As the 2020 boom in gaming showed us, video gaming is big business. What has become clear in 2021 is that the e-gaming industry is in a transition year, with massive growth potential in the years ahead.

There was record US games spending in 2020, to the tune of $56.9 billion. That represents a 27% increase year-on-year from 2019. These figures were driven in part by increasing numbers of people turning to gaming as a pastime and online socializing during the pandemic lockdowns. Software represented the lion’s share (86%) of this figure, with game content spending reaching $48.9 billion in 2020.

Given this explosive growth, it is perhaps not surprising that projections for 2021 include a slight dip. Globally, the e-gaming market is projected to hit $175.8 billion in 2021, down just 1.1% from global totals of $177.8 billion in 2020. However, this is merely a speed bump for an industry still projected to surpass $200 billion by 2023.

As evidence of the industry’s overall health, witness the number of large, non-gaming companies transitioning into the e-gaming space over the next year to 18 months. Whether it’s the gamification of existing products and services or as a play to ensure continued user engagement post-pandemic, there remains enormous potential for growth in e-gaming.

Gamifying fitness

Peloton, the exercise equipment and media company, is one company looking to branch out into the booming video game business.

Like video games, Peloton had its own banner year in 2020. With gyms and fitness classes closed due to COVID-19, Peloton’s line of internet-connected stationary bicycles saw booming business as people stuck at home did their best to keep in shape.

Now, to build on their success in 2020, Peloton has plans for an in-app exercise-based video game. The game, with the working title of Lanebreak, will involve riders varying their speed and resistance levels to score points and complete challenges. Players will be able to choose a difficulty level and the type of music that accompanies gameplay and challenge other Peloton members.

A video game play is attractive to a company like Peloton, which relies on ongoing subscriptions to its live-streamed classes for a significant portion of its revenue. As the economy reopens and gyms become accessible again, the gamification of fitness encourages Peloton users to return to the platform to take more classes, play more levels, and win more challenges.

Lanebreak is expected to open for a members-only beta test later in 2021 before being rolled out to all users in early 2022.

Social multiplayer games over Zoom

Another big winner from the lockdown era, the video-conferencing app Zoom, also has plans to roll out gaming via its platform to boost engagement as people begin to isolate less and return to the office more.

Zoom plans to offer a selection of social multiplayer games available to users as they chat in Zoom, without the need for additional downloads. These games can be played by themselves or used to improve the dynamics of existing Zoom calls, such as ice breakers or while passing the time waiting for everyone to join a call.

Game offerings include poker, a version of the popular social mystery game Werewolf, and third-party content from “instant gaming” company Playco, such as question-and-answer and guessing games. Any user can start a game and invite other users to play, and there will be no maximum player count.

Netflix for gaming

In July, Netflix announced that it would be expanding its offerings to include video games, focused on mobile games to start.

As part of its second-quarter earnings report, Netflix outlined its plans to include gaming as part of a regular Netflix subscription. Instead of monetizing games directly, Netflix intends games to drive overall subscription growth and retention. In the earnings call, Netflix said they consider games as a new content category, similar to the company’s expansion into original films, animation, and unscripted TV. While there is no word yet on what kind of game will be available, Netflix has extended deals with key creative partners like Shonda Rhimes to include both feature films and gaming content.

While this is something of a pivot for Netflix, it’s not the company’s first.

Netflix has been around for 20 years and initially brought TV and movies to its subscribers via DVD before pivoting to massive success in streaming. With more than 200 million paying subscribers worldwide, and one of the best-known brands in entertainment, Netflix becomes instantly attractive to game development partners.

Without the need to directly monetize game content with advertising or in-app purchases, developers would have a free hand to focus on gameplay and immersive experiences. Likewise, given Netflix’s stability of intellectual property (IP), there will be tremendous opportunities to turn movies and TV into video games and vice versa.

Though it would be difficult, for a variety of reasons, to replicate the success the gaming industry experienced in 2020, you can see the many positive transitions to the e-gaming sector in 2021. With a variety of companies entering the space for the first time, the gaming industry is set for significant growth over the next few years.

Investing in Video Games with HERO ETF

Evolve E-Gaming Index ETF (TSX Ticker: HERO), Canada’s first esports and video game exchange-traded fund (ETF), is a great way to access the world’s leading gaming companies like Nintendo, Activision Blizzard, Electronic Arts, Ubisoft, and Take-Two Interactive.*

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