The Rise of the Gaming Industry

League of Legends Worlds 2015. Source: Riot Games via lolesports.

Written by Victoria Chen, Class of 2019

Staples Center, Barclays Center, Madison Square Garden—while most would think this would just be a list of the homes of the Los Angeles Lakers, the Brooklyn Nets or The New York Rangers, these venues have hosted some of the biggest and most recent tournaments in eSports. As of last year, eSports’ largest game, League of Legends, had a live-stream viewer count of 32 million people. This number eclipses the ever-popular and often-discussed Super Bowl, which registered only 3 million viewers for its livestream. Once a dream, displaying eSports’ finest moments on the same stages as multi-billion dollar sports teams is now a reality. Even with viewership numbers in the millions and prize pools of similar magnitude, eSports makes up only a small subsegment of the gaming industry, despite its flashiness and visibility. The video gaming industry has grown significantly in recent years, gaining more ground as it captures a larger share of the entertainment industry each year.

Beginning as early as the 1940s, the video game industry has been around for a long time. Starting with computer and arcade games before adding in console, the gaming industry grew alongside advances in technology, allowing for better consoles and more games to be developed. In the ‘70s and ‘80s, the main focus shifted to console games, and an increasing number of games were developed for the console. This overemphasis on quantity over quality was what likely led to the North American video game crash of 1983. Consumers suddenly began rejecting new console games, for quality had declined so drastically such that new games were no longer enjoyable. This setback did not last long, however, since Nintendo quickly picked up the pieces and assured consumers of its ability to produce quality.

The video game crash shifted companies’ focus to be on more quality and complexity. Technological advances allowed for more complex games to be developed at lower costs, enabling the rise of free online games. Before, many video games had excessive turnover due to a very steep learning curve, making them unattractive to potential players, or due to a pay-to-win game structure. According to Charles Onyett from Imagine Games Network, the pay-to-win structure seemed to work well in certain countries such as China, but certainly not in the US. So, by offering quality games for free, this model became a highly attractive one that many game designers have adopted in recent years.

These games tend to appeal to a younger audience, many of whom seek the thrill of competition and glory. This transition was facilitated by changes in the game revenue model: premium in-game content no longer helped you win, for it was purely aesthetic. Winning became dependent on skill and chance alone, and these games soon captured the attention of adolescents and adults around the world.

Riot’s League of Legends is the prime example of a free-to-play game catering to those seeking to test their skill. Undoubtedly the most popular game of this past decade, and still continuing to grow, this multiplayer online battle arena (MOBA) pits one team against another, and the two teams compete to get to the opposite side of the map. League of Legends brought to consumers a way to satisfy competitive spirit and laid-back casual gaming in one fell swoop: this stems from the game’s one simple objective, which is to destroy the enemies’ base. Depending on the player’s choice of game mode, League can be as competitive or casual as the player wants. In its early years, League began with only 40 different characters to play and a professional scene limited to only North America and Europe; nowadays, League of Legends has 133 characters and a professional scene with competitive prize pools of $2 million. With 100 million monthly users worldwide and acquired by Tencent 2015, League of Legends has grown to be the industry’s largest game.

In PwC’s recent forecast of the entertainment industry, gaming is expected to grow slower than internet access and advertising, but faster than cinema, TV, music, and books. With a growth rate of an estimated 3.6% a year, PwC projects the gaming industry to reach $20.3 billion, far surpassing many of its entertainment rivals.

With this rising momentum, perhaps we should look at what Stern has to offer in this respect. Stern has just one class on the gaming industry: Business of Video Games. I interviewed Adjunct Assistant Professor Joost van Dreunen, who teaches this class. He commented on how Stern was already “ahead of the curve,” and that it was Stern that had invited him to come teach. However, it seemed that we both hoped for more support for students who were aspiring to work in the industry. As Professor van Dreunen explains, the gaming industry consists of the “suits” and the “creatives.” Especially as the industry grows, it becomes “increasingly important for the suits to understand the creatives.” Therefore, there is hope for the gaming industry to be taken more seriously, and studied with the respect that other entertainment industries have garnered.

With the gaming industry’s incredible growth and potential, why hasn’t more been done? First and foremost, there is the seeming paradox of “studying games.” Games involve play, and there is a continuing stigma around the idea that play is for children, when in reality, adults also need play, as it is a vital part of social interactions. Moreover, gaming is very different from other entertainment industries as for what is displayed. Drawing upon the example of film, and how there are actresses who walk down red carpets, Professor van Dreunen noted the dichotomy between film and games. When a game is created, the “end product is the one that is heavily displayed, and not the people who contributed to it.” Gaming draws up a new, unfamiliar model that is different from many others in entertainment industry, and perhaps, this unfamiliarity makes people more resistant towards it.

Nonetheless, there is a thriving community of students interested in the gaming industry. As an example, Professor van Dreunen’s class has grown rapidly over the years, starting from a summer class with just a handful of students to now a regular semester class offered under the Marketing department that usually has a waitlist as well. More and more Stern students are demonstrating interest in this up-and-coming industry, and there is increasing potential for the school to aid students in exploring more unconventional career paths, such as being a “suit” in the gaming industry.

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PwC Entertainment and Media Forecast. Source: PwC.

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