Despite the decades of history, despite the millions of copies sold, and despite the cultural influence that video games have already had on the world, the gaming industry is still in many ways in its infancy. It is an entirely new form of art and entertainment, and although it shares more than a few traits with its closest frenemies–the music and film industries–it is something entirely different and must be considered as such.
Both music and movies (and before movies, theater), have existed in some form or another for millennia. Even if you aren’t a fan, you understand the industries at their core. Video games are something different. They are built around an audience that has long been considered to exist on the fringe. For decades, the gaming industry was seen as something for children, or perhaps little more than something to pass the time. It wasn’t taken seriously, and to a degree it still isn’t.
The harsh truth is that until very recently most people looked down on the gaming industry. It wasn’t seen as a mainstream business, and those that played games were deemed immature. Games were something to grow out of, not delve into. But as the median age of the game player has trended upwards (the average age of the gamer is now in the 30s), the people that used to spend hours locked in their rooms playing games have slowly begun to become the people that set the trends, the people that have the power to actually create change.
Earlier this year, Activision’s Call of Duty: Modern Warfare 3 did something remarkable—it shattered two incredible entertainment records. The first was a launch day record that earned it over $400 million in the first 24 hours, making it the biggest entertainment launch of all time. The second was that it became the fastest-selling entertainment product to reach the $1 billion milestone. Obviously, games cost more to purchase than movie tickets or albums, but that can’t take away from what was obviously a successful launch.
Even if you are a gamer but hate the Call of Duty games—and many people do—if you are a fan of gaming in general, it is a good sign that game properties are breaking out of their niche role and becoming mainstream commodities. It legitimizes the industry as a whole, and more importantly, it creates new opportunities in its growth–such as the new business model being created by TwitchTV, and the possible businesses that will be spawned as a result of the TwitchTV platform.
The business of gravity
One of the best indications of growth for an industry isn’t just the revenue and profit margins, but the businesses that grow from that industry. The larger an industry, the more businesses it creates in its periphery. Like gravity, the more mass the object has, the more it pulls things towards it.
With movies and music, there are countless businesses that are based on each industry, but that don’t specifically create music or movies themselves. Magazines, TV and radio shows, concert venues, and hundreds of others are all dependent on their respective industries, and yet independent of them as well. That is only now becoming the case with gaming as well.
There are plenty of gaming magazines and websites, but with a few exceptions, the industry is still fairly self-contained. But that is changing, and entrepreneurs are finding ways to succeed in the wake of the gaming industry. Some are modeled off of other entertainment properties, but others–like TwitchTV-are fairly unique.
From reality show to a gaming destination
The idea for TwitchTV began back in 2007 when Justin Kan, Emmeat Shear, Michael Siebel, and Kyle Vogt got together and created Justin.tv. The original idea was for the group to follow Kan around and document his life 24 hours a day, seven days a week. The social experiment was dubbed lifecasting, and it debuted on March 19, 2007. It gained them a fair amount of attention, but failed to capture the audiences they were seeking.
“Justin.tv started off five years ago as me, my co-founder Emmeat Shear, Michael Siebel, and Kyle Vogt, the four of us trying to create our own live reality show,” Kan told us in a recent interview. “It launched to a lot of press, but it bombed in viewer satisfaction. We had a lot of people writing in and telling us that we were extremely boring and should get off the computer. So we launched the platform that was Justin.tv, and that grew to about 30 million uniques last year. And we noticed that one thing was really taking off, and that was gaming content.”
As Justin.tv changed from a failed reality TV show into a platform where anyone could post any streaming content, the service began to take on a life of its own. By summer of 2007, Justin.tv hosted over 60 channels. By August it was averaging two new channels a day. By April of 2008, over 30,000 broadcast accounts had been created. Since then, the site has grown both technologically and in terms of content, and channels now exist that cover everything from sports to news to science. But the most popular draw of the site was always gaming.
In the Fall of 2010 after it became apparent from the traffic that the gaming side of Justin.tv was the future of the company, Shear and a handful of engineers went off to discuss means of making the gaming side of things grow even further. The result was the founding of a new platform dedicated to gaming dubbed TwitchTV.
“In June of 2011 it was big enough that we decided it should be its own category,” Kan said, “so we launched TwitchTV as its own site, as its own property to let gamers know that we were dedicated to gaming, and that it would be obvious what that site was for.”
The results were impressive, to say the least.
The rise of e-sports
The growth of TwitchTV has been nothing short of exceptional. Since it debuted in June of 2011, the site has seen a 15-percent increase in content month over month, while the traffic has increased at a rate of 11-percent per month. Earlier this December, the site announced that it had reached 12 million uniques in November alone, and the trend continues upwards.
Inevitably, that number will level off but the growth has already given TwitchTV more than enough room to find ways to strengthen its foundations. The site itself is a host for video streams–it does not create the content you watch. The primary source of income for the site comes from its partner program that incorporates revenue sharing based on advertising. The site currently has over 1,000 partners.
The content on the channels varies, giving the site numerous possible genres to grow in. Gaming is the overall theme, but for some that comes as a series of video reviews, while for others it may simply be people sharing streams of games as they play. There are also numerous online shows where people discuss games, and many are professionally created by gaming journalists from well-known sites like Joystiq and Destructoid. Indie developers also often use the site to discuss and promote their properties, and many fans of games that feature user generated content like Minecraft, use TwitchTV to share their creations and strengthen their communities. But beyond it all, there is one clear genre that has the potential to truly explode: e-sports.
