How can game developers make more money in a recession? In a recession, revenues generally go down. That’s not been the case in 2020 … at least for games.
In fact, the $160B gaming industry with 2.7 billion gamers — an already massive industry — is seeing record-high revenues and massive growth. In this episode of TechFirst with John Koetsier, we chat with Julie Shumaker, VP from Unity, the development platform that powers 50% of all games across PC, console, and mobile.
What we chat about:
- New players to Unity jumped from 55M/week to 95M/week
- Mobile gaming is now half of all gaming revenues: $77 billion/year
- Games are up 59% in terms of ad revenue
- Console games are up too: People 46% more time in “HD” games (high definition)
- The “pandemic player” is converting to paid 25% more than usual gamers
- Weekends and weekdays flipped
- App installs jumped 84%
- And much more … including the TechFirst 10-in-5
Listen: record gaming revenues
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Full transcript: Unity VP Julie Shumaker and record game revenues
John Koetsier: How can game developers be making more money in a recession?
Welcome to TechFirst with John Koetsier. In a recession, revenues typically go down, right? That has not been the case in 2020, at least if you’re a game publisher. Games have been seeing record high revenues.
To understand why, and what’s hot right now, we’re going to chat with a VP from Unity. Unity is a development platform and more, that powers 50% of all games across PC, console, and mobile. Julie, welcome!
Julie Shumaker: Thank you for having me, John.
John Koetsier: It’s a real pleasure to have you on the show. Tell us a little bit about what happened with games over the last three to five months.
Julie Shumaker: Well, it’s been pretty extraordinary, and I loved your intro where normally at times like this, we see a downturn. In essence, before I go into the ‘what happened,’ I want to set the baseline that we’re talking about an unprecedented growth curve in an already massive industry. And so just for perspective, before we went into COVID, or I guess pre-COVID since John has referenced it to after-COVID, we already had, as an industry, 2.7 billion gamers, $160 billion industry of which mobile gaming is already experiencing $77 billion revenue. So you can imagine any of us entrepreneurs on there, it’s quite hard to radically grow a category that is that big already. So what happened after COVID? First thing was major growth in usage rates. We saw new players go from an average of 55 [million] new players a week on the Unity platform to 95 million new players the week that the World Health Organization announced the pandemic and that was the second week of March.
John Koetsier: Can I ask, just to interrupt you for half a second, can I ask for clarification on that. So what I’m trying to understand there is you saw 55 million new gamers a week, is that what you’re saying? In a typical week?
Julie Shumaker: That’s the average, the typical week for Unity would be 55 million new. And the week following the pandemic we went to 95 million new.
John Koetsier: Wow.
Julie Shumaker: And even now, as we’re all going back to a little more normalcy and we’re watching it flood through the globe, we’re still averaging 88 million new players.
John Koetsier: Interesting.
Julie Shumaker: So, new players to me is while we all talk about economic curves and efficiencies, to take a market of 2.7 billion players and introduce all these fresh new players, I think it’s extraordinary.
John Koetsier: It is definitely, no question about it. So, that’s kind of the baseline, massive market, 2.7 billion gamers, growing now even now after some sort of return to the new ‘abnormal,’ I call it. We’re seeing significant growth still. What’s happened though over the past three to five months in terms of revenue?
Julie Shumaker: Well, on the ad revenue side, we’re up about 59% in ad revenues. And that is converting in an interesting way for gaming developers, many of whom have a large amount of their economy and in the case of hyper casual, almost their entire economy, based on advertising revenues. So revenues are up, conversion rates, meaning the ad impression to driving an install for a new game are up significantly as well. As a matter of fact, 18% increase in conversion rates.
John Koetsier: Interesting, interesting. Can you talk a little bit about what kind of games grew the most?
