Welcome to the 2020s from Wilson Sonsini's Electronic Gaming Group1
In This Issue
- The Mass Effect: Bigger Games and the Need for More Powerful Hardware
- Stay Aware of Your Surroundings: Games Begin to Incorporate Virtual and Augmented Reality
- A Breath of the Wild: Gaming Goes Mobile
- Press X to Pillage Treasure Chest: Do Loot Boxes Mimic Gambling?
- Portal 2 Another Platform: Is Cross-Platform Play the Future of Console Gaming?
- Toss a Coin to Hollywood: Warcraft, Witcher, and Pokémon Bring Life to Videogame Cinema
- Players Unknown: Live-Streaming Becomes a Lucrative Industry
- The Elder Scrolls: Established Properties Dominate Sales, but Indie Games Find Their Notch
- Welcome to Summoner's Rift: The Rise of eSports
The 2010s were filled with substantial innovations, unexpected trends, and ongoing enthusiasm for electronic gaming. Wilson Sonsini's Electronic Gaming Group would like to take a moment to reflect on some major themes of the 2010s and relay some of our expectations going into the new decade for the electronic gaming industry. Here is our rundown of some of the biggest trends in electronic gaming as we step further into the 2020s.
The Mass Effect: Bigger Games and the Need for More Powerful Hardware
While the electronic gaming industry is projected to be a $300 billion industry by 20252, the size of the industry itself is not the only aspect of gaming that has grown in size in the 2010s. File sizes of games have grown substantially, along with the amount of free space gamers need on their devices to download and play new games. In the first half of the 2010s, games including Titanfall and Grand Theft Auto V made headlines with their respective 48GB and 65GB file sizes3, but the capacity requirements for those games pale in comparison to the requirements for titles released in the second half of the 2010s, including Final Fantasy XV in 4K at 155GB, Destiny 2: Shadowkeep at 165GB, and Call of Duty: Modern Warfare at 175GB.4
File sizes over 50GB are now par-for-the-course in the AAA-gaming scene. Hardware manufacturers have had to keep up with these increasing file sizes, and alternative business models have emerged to address hardware limitations, such as Google's game-streaming service Stadia. It is unlikely game file sizes will decrease any time soon, so we expect to see continued pressure on hardware manufacturers to keep up pace and the development of new technological approaches aimed at managing these storage challenges in the 2020s. As companies retain more user content and as gamers pivot more and more to online gaming, companies in the electronic gaming industry will also need to keep up with a changing regulatory landscape from data privacy to the enforceability of online terms and conditions.
Stay Aware of Your Surroundings: Games Begin to Incorporate Virtual and Augmented Reality
When Nintendo launched the Nintendo 3DS in 2011, the handheld console came equipped with six "AR Cards," which provided limited augmented-reality (AR) functionality. In 2016, the virtual-reality (VR) headset Oculus Rift was released, and Niantic released Pokémon Go, which generated $2.65 billion in revenue in only three years.5 By 2019, Valve announced that its upcoming Half-Life: Alyx game will be a fully VR experience.6
From limited AR functionality to fully immersive VR experiences, both gamers and developers seem keen on these emerging technologies being used in games. We anticipate that developers will create more games with AR and VR elements and that more licensing arrangements for these technologies will emerge in the 2020s. With the gap between online and physical worlds shrinking, providers of AR and VR content must now be mindful of concepts usually reserved for the physical world, like property ownership, personal injury, and products liability, and consider if and how those concepts apply to their AR and VR content and hardware.
A Breath of the Wild: Gaming Goes Mobile
More than half of the $120 billion in revenue that the electronic gaming industry generated in 2019 came from mobile games.7 Popular mobile games like Clash of Clans, Candy Crush Saga, and Pokémon Go have each earned over $1 billion in revenue.8 As mobile gaming dominated the 2010s, traditional console manufacturers and game developers attempted to tap into the market for gaming on the go. In 2017, Nintendo launched the Nintendo Switch, which functions as both a home and a handheld console,9 and a free-to-play mobile version of the popular Call of Duty franchise was released in 2019, which generated over $87 million in its first two months.10
The popularity of mobile gaming is unlikely to wane in the 2020s. As a result, we expect game developers and publishers will continue to look for innovative ways to tap into the gaming-on-the-go market in the 2020s, whether through streaming services, enabling cross-platform play functionality or incorporating AR/VR technology. As gaming goes mobile, developers, publishers, and other content creators will have to address numerous issues that historically rarely applied to gaming, including compliance with gaming platform rules and anti-money laundering, payment, and autorenewal requirements.
Press X to Pillage Treasure Chest: Do Loot Boxes Mimic Gambling?
