The video game industry has indeed extended far beyond just a mere pastime or hobby. It has become a vast, powerful, and lucrative industry of international proportions today, bringing influences on diverse dimensions of the economy, like finance. The two most recent ways through which gaming is making waves and money are through both esports and virtual economies. As these virtual worlds evolve, new investment opportunities, employment avenues, and a source of revenue appear to open up.
Esports: Changing the Financial Landscape
Esports has exploded during the last few years from underground communities to mainstream awareness. Starting as a play of a group of friends in the basement, the game has emerged as a global game that hosts professional players, sponsorship money, and trillion-dollar revenues.
- Esports Revenue Growth: Esports has quickly become a multibillion-dollar industry, sucked in the attention of one billion viewers and thousands more players across the globe. For the very first time in its history, in 2023, the overall global esports revenues are said to stand at about $1.6 billion, as published by Newzoo, which described itself as a leading gaming analytics company. The figure comprised sponsorships, media rights, merchandise, and ticket sales. It's a pretty good jump from just a few years ago, showing that the financial potential of esports is only increasing. Investors are waking up to the enormous opportunities afforded by esports-from big gaming firms like Activision Blizzard and Electronic Arts (EA) launching their leagues where players will compete for valuable cash prizes, multi-million dollar prize pools. For example, The International, organized by Valve, had a $40 million purse in 2021.
Esports also yields financial benefits, which extend beyond tournament prizes. Sponsorships and partnerships with brands that are interested in reaching the engaged gaming market are a fast increasing trend. Brands like Nike and Coca-Cola have invested millions of dollars into the esports scene through team sponsorships and events that have solidified the legitimacy of the industry as a significant financial force.
- Esports Jobs and Career Opportunities: Esports is not only about teams and players but an industry provided employment via a range of positions, from a shoutcaster, otherwise known as an esports commentator, to team managers and event organizers. Estimated global esports-related jobs are over 500,000 by 2025 in coaching, marketing, software development, and broadcasting. It has definitely increased the quest for skills particularly applicable to gaming and esports, which contribute further to affecting traditional education and career paths.
Emerging Virtual Economies: A New Financial Frontier
Virtual economies are no longer evolving the way economies operate within games, whereby most interactions with these games entailed trading in digital currencies, trading virtual goods, and even investing in digital real estate. Do these virtual economies have real implications on the financial world?
- In-Game Purchases: The most significant source of revenue in the gaming industry now is in-game purchasing. This could be a cosmetic item, like skins for characters, or functional items like weapons and gear. According to estimates from Statista, the global market for in-game purchases was approximated to $85 billion in 2022 and will be estimated to reach $110 billion by 2025. Part of the reason why in-game purchases are so financially impactful is the fact that games have moved towards a freemium model. A freemium model is any model where users can download the game for free but pay for the privileges to enhance their gaming experience. Examples of great success with such a model would be Fortnite and League of Legends, which rake in millions from microtransactions.
- The Financial Value of Digital Assets: Some newer games allow players to buy, sell, and trade their assets digitally-a form of an asset that can, in itself, hold a financial value in real life. Such games are Axie Infinity, which is based on blockchain technology, and Decentraland, among others, as they give ownership over in-game assets as NFT. Digital assets can be traded in secondary markets for profit or any other good reason which could be analogous with traditional investments. In 2021, NFT sales on most platforms exceeded $25 billion; the area of gaming-related NFTs constituted a significant proportion. This trend indicates that gaming is intertwining with finance, as players can apply their skills and investments in the virtual world to earn real world financial returns.
Virtual Currencies as Meeting Gaming with Finance
Virtual currencies, such as V-Bucks for Fortnite or Riot Points in League of Legends, let one buy in-game items. However, this influence of virtual currency transcends even gaming: digital trading bridges the traditional world of finance to a whole digital economy by teaching them how to make deals with digital transactions, how blockchain can be applied, and how to trade virtually.
Another trend is that some games are beginning to use cryptocurrencies as a form of payment medium. For example, blockchain-based gaming uses the cryptocurrency Ethereum for a transaction. This could bring more worlds together: the gaming world and the crypto world. One could consider this a way of educating the next generations about digital assets and finance, which will prepare them for a future where digital currencies will be part of life.
Monetary Value of Gaming
- Growth in Audience of Esports: Newzoo forecasts that the number of esports viewers worldwide will be 577 million by 2025, compared to 474 million in 2021. More audience growth accelerates opportunities through sponsorships, advertising, and media rights deals, further expanding financial gains in the industry.
- In-Game Purchase Revenues: As stated above, the in-game purchases market is going great guns. Its revenues are poised to cross $110 billion by 2025. Mobile games currently account for 50% of the gaming market's revenue, following their exponential growth.
- Virtual Real Estate Values: Some virtual worlds value their digital real estate as much as, if not more than, their real-world counterparts. For instance, recently a virtual land plot sold for $2.4 million in the blockchain-based virtual world Decentraland, representing the rapid interest in digital ownership. Virtual investments are gaining traction among investors seeking to diversify their portfolios with digital assets.
Where is Gaming and Finance Headed?
- More Use of Blockchain: Blockchain is here to stay in the world of gaming. It brings with it a future reality that completely owned digital assets represent the possibility for players to control their assets.
- Play-to-Earn Models: The rise of play-to-earn models gives players a great opportunity to monetize their gaming experience. Games are increasingly adopting the play-to-earn model, where rewards accrued have real-world value. This development is taking gaming not just as an entertainment-based product but an open avenue for some to generate income.
The growth of esports would be accelerated within other regions such as Asia-Pacific and South America due to increased access to the internet in emerging markets with new financial opportunities. The impact gaming has on finance is undeniable. Esports and virtual economies drive massive change in the industry, which continues to grow for individuals and investors to generate revenue and interact with digital finance. From an in-game economy purchase to virtual real estate, financial implications of gaming will only evolve forward in a more digitally-driven economy. The future of gaming and finance is interlinked, for digital technology will continue to advance. Therefore, financial possibility will just grow much more robust in virtual worlds.
