The holidays are approaching, and that means a big retail boost for video games during that all-important shopping season. Indeed, video games are helping to drive innovation when it comes to commerce and payments.
Video games have changed a lot since the early days of home gaming in the late 1970s and early ’80s. But for the last three decades or so, the business model did not change very much. The customer bought a game and paid a lot of money for it, not to mention the cost of buying the expensive hardware required to play it. Video game manufacturers operated a different model of sorts: Create great games to get consumers to buy the hardware, then keep cranking out great games that would keep consumers on board and upgrading those devices.
It’s a model that’s being disrupted by new platforms with disruptive business models, Recurly Co-Founder and CEO Dan Burkhart recently told PYMNTS. Making money in gaming is no longer about selling the games for a high upfront cost, or even buying expensive gear on which to play them. Today, it’s about subscriptions and access to titles and content, he said, a baseline that provides lots of opportunities to grow revenue by monetizing in-game purchases and selling expansion packs or specialized equipment, accessories and even branded clothing. “Gaming is figuring out the upsell,” Burkhart said, “and utterly changing the entire market.”
As PYMNTS research has found, there are more than 2.5 billion gamers worldwide, and consumers are demanding more content, options and perks in their online subscriptions. This group is set to spend $152.1 billion on games by the end of 2019, putting pressure on gaming subscription services to offer competitive pricing, features and, above all, content. Subscribers want access to new technologies or support for mobile games, but gaming subscription services also need to cater to preferences that have historically been slow to change, even in today’s digital world.
Mobile gaming is one of the fastest-growing industry segments, but many gamers still utilize consoles. Digital gaming is popular with players worldwide; most feel a sense of ownership regarding the online games they stream, making it difficult for providers to be fast or flexible enough to remain competitive.
Gaming companies will need to approach subscription services in a way that engages customers who want the same personalized experiences they receive when picking out games in a store, particularly as online gaming continues to expand.
This is only part of the innovation trend stemming from video games.
Tilly’s, a Southern California-based apparel and accessories retailer with a particular focus on teenage customers, aims to tap into the trend via a partnership with the High School Esports League (HSEL), which connects more than 1,500 virtual high school sports clubs across North America.
The move is one of several Tilly’s has been pursuing recently to draw additional foot traffic in an era when, like many youth-focused retailers, it is seeing its sales constantly shifting online.
Augmented reality (AR) gaming has been a particular area of focus for Tilly’s, which has been partnered with AR developer Zappar since 2017 on a mobile-based, AR-centric campaign centered on increasing app downloads and driving store traffic. In 2017, for example, the two collaborated on an in-store scavenger hunt with YouTube influencer Shonduras that allowed shoppers to use the retailer’s app to collect virtual coins and redeem them for prizes and discounts.
In-store sales, notably, is where the retailer needs to see growth. Consumers are buying Tilly’s products online, as digital growth was up 22 percent in 2018. But in-store sales didn’t fare as well – there was growth, but at 1.4 percent, it wasn’t as much as the retailer wanted to see.
We can expect more moves involving video games in the coming months.