“We’re all in the same game, just different levels.”
Big D, “Rage of a Poet“
As both a gamer and an investor, I am frequently amazed by the advancements in gaming. At the same time, I maintain a healthy dose of skepticism when it comes to new or emerging gaming trends. As a VC in gaming, my job is to separate the reality from the buzz, identify promising trends, and understand where those trends fit on the adoption curve.
So what’s real and hot versus what’s not in gaming in 2017? If you’re guessing virtual reality (VR) and augmented reality (AR), you’re partially right. Read on for the scoop in gaming trends 2017.
VR Still Sucks
My view on VR remains unchanged from that of previous years: we’re still three to five years away from fully capitalizing on it. The reality is, VR is really cool, but it’s nowhere near ready for prime time for two chief reasons I’ve cited before:
- VR headsets remain problematic. Form-factors are too bulky and cumbersome to wear comfortably…or fashionably. I’m not looking for haute couture here, just something that I can wear that doesn’t make me look like an idiot. Plus, VR headsets tend to heat up, which gets pretty uncomfortable. And the biggest issue of all is that VR headsets still cause motion sickness.
- Cost is yet another barrier: VR headsets are still too expensive for mainstream adoption. VR headsets cost roughly three times more than an inflation-adjusted gaming console over the last 20 years. The price is especially steep with headsets like Vive and Oculus, which require gaming PCs to operate properly. That means if you don’t have a gaming PC, you need to shell out at least $1000 to upgrade your existing PC with an Intel Core i5-4590 processor or better. If you don’t have an existing PC that’s upgradeable, be ready to spend a small fortune. The other major issue is that VR is competing with some amazing alternatives – you can spend $300 on a PS4 and COD (Call of Duty) and play hours a day with your friends or online.
My hope is that all the VR hype will eventually yield real progress. The big companies fueling the hype––Facebook, Google, Samsung and Sony––are putting their money where their mouth is and spending billions in a virtual arms race to win in VR innovation. It is their job to spend 1-2% of their market caps on what could be the next big platform, but that doesn’t mean there is a market for it yet. So while these sizeable investments are driven less by consumer demand and more by the desire for industry development, they will hopefully address the poor user experience (UX) and high price point of today’s VR gaming devices.
AR Has Arrived
While VR revenue forecasts are expected to reach $30 billion by 2020 (I’m skeptical), AR revenue forecasts are much higher — with expectations to exceed $90 billion by 2020.
More significantly, AR has progressed beyond a concept/ prototype to a tangible product/application. Just look at the massive success of Pokemon Go. That’s the type of market validation that VR has yet to achieve.
Making its debut in July 2016, Pokemon Go quickly became one of the top five grossing apps and surpassed Twitter in its number of daily active users (DAU). In just over a week, the app was downloaded from the Apple Store 15 million times, and in a matter of days, Nintendo’s tech stock increased by more than 50 percent.
Pokemon Go is appealing because it combines location-based gaming with AR. It’s an exciting experience because it breaks the traditional paradigm of playing games in your living room and instead requires interactions in new environments.
We’ll see more AR in games this year, maybe something as big or bigger than Pokemon Go. That’s why I’m actively looking at investments in AR gaming––and not so much in VR. Keep an eye out for new and exciting AR games that will be released by my portfolio companies in 2017.
PvP is Better Than Ever
PvP (player versus player) continues along a trajectory of advancements, chiefly in two areas: human engagement and real-time capabilities.
Broadly speaking, PvP applies to any game with multiplayer capabilities. More accurately, real-time PvP games involve human-to-human interaction or competition and less (if not little) computer-driven opponents, i.e., artificial intelligence.
Enhancements in human controls, combined with real-time capabilities, are taking PvP games to a whole new level of fun and player engagement. The best recent example: Supercell’s Clash Royale.
I’m addicted to Clash Royale, and I’m not alone. Several elements make Clash Royale compelling. There are the traditional elements fundamental to any “sticky” game: fast-paced, strategic, and fun. Then there are the modern elements that in combination deliver an entirely new gaming experience: mobile, multiplayer, and real-time.
Clash Royale is one among three other big hits developed by Supercell, which is valued at $10 billion. I anticipate that SuperCell will continue to ride this wave with its three-pronged focus on mobile, multiplayer, and real time. Given the success of this recipe, there are now plenty of competitors in the race. And that means more and better PvP games for you and me.
eSports is on a Path of Super Bowl Proportion
Y
es, I’m still talking about eSports. It continues to grow massively.
eSports are video game competitions broadcasted online. The competitors are master gamers; the audience are online spectators. In 2015, 36 million viewers tuned into the League of Legends World Championship, and in 2017, that number is expected to rise to 145 million. As a matter of fact, League of Legends is officially considered the biggest game in the world, with over 100 million monthly active users.
I wouldn’t be surprised to see viewership of the largest eSports event exceed that of the Super Bowl in the next few years.
Suffice it to say the size of the eSports audience represents big monetization opportunities, e.g., turning games into entertainment franchises.
Let the Games Begin in 2017
Hot: AR, Real-time PvP and eSports. Not (yet): VR.
That’s my summary outlook on games in 2017.
Meanwhile, the global gaming market continues to see year-over-year growth and is forecasted to reach $106.5 billion this year. I remain bullish about investing in gaming.
SanFranciscoVC 
Thanks for providing a great insight to gaming in 2017 and it’s true that PvP has become better than ever.
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Thought I’d comment on PvP to just add…
I think the big strength of PvP is this: “Players as content.”
Clash of Clans is a great example, because players themselves are the content. Each player creates their own base, and in doing so, is making a puzzle for other players.
In games like League of Legends or Counter-Strike, each team forms their own meta-strategies that make every game feel different. One team might be excellent at tactical grenades, while another might have more precise aim. Those differences amount to subtle variations in gameplay that ultimately serve as “content” for players to learn and master in short sessions.
I would even abstract it beyond PvP and say that it’s the ability to have their players generate meaningful content for other players during the course of gameplay.
The only instance I’ve really seen this work outside of PvP is in the “creation” genres: Minecraft, Draw Something, etc. In Minecraft, players are inviting other players into their worlds, showing them creations, and inspiring new ideas. Minecraft’s early and strong modding scene also reinforces the creation genre.
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