Tipping point The coming consolidation of live service games

20,000 foot view:  The games industry has become addicted to the promise of lower risk and better ROI from live service games. As a result, there has been a flurry of live service titles released over the last            years. This is the key reason why the games industry’s core business model has shifted from unit-sales based to engagement based. Given the saturated attention economy and increasing number of live service games competing for the same consumer time, the initial advantages that the early movers had is evaporating. This will lead to a consolidation of the live service games market, likely pushing up IP valuations of a small handful of market leaders. We are now at the tipping point. Games companies should examine their positioning in live services and carefully balance their games strategy to hedge against oncoming risk.

Key insights  

• Games companies’            of the live service promise            lower risk and higher returns            resulted in more than two            of games revenue now coming            in-game spending
• Live service            depend on time spent, but            time spent is finite, the            of competing live services is           
• This means            on average, consumers will either            to distribute their limited time            more games or not adopt            games in an over-saturating live            sector
• Diluting time            will eventually lead to decreasing            to the point where the            commercial appeal of the live            business model evaporates
• In-game buyers                       hours per month more than            average gamer playing games, but            also play more titles in            given month            vs           
• Up until            in-game buyers’ higher time spent            games was enough to offset            fact that they distribute that            among a number of games,            we are now at the            point
• Companies run            risk of not seeing this            enough, as low value users            first will initially result in            and average time spent increasing
• The oversaturation            result in consolidation, building the            of a handful of established            and affecting each company differently,            on size and stage of            progress
• For games            to be successful in live            games, four core needs must            met: audience size, share of            degree of monetisation and cultural           
• Established IP            service games will have inherent            over newcomers

Companies and brands mentioned in this report:  Apex Legends , Ariana Grande, Call of Duty, Call of Duty: Warzone,  Defiance, EA, Fall Guys, FIFA, Fortnite, SKATE, TikTok,Travis Scott, Overwatch, World of Tanks, and Minecraft