No longer a niche market, the video gaming world offers useful lessons for entrepreneurs and other business leaders with big ambitions.
Video gaming has come a long way in a short period of time. Once viewed – unfairly perhaps – as little more than a pastime for children and teenagers, the industry is now one of the fastest growing in the world.
Those who have found success in the video gaming space demonstrate ambition and a special sort of agility: an ability to quickly adapt to market changes, rapidly evaluate risks, respond to customer demands and continuously be at a competitive advantage.
Through HSBC Group’s video game insight series and our increased focus on the video game industry, HSBC Private Banking has learned a lot about the industry mindset and how to find solutions for the challenges leaders here face. It’s also increasingly apparent that their skills are transferrable, and their experience can offer useful lessons across a variety of sectors.
Ready to react
Revenue from the global video games market increased by 20 per cent to USD179.7bn in 20201, making video gaming significantly bigger than the worldwide film and music industry.
The number of people playing video games has no doubt been boosted by long periods spent indoors through Covid-19 lockdowns, but this is unlikely to be a one-off spike. We are emerging from a lockdown world where playing games is now accepted as a common method of socialising, and growth is expected to continue with the release of the latest generations of the Sony PlayStation and Microsoft Xbox, as well as greater adoption of mobile games around the world2.
The companies that design the most popular games can bring their founders and executives life-changing success, and the technology they develop is sought after across a wide range of different industries. So what does it take to succeed as a video games developer?
While each individual is unique and finds success in their own way, there are certain common attributes. Working in an industry that sits at the intersection of creativity and technology means it is essential to be agile and able to adapt quickly to changes in the market. Responding rapidly to shifts in customer sentiment – or anticipating them before they happen – is also vital in creating a competitive advantage.
One quality that is almost universal is a global mindset. Development might start in relatively humble circumstances, but the aspirations are truly global. That goes for the user community or customer base, but also the talent. The collaboration required to create a video game success story is certainly not restricted by borders.
Building relationships and a community
There are still misconceptions about the video gaming industry. The stereotype of introverted, code-obsessed developers exists because there is an element of truth to it, but many top executives are in fact the opposite personality type. At that level, building relationships across multiple stakeholders is essential for success, as is using a breadth of life experience to help create great games played by millions.
Another misconception is about the end user. It is not all children – far from it. The average Minecraft player, for example, is 243. Indeed, many people who grew up playing video games have not stopped and now form one of the most powerful aspects of the video game industry: the community.
For many game creators, the reason they’re successful isn’t just about developing a good game, it’s about creating a community of users. Building a global network encourages loyalty, helping business resilience and longevity.
Games such as DOTA2 and Counter-Strike: Global Offensive have retained their popularity for more than a decade due to their huge community of loyal followers. Such games attract audiences of millions for big tournaments4 as well as lucrative sponsorship deals. DOTA2’s prize pool for its flagship International tournament reached USD40 million last year, the majority of which was raised through community fundraising5.
This sort of network also provides developers with a ready-made community which they can use to measure the performance of their games, receive feedback on updates and test new versions.
Willing to shift and change
Very few industries do such intensive testing. This points to another lesson on agility from the video gaming industry: A willingness to collaborate and improve via communities of engaged customers often leads to an improved product and better sales.
It also provides a solid foundation from which the video games industry is spreading its influence across other sectors. With such pioneering technology being developed, those who own the intellectual property (IP) are starting to pivot and diversify. The technology used to produce graphically intensive, immersive games is in demand by Hollywood studios.6 Architectural firms can use games technology in software to create 3D models.
Ed Cave, Relationship Manager at HSBC Private Banking and Chairman of the HSBC Video Games and Esports Working Group, adds: “The use of video game IP beyond games itself is a key trend, which is going to help push the industry’s growth over the next decade. We are seeing video game companies across HSBC firmly challenge the consensus of other industries, such as film, music, TV and engineering, and we are keen to help them.”
This demonstrates that building on success by thinking outside your immediate world – pivoting, diversifying and changing your proposition – can reveal that the plan you started out with isn’t necessarily the most profitable.
About our work with video gaming clients
HSBC has a wealth of experience working for video gaming clients. Our Video Games and Esports Working Group can help with global connectivity and access to fast-growing markets, providing a competitive edge to industry leaders. We have a deep understanding of the space – from raising money in capital markets to investing founders’ newly acquired wealth.
Given the industry’s pivot towards Asia in recent years, HSBC’s strength in the region – we have access to expertise in jurisdictions that can be difficult to navigate without on-the-ground experience – becomes a real asset. There are 657 million Chinese gamers, and the country accounts for about a third of global revenue.7 It is estimated that 54 per cent of global players are located in the Asia-Pacific region, with growth still accelerating in some of the markets there.8
Wherever you are located, we are able to serve clients who are always in search of a competitive edge, and who need responsiveness and immediacy to achieve their ambitious goals. Our experience working with individuals who have built wealth very quickly also becomes an advantage in the fast-moving world of video games, when fortunes can be built almost overnight.
This has become even more relevant since the start of Covid-19, during which time the share prices of publicly listed video game developers have increased dramatically in some cases.9 This has enabled a series of big-money acquisitions, such as Electronic Arts’ USD1.2bn purchase of Codemasters.10
Big deals create big wealth management challenges. HSBC Private Banking can offer creative solutions and opportunities – all under one roof.
To find out more, contact us or your Relationship Manager.
1Videogames are a bigger industry than movies and North American sports combined, thanks to the pandemic, MarketWatch, January 2021 ↩
2Videogames are a bigger industry than movies and North American sports combined, thanks to the pandemic, MarketWatch, January 2021 ↩
3Believe it or not, the average age of a Minecraft player is 24, PCGamesN, October 2019 ↩
5‘Dota 2's The International surpasses $40 million in prize money’, ESPN, October 2020 ↩
6Why Hollywood needs computer games tech more than ever, BBC, July 2020 ↩
7China’s Evolving Game Industry Continues Growth In First Half of 2020, Cocos, August 2020 ↩