While loot boxes were almost unheard of in 2010, it is estimated that gamers spent over $25 billion on loot boxes in 2019.11 With that much money on the table, it is no surprise that everyone—from gamers to politicians—has an opinion on the subject. When Star Wars: Battlefront II launched in 2017, gamers decried what they saw as pay-to-win game mechanics, and the backlash eventually led to EA Games removing paid loot boxes from the game entirely.12 Governments around the world have expressed concern over loot boxes and have explored how to regulate them.13 This collective pushback has led to some self-regulating by companies like Nintendo, Sony, and Microsoft, who now all require game publishers to disclose a user's chances of receiving specific items in loot boxes.14
While we expect to see more transparent loot boxes in the 2020s, we also do not expect to see loot boxes go away. Regardless of how loot boxes evolve in the 2020s, we believe game developers and publishers will continue to look for creative ways to monetize games. No matter the monetization strategy, game developers and publishers alike should understand and appreciate the economics of in-game offerings and the status of those offerings under advertising, consumer protection, securities, anti-money laundering, and other laws.
Portal 2 Another Platform: Is Cross-Platform Play the Future of Console Gaming?
In 2019, Sony and Microsoft announced their entry into a cloud-gaming partnership that experimented with cross-platform play on titles like PlayerUnknown's Battlegrounds and Call of Duty: Modern Warfare.15 With the PlayStation 5 and Xbox Series X set to launch in 2020, speculators anticipate the two consoles will rely on similar back-end server hardware to make it easier to develop games for both consoles at the same time, opening up the door for even more cross-platform play in the future. Nintendo has also explored its cross-platform play options, partnering with Microsoft to enable cross-platform play on games such as Fortnite and Rocket League.
Cross-platform play may be a response by console manufacturers to the perceived threat of Google's Stadia or whispers of Amazon's entry into the cloud-gaming market. Whatever the cause, we expect more gamers will be able to play games with friends on other devices because of increased cross-platform play in the 2020s, but the list of games that can take advantage of cross-platform play may be more limited than gamers would like. Game developers should take cross-platform play into account when considering entering into "exclusive" distribution deals or when assessing the pros and cons of limiting the type or number of platforms their games can be released on in negotiations with publishers.
Toss a Coin to Hollywood: Warcraft, Witcher, and Pokémon Bring Life to Videogame Cinema
Despite years of thinking it could not be done, recent releases of movies and TV shows based on video games have seen unprecedented success in the 2010s. Warcraft released in 2016 and became the highest-grossing videogame movie with $439 million in revenue worldwide. In 2018 and 2019, Rampage and Pokémon: Detective Pikachu both surpassed $100 million domestically and grossed over $400 million globally.16 Finally, Netflix's The Witcher became one of the most watched series on the platform, with Netflix reporting 76 million viewers.17
Hollywood seems to have learned how to transform video game content to movies and TV in a way that resonates with the general public, and we expect to see more of the same in the 2020s. Creators of valuable intellectual property that can be monetized through various media need to be mindful when entering into licensing transactions to not agree to terms that could frustrate future economic opportunities.
Players Unknown: Live-Streaming Becomes a Lucrative Industry
People no longer just pay to play games; they also pay to watch other people play games. The explosive growth of live-streaming platforms and channels was a defining characteristic of the 2010s. Twitch launched in 2011 and, by 2014, was the fourth highest source of peak internet traffic.18 Streaming has become a full-time job for some, with the most popular streamers earning significant sums.19 In the 2010s, other live-streaming platforms launched, added game live-streaming functions to their existing platforms, and/or began to directly compete with Twitch. For example, Microsoft's Mixer paid Tyler "Ninja" Blevins to stream on its platform exclusively instead of on Twitch.
Maintaining the attention of viewers, whether by signing popular streamers or adding unique functionality to a platform, has become a new challenge of the 2020s. We expect more platforms will compete for the attention of viewers in the 2020s and will meet that challenge in alternative ways. Game developers should ensure they obtain sufficient rights for in-licensed content so that third-party content in their games can be not only presented to the gamer but also broadcasted on live-streaming platforms.
The Elder Scrolls: Established Properties Dominate Sales, but Indie Games Find Their Notch
Many of the highest-grossing games of the 2010s are additions to familiar franchises, like Grand Theft Auto, Call of Duty, Battlefield, Mario, Zelda, and Star Wars, or are reboots of classics, like Doom, Resident Evil, and Mortal Kombat.20 These established properties dominated sales, but gamers also gained a treasure trove of indie games in the 2010s, including Minecraft, Super Meat Boy, Untitled Goose Game, Stardew Valley, Undertale, and Cuphead, just to name a few.