Julie Shumaker: Well in total users, mobile grew the most. However, if we think about time spent, the high definition category, which you would normally think about is PC kind of really immersive storytelling, console-based gaming, those numbers I actually think are pretty staggering. So high definition, let me just make sure I get the right numbers here… we saw 46% increase in high definition gameplay. So what I like to think about is the household family play changed. And so while mobile gaming tends to be a more isolated one-person play, the household was like, hey, grab a second controller, let’s dive in.
John Koetsier: Yes.
Julie Shumaker: And I can say, I have an 11-year-old. I mean, she’s roped me into, I’ve been playing Overcooked and I’ve been playing Fortnite and games I’d never played with her until this moment.
John Koetsier: Julie, are you good at Fortnite?
Julie Shumaker: I’m terrible! And I get a lot of trash talk from my 11-year-old, but it’s quite fun.
John Koetsier: I would get so much trash talk. I would suck so horrifically, you know, I would say, where is my keyboard and mouse? I would do okay with that.
Julie Shumaker: Absolutely. I get yelled at in Overcooked too when I burn the soup.
John Koetsier: I have boys at home still, so I wouldn’t have that problem because they’re not into that game, so…
Julie Shumaker: Okay, good for you.
John Koetsier: Did any games shrink? Did any category shrink that you saw or were they all sort of positive?
Julie Shumaker: So I think what we’re going to see is some release challenges in the gaming sector that will ultimately push out revenues, but during this moment in time, we saw a 24% increase in in-app purchase revenue. So that means across all mobile games categories we saw increases in consumer pay. We’ve already talked about the fact we’ve had increases in advertising revenues. Now games that are highly reliant on brand advertising revenues did see some decline, we saw in general the brand ad market dramatically declined during the period. Unfortunately for many game companies that have a balance of both non-endemic and endemic advertising, they were able to grow the category.
John Koetsier: Mm-hmm. So there was something interesting in the report that you created, by the way, which is available at your website. People should go check that out. Weekends and weekdays kind of flipped. Can you explain that?
Julie Shumaker: Well, that’s a really interesting phenomenon as well, because what we generally see is a pretty dramatic, now it looks small in percentage, but we have a 1 to 1.5x shift on the weekends of increased gameplay. So one and a half times more than Monday through Friday. And that is a steady state that we see fairly consistent throughout the year, except of course during holiday weekends weeks, so Thanksgiving and various holidays across the globe. What we saw was the delta, the variance which is normally two thirds, was literally percentage points variance during COVID. And in one week we actually saw an inversion and I apologize to all you employers out there, we saw heavier game consumption during the weekdays than we saw on the weekends.
John Koetsier: Wow. Interesting, interesting. And so we saw that revenue was up pretty much across the board. Some challenges on brand advertising, costs were probably down as well though for games, correct?
Julie Shumaker: Yes. So the efficiency of the ad dollar was pretty impactful. So in essence, you could purchase for almost 30… in hyper casual category, the cost of an install in essence fell by almost 35% in many cases. For CPMs in total, they were down across the board by 3%. So what that translates to is for the same budget, you could acquire more players. And in essence, we saw many of our developers spending even more to grow that efficiency.
John Koetsier: Wow.
Julie Shumaker: So total budgets went up and efficiency per user acquisition climbed even at a higher rate. So 35% decline in a hyper casual cost of install, while we saw obviously a higher install rate for the success of the developer.
John Koetsier: Very very interesting, because I talked to 250 CMOs and other marketing leaders early on in the pandemic phase, and some of them were already seeing that and saying, ‘hey, there’s kind of a sale on customer acquisition or user acquisition in the mobile space right now, and it’s time to take advantage.’ And it sounds like people actually did. Super interesting to hear. Now, you also saw that people were installing more games than ever before, like they were installing way more mobile games specifically, more frequently and more often. What did you see about that and what was different about these so-called pandemic gamers?
