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👋 I’m Zoe Chew, a product builder. I’ve built multiple apps using the rapid MVP method: sneaker app, personal FAQ, meal kit app, virtual event app, SaaS tracker, food delivery, content app +more
I’m on a quest to understand the future of the Internet. Each week at Venturescale, I analyze profitable industries, and how you can compete and monetize—at the intersection of Internet platforms & consumer tech.
Today’s post is about gaming tech. Read here if you’re interested in SaaS, Web3 creators economy, future of social networks, FinTech & wellness tech, or online marketplaces.
In this analysis, we will unlock 3 market opportunities:
- Help game creators make money, i.e. people who build and sell games
- Help game players (the player-creator) make money
- Monetize gaming tech and game businesses by solving real problems
Video games and the creator economy
From big game studios to independent game developers making money by releasing “indie games”, the creator economy has arrived in the gaming space. Unlike video games released by major publishers with AAA titles (e.g. Grand Theft Auto, Call of Duty, Halo, Final Fantasy), indie games are created by solo game developers or smaller game studios without large marketing budgets or funding.
In 2020, there were 9,722 indie games released (up 25.6% from 2019). Hades, Among Us, Fall Guys, Spiritfarer, and Paradise Killer have gained mainstream popularity among casual gamers during the pandemic lockdown. Work-from-home has created opportunities for indie developers to work on side projects and release games.
Empower game makers to monetize
New digital distribution channels have enabled game developers to sell their new games and reach wider audiences:
- Steam has over 47% of game publishers selling their games on the platform.
- Roblox offers a game creation (Roblox Studio) plus publishing platform. Users can program games and play games created by other users.
- Epic Games helps developers self-publish their games, set up their game page, and collaborate with game influencers.
- GOG is a publisher focusing on the best classic games niche.
- (📥 Full version) 7 more company examples and unique value propositions
The rise of UGC and player-creators
Now there are two types of game creators. (1) People who code and sell video games which we’ve already mentioned. (2) People who play games and sell virtual goods such as avatars, skins, gifts, collectibles, virtual worlds—or monetize storytelling through audience-building and streaming. They are known as the in-game creators, game modders, or game content creators.
User-generated content (UGC) platforms allow game players to participate in the gaming creators’ economy and monetize virtual worlds. Key players include:
- Overwolf is for creating, sharing, and monetizing in-game apps and mods.
- Mod.io helps players create game modding, host, moderate, monetize, brand & grow a creator community.
- Rec Room has over 2 million players who created in-game content such as player-made game rooms. The company raised $100 million to extend more than $1 million in payouts for creators.
- (📥 Full version) 5 more game creators monetization tools
What problems do they solve?
- Help people discover new games. Game publishers like Steam, Roblox, GOG provide a listing of popular video games, recommend new releases, and a marketplace for players to discover, download or play new games. They are the “app store” for game distribution.
- Connect developers with players. Steam has 120 million monthly active players in 2020 (up 95 million from 2019). Roblox has 33.4 million daily users. Epic Games has 100 million players on the platforms. Developers can leverage these publishing platforms to increase game revenues.
- (📥 Full version) 3 more valid problems existing players are solving. Understanding these valid problems will help you build something people want. You’ll also learn:
- Problem definition 1: How are Roblox & Epic Games solving problems for game developers?
- Problem definition 2: How Steam generates additional revenue by solving this problem?
- Problem definition 3: What problem does Mod.io solve to make money as a business?
Business models
In the past, the gaming industry monetizes through selling game copies. Newer business models known as game-as-a-service (GaaS) are thriving in the gaming space to help publishers, developers, and game creators monetize better:
- Game subscription: Apple Arcade ($4.99/mo, access 200+ games) bundles unlimited access to a selection of games, focuses on mobile-first gaming and Apple devices. Xbox Game Pass Ultimate ($14.99/mo, access 100+ games) focuses on indie, blockbuster games, and cross-platform subscriptions on console, PC, and mobile devices
- Free-to-play: Tencent invested $330 million in Epic Games back in 2012 to expand its free-to-play model—a more profitable business model than selling game copies (one-time model). Similar to Freemium in SaaS, players can play a fully functional game, and then pay “upgrade” fees for buying virtual goods, unlocking next levels, playing without ads, new game updates, or big releases.
- (📥 Full version) 2 more strategies to help you layer different revenue streams and build a profitable game tech business. You’ll also learn:
- Strategy 1: How to use this model to reduce marketing costs or user acquisition efforts?
- Strategy 2: Most popular way (due to its flexibility) to expand your revenue streams as a game business, including examples of big game studios applying this model.
Why now?
There are massive opportunities for building in the gaming space. This section explores the key takeaways, the future of gaming tech, and the “why now” questions (most important slide in a pitch deck!) for your investors:
- Lower marketing costs due to community-driven platforms. People find gamers friends online, join groups, play together and socialize. Natural network effects happen when players attract more players by inviting their friends.
- As the creator economy rises, new creators platforms will emerge to help passionate players create, sell & trade virtual goods and earn side incomes. Similarly in the adjacent player-creator category, game influencers will leverage storytelling or live-streaming to help game studios distribute new games.
- (📥 Full version) 5 more market evidence in detail to help you make smart entrepreneurial decisions. You’ll also learn:
- Evidence 1: Why the rise of new gaming business models will drive demand for adjacent product categories to rise?
- Evidence 2: New problems have started to emerge in the creators’ economy and why new solutions are needed?
- Evidence 3: Competition in creators economy is rising and why new solutions are needed to drive out competition and win?
- Evidence 4: Impact of eSports and the next-gen game tech solutions
- Evidence 5: Why gaming tech should cater their solutions to this user behavior shift?
Business opportunities
- Shopify for game businesses. Think direct-to-consumers (D2C) but for gaming. Build a digital commerce solution for game creators to easily set up their online storefront, cloud streaming, analytics, payment, and customer relationships through their own site. Having their own brand will be able to control the user experiences and eliminate platform fees on marketplaces like Steam, Epic Games, and GOG.
- (📥 Full version) 3 more specific product ideas and business opportunities that are solving problems. You’ll unlock:
- Opportunity 1: Game-as-a-service (GaaS) idea
- Opportunity 2: Monetize by helping game founders succeed
- Opportunity 3: Monetize by helping game developers succeed
- Opportunity 4: Niche business idea for no-code game creation platform
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