In October of last year, I wrote about the absurdity of the fact that Big Media content companies and distributors were spending unprecedented sums to increase their exposure to a segment of the media industry with declining value (video), even as another (video games) was growing 15-25% per year. While I remain surprised by the differential between investment and growth potential, it’s worth considering why the future of gaming is so immense.
#1 – The Dominant Attention Medium, Television, Has Peaked and its Time is Being Redistributed
In the 19th century, the idea of “leisure” versus “work” emerged. To economists, we could do only two things with our time: “generate” income by working, or give up potential income and/or “spend” our income on leisure (either literally or via opportunity cost). This latter classification included everything from going to a play, reading a book, spending time with your partner, or sleeping. For the most part, these different leisure activities didn’t actually compete that much – before electricity, you could only read so late, there weren’t many local theaters, the solar cycle defined when you needed to wake up, etc. More broadly, there were few real alternatives in entertainment. For example, you had (1) newspapers, which refreshed only once a day and needed to be either delivered or picked up; (2) books, which took lots of effort to consume and were text only; (3) radio, which was audio and live only; and (4) socializing, which required planning, wasn’t for everyone, and had high, logistical costs and limitation.
And so, by the time TV arrived – which offered an abundance of content to choose from, and, uniquely, moving video plus dynamic audio – it dominated. By 2010, more than nine in ten American households were paying $50+ per month for Pay-TV, making it the most accessed and highest revenue-generating entertainment category. What’s more, 280MM Americans were spending an average of 5+ hours per day on the medium.
TV isn’t going away. But regardless of how effectively the major TV companies transition to digital, it’s hard to imagine it will maintain current levels (at least until autonomous vehicles free up another two hours per day). It’s not new that human attention is finite, but the “attention economy” is so talked about today because there’s finally competition for leisure time. That doesn’t mean video time will ever fall below three hours per day, but the historical 5+ level is likely inflated by the fact real substitutes didn’t exist. Now there’s TikTok, Snapchat and Fortnite. And they continue to take generational share away from the category with the most to give.
This is why I once tweeted that Fortnite was Netflix’s most threatening competitor (which CEO Reed Hastings said in his investor letter a month later). This is most plainly understood as the idea that everyone is competing for finite attention and there are more applications for this attention than ever before. But the real challenge for Hollywood is that for decades, whenever “leisure” won over “work”, TV was the primary beneficiary. In recent years, the leisure decision has changed or “moved up” a level. It used to be “what to watch” and now it’s “whether to watch” – and the answer is increasingly “no, I’m going to play a game”. Neither Netflix nor Hollywood has a good solution for this problem. And no one chooses not to game because there’s a branching narrative available instead.
#2 – Gaming is Replicating the TV Package
At the same time, the degree of TV’s success isn’t just due to the scarcity of leisure competition. It boasted many characteristics that ensured its mass appeal, drove its penetration, and maximized its usage. Yes, it was flawed and over time, its value perverted - but Pay-TV was still an incredible package, one that bundled together and offered:
#1 – The Dominant Attention Medium, Television, Has Peaked and its Time is Being Redistributed
In the 19th century, the idea of “leisure” versus “work” emerged. To economists, we could do only two things with our time: “generate” income by working, or give up potential income and/or “spend” our income on leisure (either literally or via opportunity cost). This latter classification included everything from going to a play, reading a book, spending time with your partner, or sleeping. For the most part, these different leisure activities didn’t actually compete that much – before electricity, you could only read so late, there weren’t many local theaters, the solar cycle defined when you needed to wake up, etc. More broadly, there were few real alternatives in entertainment. For example, you had (1) newspapers, which refreshed only once a day and needed to be either delivered or picked up; (2) books, which took lots of effort to consume and were text only; (3) radio, which was audio and live only; and (4) socializing, which required planning, wasn’t for everyone, and had high, logistical costs and limitation.
And so, by the time TV arrived – which offered an abundance of content to choose from, and, uniquely, moving video plus dynamic audio – it dominated. By 2010, more than nine in ten American households were paying $50+ per month for Pay-TV, making it the most accessed and highest revenue-generating entertainment category. What’s more, 280MM Americans were spending an average of 5+ hours per day on the medium.TV isn’t going away. But regardless of how effectively the major TV companies transition to digital, it’s hard to imagine it will maintain current levels (at least until autonomous vehicles free up another two hours per day). It’s not new that human attention is finite, but the “attention economy” is so talked about today because there’s finally competition for leisure time. That doesn’t mean video time will ever fall below three hours per day, but the historical 5+ level is likely inflated by the fact real substitutes didn’t exist. Now there’s TikTok, Snapchat and Fortnite. And they continue to take generational share away from the category with the most to give.
This is why I once tweeted that Fortnite was Netflix’s most threatening competitor (which CEO Reed Hastings said in his investor letter a month later). This is most plainly understood as the idea that everyone is competing for finite attention and there are more applications for this attention than ever before. But the real challenge for Hollywood is that for decades, whenever “leisure” won over “work”, TV was the primary beneficiary. In recent years, the leisure decision has changed or “moved up” a level. It used to be “what to watch” and now it’s “whether to watch” – and the answer is increasingly “no, I’m going to play a game”. Neither Netflix nor Hollywood has a good solution for this problem. And no one chooses not to game because there’s a branching narrative available instead.
#2 – Gaming is Replicating the TV Package
At the same time, the degree of TV’s success isn’t just due to the scarcity of leisure competition. It boasted many characteristics that ensured its mass appeal, drove its penetration, and maximized its usage. Yes, it was flawed and over time, its value perverted - but Pay-TV was still an incredible package, one that bundled together and offered:
- An abundance of content (in both volume and variety)
- Ease of access (TV was everywhere, its content universally accessible and immediately viewable; you could go to your friend’s house, a bar, or another state, and immediately resume your “regularly scheduled programming”)
- Frictionless content discovery and sampling (aside from basically three channels, all content was immediately accessible; indeed, much of it was found by accident or while simply “channel surfing” during commercials
- A wide range of different use cases and functions (some content was designed to inform, others to entertain, babysit, teach, or tap into local tribalism, etc.)
- A range of different engagement levels (viewers could lean in and be totally immersed, lean back and just watch, or turn the TV on in the background for even more passive distraction as they tended to cook, do laundry, or run on the treadmill, etc.)… In addition, TV benefited from…
- Achieving a cultural tipping point. Because “enough” people watched TV, it became a watercooler discussion and dominated pop culture – forcing many to watch TV simply to participate in society, similar to “social smokers” who only smoke when with smokers who are smoking
- Incredible competition that continually drove more value and format diversity/innovation
by Matthew Ball | Read more:
Image: uncredited
[ed. I'll admit, I know zero about gaming so this is all very interesting.]