Julie Shumaker: Well, I think on the install rate, I mean again, we’re talking about extraordinary increment on an already large market. So the mobile, the app download industry 84% increase in install rates. So we increased 2 billion to 13 billion in Q1 on Android, on Google and Apple. So to move a market again from 11 billion to 13 billion is pretty increasing. And when we talk about the pandemic player, and I love that you caught onto that one, the ‘pandemic player,’ they’re actually converting to pay 25% higher access. So that is quite new. You know, I’ve been around the block for a long time. I started my career in television and I often think about hyper casual as a construct of television, right? What did television do so well? They learned how to manage ad balance, they learned how to manage new viewers who came in from water cooler talk, which is very much like hyper casual, right? Quick to pick up, slow to put down… but was that hype, was that casual TV viewer going to be the reason you converted to an upgraded plan with your cable? It wasn’t, right? It was the immersed sports viewer that upgraded the cable plan, these type of things I mean, if we were going to learn from the construct of television. And what we saw with this 24% increase in conversion to pay is unusual for a new player.
John Koetsier: Interesting, very interesting. I suppose there were some who had to finally get HBO because they kept hearing about Game of Thrones around the office cooler…
Julie Shumaker: Totally.
John Koetsier: … incessantly. Did you see the latest episode?
Julie Shumaker: Exactly, it’s those water cooler moments. I genuinely believe that obviously there will be a lot of horrible memories of COVID-19, but it is a social water cooler moment. And generally in media we see these things at like every four years with the Olympics, we see kind of these big media moments. And so we’ve all had our, you know, pandemic players are experiencing their gaming moment.
John Koetsier: Yes, yes. So pretty interesting, because of course there was a flow and a movement to COVID-19 and Coronavirus, right? From where it started in China and a shutdown there, and then when it traveled to South Korea, and then it came maybe more to Italy and some other countries like that, and then it became more of a big deal in the US, and lately it’s even more of a big deal in Brazil. Can you basically track the spread of COVID-19 across the world in game downloads and sessions?
Julie Shumaker: Absolutely. I mean, we see to the minute what players are doing, what format they’re playing, you know, you can imagine the commuter is playing a lot of quick-to-pick-up, slow-to-put-down hyper casual, and that’s why if you look at the hyper casual timeframe an average of two minutes, you know, a little over two minutes a session. It’s very much a ‘I’m on the move’ player. Now, obviously hyper casual has seen growth with COVID, but it’s the non kind of quick cycle games that have seen even bigger growth. So when we watch someone, I mean we don’t watch it at the human level. When we see millions and millions of people’s session links increase, the time of day they’re playing, the day they’re playing shift, we clearly see something’s happening.
John Koetsier: Interesting, interesting. So there’s long been a saying in the gaming industry and it stretches back to historical recessions, perhaps as long ago as the nineties, maybe even the eighties when consoles were more of the big thing, PC games as well, which are still a big obviously, but it used to be said that “Gaming is recession-proof.” Your thoughts on that?
Julie Shumaker: Gaming is, I mean I’m going to say there is a part of a modern human, particularly in the Western world, of the escapism is really important, right? So why do we see regardless of income, household income, huge usage of high definition televisions? Why do we see cable programs? Why do we see in-app purchase and video game purchase? Streaming movies? So the importance of that in the psyche of the human condition has become very real. Gaming is now the wave that maybe radio was a hundred years ago, television became 50 years ago, gaming is now, and that does translate to a recession-proof industry.
John Koetsier: Interesting.
Julie Shumaker: Where I do want to point out the challenges of the remote workplace, is likely our greater challenge than the consumer behavior. So for instance, you can imagine the collaboration and amount of work product that a game studio is putting into their latest release. So I do think we will see again, it’s not a reduction in revenues, we’re going to see some shifting of revenues this year because we don’t quite know how teams will respond to getting those games out in the same timeframe they used to.
John Koetsier: Yeah, yeah. Understandable, understandable. And I guess the one question on my mind is ad revenue. If the economy as a whole goes down, and ad revenue has become such a big part of gaming, especially on the mobile side, if we see a decrease in that, that could have challenges. But as you mentioned, that’s offset by a lower cost of user acquisition, customer acquisition. And so perhaps that’s going to be a wash.
