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OGCP Papers: Gaming Industry

Updated: Dec 19, 2022

Gaming today is larger than the global music, film, and on-demand entertainment sectors combined. Among these media categories, gaming is also the fastest growing sector. In this issue, we explore the gaming market by breaking down into gaming hardware, gaming software, and gaming content.

 


 
 

History

In 1985, a Japanese company named Nintendo launched the NES, an at-home video gaming console that served as a cheap way to play multiple video games in the living room, each game pre-loaded on a cartridge and allowing for a user to change games at will. Not long after Nintendo’s launch of the NES, the Hawaiian-based Sega launched a similar console called the Sega Genesis, which served as the NES’s main competitor pushing the two to lead an industry that was valued at $19.9B. The 1990s brought the Sony PlayStation which derived its innovation from selling its games as CDs. The early 2000s brought Electronic Arts development of the game Sims, a life simulation game meant to give let users share a “virtual life” with their friends. Electronic arts development of Sims throughout the iterations has caused it to be the greatest selling video game of all time, selling 200 million copies worldwide. Sims was played on the personal computer; although not the first to do this, was the most popular PC game. The early 2000s led to the development of the PC game and for some time it seemed as if the PC game would be the world’s primary source of gaming.


In 2007, Apple launched the iPhone, which started the mobile computing revolution; although not the only mobile phone on the market, it revolutionized the gaming industry allowing a user to always have a game in their pocket. Games such as the Candy Crush, Temple Run, and Subway Surfers took the gaming industry by storm. This mobile revolution pushed the gaming industry to a value of $68B. In 2018, a privately held gaming studio named Epic Games launched the game Fortnite, an instant success that was able to secure $5.8b in revenue in 2021.

 

Gaming Ecosystem

Gaming today is larger than the global music, film, and on-demand entertainment sectors combined. Among these media categories, gaming is also the fastest growing at around 10%, according to various industry research firms including Newzoo or WSJ / Activate.


Gaming market breakdown at 2021:

  • Gaming hardware - $108.6B (32%)

  • Gaming software - $32.4B (10%)

  • Gaming content & IP - $194.5B (58%)

 

VC Outlook

By the end of the first half of 2022, there are 25 Late-stage VC and Corporate deals, with a total disclosed value of $2.8B. The top-3 placements have taken up 85% of the category deal value:

  • Epic Games $2B funding by Sony and KIRKBI, with each party investing $1B respectively, bringing the company’s valuation to $31.5B.

  • Turkey-based Dream Games closed a $255m Series C round back in January, led by Index Ventures.

  • US-based Thatgamecompany $160m Series B+ round from TPG and Sequoia back in March.

 

Key Trends & Emerging Opportunities

  • Decentralized Autonomous Organisations (DAO)

 


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