Interactive entertainment against home entertainment

Abstract

The last decade has witnessed a paradigm shift in the entertainment sector, GTA 5 the flagship title of Rockstar games a Santa Monica based studio launched in 2013 was awarded the highest grossing entertainment product of the history. The title alone has sold over 130 million copies with a revenue of over 8 billion dollars which is equivalent to the till date gross revenue of the Star Wars movie franchise. Pokémon which is the world’s highest valued entertainment franchise with a staggering valuation of over $100 billion, almost 20% comes from its video games business while a meagre 3% is contributed by box office and home entertainment combined. The trends also show that 7 out of the top 10 entertainment franchise have an interactive entertainment product. The total gaming market is valued at over $150 Billion and expected to rise with a CAGR of 13% while the global box office and home entertainment market is valued at $130 Billion and expected to rise by a meagre 4% year on year. The top 3 gaming studios (Rockstar, Activision, EA) have generated ROI in the range of 70% YoY for the past 5 yrs. The covid 19 pandemic has witnessed a steep rise in the video gaming market with over 40% rise in sales and stockouts at major demand centres. While the pandemic has proved devastating to box office given lockdowns and social distancing norms the in-home entertainment segment (OTT and gaming) has been picking up steadily. The covid era also witnessed the launch of next generation gaming hardware which saw an immediate spike in demand and global stockouts. While next gen console sales is expected to add fuel to video game adoption the major chunk of revenues are expected to slide from the mobile gaming market led by China. The emergence of several models including freemium, season pass, subscription and free to play coupled with high bandwidth data availability have enhanced penetration of the industry in nooks and corners across the world. Through this piece of work we seek to analyse the emergence of the likely entertainment disruption in form of interactive entertainment. The study entails a look at the business models across the two domains, understand their financial viability alongside also having a closer look at the operating challenges for the same. We will also have a closer look at shifting screen time preferences of consumers, the marketing and sales strategies of the incumbents. At the end we will explore the emerging consumer trends and forecast a likely future going ahead for the players in the space. As the threat looms and very much recognised by Netflix’s CEO Reed Hastings “the biggest threat going ahead for us will not be Disney or HBO but Fortnite.”