Julie Shumaker: John, I actually think it is the revenue opportunity for our category. So let’s take a moment and think about brands spending decades sitting on the sidelines of games, and they’re spending $30, $40, $80 CPMs to have a 30-second TV spot that cost them, by the way, $10 million to produce. Okay, so the tools that make video games are ubiquitous. Look at a platform like Unity. You said it, you know, over half the world’s games on mobile are made with Unity. They’re spending $30, $40, $80 CPMs [cost per thousand views] to have a 30-second TV spot that cost them, by the way, $10 million to produce. What if these brands get incredibly agile in developing immersive content for very low dollars — I’m talking a couple thousand dollar production quality — and take advantage of what is now becoming one of the most important mediums in the world? And so I think our category has, even as brands have challenges in their own budgets because of consumer pay, we are such an interesting space for efficiency of their dollar. We have an action-oriented player. Think about, we talked about those conversion rates, right? If 18% conversion rate and if I spent 20 cents for this player to come and take an action on my, in essence, my game as a brand, what if that’s a bottle of Tide, and Tide can spend 20 cents to get a customer they’re going to have for the next 15 years? I think we’re gonna, I believe that even a continued downturn in the economy is going to only increase revenues that are for the smarter marketers who are getting more flexible in their thinking to join our category.
John Koetsier: Well, that’s actually a really interesting way of putting it. It’s kind of like mobile commerce, which is growing even though all commerce in total has been down. Super interesting. So I’ve got to do it. It’s the TechFirst [10-in-5]… 10 questions, 5 minutes. Favorite piece of tech in your house?
Julie Shumaker: My Google Home.
John Koetsier: Your Google Home. Excellent. Can’t do without it tech that you wear?
Julie Shumaker: None.
John Koetsier: None. Hey, that is technology. That is technology.
Julie Shumaker: I’m wearing a beautiful Omega Seamaster.
John Koetsier: Excellent. Android or iOS?
Julie Shumaker: Android.
John Koetsier: EV or gas?
Julie Shumaker: Gas.
John Koetsier: Okay. Might change at some point?
Julie Shumaker: I don’t think so.
John Koetsier: Okay.
Julie Shumaker: I’m German, Shumaker. No, I will have a lot of haters from that. I think Porsche’s work in electric is very interesting.
John Koetsier: It is, no doubt about it. Mac or Windows?
Julie Shumaker: Mac.
John Koetsier: Okay, GIF or JIF?
Julie Shumaker: GIF.
John Koetsier: Oh, you said the right thing. Awesome. Favorite tech news source?
Julie Shumaker: TechCrunch.
John Koetsier: And do you want a self-driving car or do you want to drive yourself forever?
Julie Shumaker: Self-driving.
John Koetsier: Oh, wow. You might wait a long time for Porsche to come out with that.
Julie Shumaker: I know. I want to drink my cocktail while I…
John Koetsier: Haha, okay, I get it. Yeah. Elon Musk offers you a trip to Mars, you in or you out?
Julie Shumaker: I’m in.
John Koetsier: Awesome, excellent. And you already answered this one. It’s Alexa, or Hey Google, or Hey Siri, but you said Google Home. So it’s only one of the three.
Julie Shumaker: Yes, absolutely, all Google.
John Koetsier: Excellent. Well, thank you so much for your time. Really appreciate it, Julie.
Julie Shumaker: Thank you, John. Bye now.
John Koetsier: Thank you so much for joining us on TechFirst. My name is John Koetsier, I appreciate you being along for the ride. Whatever platform you’re on, please like, subscribe, share, comment, all the above. If you’re on the podcast later on, hey, like it, rate it, review it, that would be a massive help. Thanks! Until next time, this is John Koetsier with TechFirst.