up its user experience as a guide for its platform users. Many star streamers (influencers) also provide a consistent streaming experience to their followers by reinforcing their bond with their audience through their schedules.

Content creation and consumption through intimacy and interactions can be considered some of the distinguishing features of online video streaming platforms, particularly Twitch. Across Twitch’s platform ecosystem, streamers play the role of content producers by recording and broadcasting real-time videos through mobile gadgets, such as smartphones, tablets, laptops, and desktops. At the same time, on the receiving side, the consumers become the audience that interacts with their favorite streamers or professionals through chats or other VR-like aesthetics.

Unlike traditional media such as TV, YouTube, or other on-demand video entertainment, video game live-streaming experiences are unlike any, given the suspense, real-time, and social media features at the core of the experiences.

The dominant segments of video game live streaming are eSports (a niche for professional competitions), the speed runners who compete to prove how fast they are, and finally, Let’s Players—the self-entertainers. One phenomenon making all this possible is the rapid growth of Internet consumers who watch videos daily—65% of them do it, while over 84% do it in the United States. As a result, the number of gamers worldwide is expected to increase from 2.2 billion in 2017 to 2.7 billion by the end of this year (2021). The streamers use one or a combination of video game live-streaming devices, such as handheld consoles, gaming consoles, laptops, tablets, desktops, and smartphones.

Consumption Trends, Sea Changes, and Disruption Across the Gaming Sector

During the heyday of console oligopoly (before 2015), the value of positive network effect was imperative—building a huge network of console-specific users was crucial in attracting developers while enhancing the variety of console-specific releases. However, in our increasingly digital ecosystem, where releases are digitally distributed across various platforms simultaneously, strategy based on network effects seems myopic and akin to a fool’s errand.

Before 2015, people below 18 were the biggest consumers of video games. However, since 2018, hidden trends and tectonic shifts have been happening below the executives’ radar—the opposite of what was previously assumed in the gaming industry. For example, consumers above 18, with an average age of nearly 35, are the biggest consumers of video games. Moreover, women constitute 33% of the game players worldwide, while boys under 18 account for just 17% of the gaming industry’s consumers. Furthermore, over 69% of gamers today are 18 or older.

Indeed, from consumers’ insights and analysis standpoint, over 65% of consumers revealed that graphics quality greatly influences their purchase decision. In other words, PC-based games are their top choices, followed by consoles from Microsoft Xbox, Sony’s PlayStation, and Nintendo, which have better graphics than mobile gaming devices.
Other trends are emerging across the fast-changing gaming industry—the power of user-generated content (UGC) in descriptive tags, particularly in the PC gaming segment. Our experience, consistent with recent empirical analysis, suggests that game descriptions such as online multiplayer, shooter, Sci-Fi, strategy/RP, simulator, horror, etc., considerably influence weekly sales. They can boost the weekly sales by over 20%. However, game descriptions such as anime, sports, early success, or VR genres hurt weekly revenues.

Live Streaming is Disrupting the Game Review Process

Traditionally, expert journalists have done game reviews. They provide their reviews while ensuring they do not reveal too much to their audience by unintentionally affecting the demand for games. However, the process is time-consuming and leaves consumers with many unanswered questions about the games they want to purchase. This process has been disrupted with the rise of live streaming on Twitch. Now, consumers can watch the game live while a professional streamer broadcasts the game. Unlike journalistic written or video reviews, consumers now have better access to relevant information regarding suspense and other features. As a result, some publishers and producers worrying about the potential impact of streaming have increasingly become selective regarding the streamers’ reputation before any collaboration. Others fear that the intellectual property of their games is at risk with the rise of game live streaming.

The Industry’s Power Dynamics Disrupted

Before 2015, the console segment was the dominant part of the industry. However, digital distribution has gained steam in recent years with the rise of digitalization within the global economy. In 2010, just 31% of games were distributed in digital format; by the end of 2017, the trend had increased to a massive 79%. Similarly, between 2017 and 2018, mobile gaming grew by nearly 26%, increasing its market share to 51%. The console gaming lost market share to 25%, and PC gaming had 24% by the end of 2018. However, in 2020, the console regained nearly 4% more market share to end the year with 29% ($52.5B sales vs. Mobile $88B of the industry’s $180B sales). However, the console is still far from where it used to be in the previous decades – the heyday of console gaming.
However, this is not the complete picture of how people play games worldwide. For one thing, PC-based game playing is leading the way with 41%, console with 36%, mobile devices with 24%, and VR systems with 14%.

Independent Publishers and Producers (Indie) are Becoming Visible, and Game Lifespan is Increasing

Independent publishers and producers have struggled in the gaming industry for years, given their lack of credibility, name recognition, and financial war chest in producing and marketing their products like the industry bellwethers. However, with the sea change sweeping the industry brought by the rise of Twitch platforms and game live streaming in general, Indies publishers and producers are increasingly getting visibility across ecosystems.

When it comes to online reviews, we believe that they have an uneven impact on sales. However, the truth is that they positively affect less popular games because those games, given their lack of visibility (unpopularity), have less budget to devote to marketing activities traditionally done across the gaming sector. Having good reviews makes the talking point regarding word of mouth (WoM), which, as we know, is one of the most trusted marketing communication channels.

Disrupted, the Console Kings are Signing Sponsorship Deals With Influential Streamers

Like social media influencers, Twitch video streaming has its influencers called Twitch Ninjas. They earn, on average, over $420,000 per month and counting, given their increasing stardom over the years. They have a huge audience during their events. With consoles’ oligopolistic power gradually decreasing, the console kings and other tech titans such as Nintendo, Electronic Art (EA), Microsoft, Sony, and Samsung have been forced to collaborate with influential streamers, as Samsung did with its Galaxy Note9 advertising.

Working with streamers has risks, including intellectual property risk, which has become a serious concern among game industry players. However, the partnership upside potential is greater for many than the downside risk. Thus, they have chosen to stick with these new emerging influencers within the gaming sector. That’s why streamers increasingly receive sponsorship deals from big players such as Microsoft, Nintendo, and Sony for their console games. The deals are brokered by Twitch or sometimes by other players such as WeHype.