“We’re seeing an inflection point starting around mid-to-late last year, and really this year in 2011, where more and more tournaments are happening. Maybe 2-3 times in person, real world events around gaming are happening.” Kan told us. “The way I like to put it is that competitive gaming is really analogous to poker. Twenty years ago if I said that competitive poker would be a spectator sport, you’d probably say ‘I don’t believe you.’”
Over the years, competitive poker has gone from a private affair to a world-wide phenomenon thanks to three major factors: new technology via the camera view that allows viewers to see the players’ hold cards, commenters explaining the game in a way even casual fans can understand, and the push for the game from ESPN, who turned the World Series of Poker into a major television event.
“We’re really seeing the same thing with games happening right now,” Kan said of the comparison between competitive gaming and poker, “and that’s been pretty exciting.”
While still a minor category, e-sports are growing around the world. Tournaments for a new breed of professional gamers continue to pop up, with significant cash prizes, as well as global rankings. The trick is getting spectators to be invested enough to want to watch.
In Korea, the game of StarCraft is something of a national obsession, complete with a TV network dedicated to airing events, cash prizes and sponsorships for tournaments, and even match fixing scandals. Partly because of that the maker of the StarCraft series, Blizzard, included far more spectator options into the sequel. When paired with commentators that know the game well, the presentation can be compelling when people go head-to-head. Add in the idea that by definition, most gamers already have at least a passing familiarity with digital content, and TwitchTV’s positioning makes them the perfect partner to help the e-sports industry grow.
Currently, StarCraft II is the top viewed on TwitchTV, and there are several networks dedicated to presenting the game in a professional manner that would rival most sports presentations. Other competitive games like Modern Warfare 3 also have a solid following, as do fighting games, notably Street Fighter IV. The growth is exponential, and when one channel shows success, others use that model and follow suit.
The future of gaming
Competitive gaming is growing, but that growth has to be organic to a degree. There have been shows on TV that attempted to feature competitive gaming and e-sports, but they never took hold. The public simply wasn’t ready, and the presentation wasn’t enough to win people over.
But the current growth of competitive gaming is far more natural, and coming from the fans of the games as much as any group pushing it. In Seattle a movement known as “BarCraft” recently took hold. The idea was simple enough—on slow nights, have StarCraft players come in and play the game at the bar. The idea was such a hit that it became a weekly event. Now more than 100 bars around the world run their own weekly BarCraft nights.
The success of competitive gaming will be a result of the desires from fans, but it will also take a certain amount of professionalism if it is ever going to find more than niche success. The fans, however, are already there.
For competitive gaming to take hold, it will need to find a balance between a professional presentation and a hunger from the fans. The presentation is an evolving work in progress, but the fans have shown that they are there. TwitchTV is currently reporting some incredible numbers in terms of viewer retention, so from here it is simply a matter of building on what has proven to work.
“Our average subscriber length is pretty high,” Kan said. “It is something like 47 minutes per session. If someone comes to the site, they’ll watch something for around 47 minutes of content on average.”
The thing to remember is that this is all new territory for everyone involved. The e-sports model is similar to many others, most notably poker, but it is using new technology and new business models. Essentially, everything is in a way still just an experiment.
TwitchTV is looking at several possibilities to increase advertising, but there are chances to work with partners in other ways. One idea is to grant better quality streams to events for “ticket holders.” In the past, Justin.tv has hosted events that sold over 10,000 tickets. One possible model would see better streams to that event costing more—essentially it would be similar to a sporting event, where you pay more for better seats.
Partners on TwitchTV can also experiment with filling downtime, time that would otherwise be equivalent to dead air, with paid advertisements. This could open the door to give more possible content providers a realistic business model to begin producing more shows with higher production values, and bring in additional things to help gain fans—like more commenters.
The things that work will continue to grow, while those that don’t will hit the scrapheap. But whether or not the formula is perfect, the potential is there for gaming to nurture an entirely new industry within itself as long as there are people willing to try it out.
Final round
TwitchTV is already a success story. The numbers are incredible, the partners continue to line up, and the amount of new content being generated is staggering. Some of it is professionally crafted, while others are entirely fan made, giving a little something for everyone. The site is currently in the midst of expanding its staff as well, in order to prepare for the next phase of growth, whatever that may be.
“One of the things we done recently is make a lot of new hires in gaming,” Kan said. “As we’ve worked on Twitch and the focus of the company has shifted—with TwitchTV now being the primary thing we do at Justin.tv, we’ve hired more and more people in the gaming space.”
But while the site in general should continue to flourish regardless, the next breakout category could, and should be e-sports–the trick will be in how to properly monetize events in order to grow the fledgling e-sports industry without alienating the fans.
“I think we’re turning the corner and becoming something that looks much more like a traditional professional sport,” Kan stated, and he is not alone in thinking that.
The growth of e-sports isn’t just good news for TwitchTV or fans of e-sports in general, it is good news for the industry as a whole. Twitch.tv and Justin.tv before that have shown that gamers are a passionate and involved group, and the room for growth in the industry is incredible. All it takes is a new way of looking at things, and that is exactly what TwitchTV has to offer.