We anticipate there will continue to be new games tied to established properties in the 2020s, as well as new games from indie developers that will become classics. If the 2010s proved anything, it is that there is room for both established and new properties in game development, and we expect to see that remain true in the 2020s. Creators of new properties should prioritize protecting their intellectual property rights, as any new property could become a familiar franchise or ready for a reboot at some point in the future.
Welcome to Summoner's Rift: The Rise of eSports
In 2019, over 100 million people watched the League of Legends World Championship Finals in Paris.21 That same year, a teenager from Pennsylvania won $3 million in the Fortnite World Cup.22 The early 2010s saw the release of a number of games that went on to be eSports staples: Starcraft II, DotA 2, Counterstrike: Global Offensive, and League of Legends (released October 2009). Live-streaming platforms, like Twitch and YouTube, have made tournaments for these games accessible to the casual viewer and have been competing for broadcasting rights, with YouTube winning exclusive broadcasting rights to OverWatch, Call of Duty, and Hearthstone from Activision Blizzard.
The 2010s proved that sold-out stadiums are no longer reserved for traditional sports contests. While the eSports industry is still young, and, in the 2010s, most eSports franchises and tournaments ran on tight margins and remained heavily reliant on venture capital funding, we expect the eSports industry to continue to grow, mature, and evolve in the 2020s and for eSports franchises and tournaments to find profits. To get there, the eSports industry will have to deal with a range of issues covering multiple legal areas, including, among others, intellectual property monetization, sweepstakes and contest rules, virtual currencies and gambling laws, and possibly labor and players' association rules.
Wilson Sonsini's Electronic Gaming Group has been advising participants in the gaming industry throughout the 2010s and will continue to do so in the 2020s as well. We look forward to continuing to work with game developers, publishers, and other participants in the electronic gaming industry as these trends from the 2010s continue to evolve, and as they encounter new technologies and issues in the 2020s.
- This issue was prepared by Chris Paniewski, Scott McKinney, Julie Krosnicki and Matt Blair.
- Liz Lanier, Video Games Could Be a $300 Billion Industry by 2025 (Report), VARIETY (May 1, 2019), https://variety.com/2019/gaming/news/video-games-300-billion-industry-2025-report-1203202672/.
- Wesley Yin-Poole, Why the PC version of Titanfall is a 48GB install, EUROGAMER (Mar. 11, 2014), https://www.eurogamer.net/articles/2014-03-11-why-the-pc-version-of-titanfall-is-a-48gb-install; Phil Savage, GTA 5 PC system requirements: everything you need to know, PC GAMER (Mar. 5, 2018), https://www.pcgamer.com/gta-5-system-requirements-announced/. To put some of this growth in perspective, the original Call of Duty 4: Modern Warfare, which released in 2007, only took up 8GB of space.
- Rishi Alwani, Final Fantasy XV Windows Edition Unlock Time, System Requirements, Download Size, and Everything Else You Need to Know, GADGETS 360 (Mar. 5, 2018), https://gadgets.ndtv.com/games/features/final-fantasy-xv-windows-edition-unlock-time-download-size-system-requirements-1819817; Zuhaad Ali, Destiny 2: Shadowkeep Requires a Total of 165 GB Storage Space, VGR (Aug. 10, 2019), https://www.vgr.com/destiny-2-shadowkeep-requires-165-gb-storage-space; and Tom Marks, Every Call of Duty Install Size Compared, From 2003 to Modern Warfare, IGN (Jan. 13, 2020), https://www.ign.com/articles/2019/10/25/every-call-of-duty-install-size-compared-from-2003-to-modern-warfare.
- Mike Minotti, Sensor Tower: Pokémon Go made $2.65 billion in three years, VENTURE BEAT (July 9, 2019), https://venturebeat.com/2019/07/09/sensor-tower-pokemon-go-made-2-65-billion-in-three-years.
- Julie Muncy, Half-Life Is Coming Back—in Virtual Reality, WIRED (Nov. 22, 2019), https://www.wired.com/story/half-life-alyx.
- Dean Takahashi, SuperData: Games hit $120.1 billion in 2019, with Fortnite topping $1.8 billion, VENTURE BEAT (Jan. 2, 2020), https://venturebeat.com/2020/01/02/superdata-games-hit-120-1-billion-in-2019-with-fortnite-topping-1-8-billion; Mike Minotti, Sensor Tower: Mobile players spent $61.7 billion on games in 2019, Venture Beat (Jan. 13, 2020), https://venturebeat.com/2020/01/13/sensor-tower-mobile-players-spent-61-7-billion-on-games-in-2019.
- Updated: 22 mobile games that have generated more than $1 billion in lifetime sales, POCKET GAMER (Dec. 19, 2019), https://www.pocketgamer.biz/feature/66339/updated-22-mobile-games-that-have-generated-more-than-1-billion-in-lifetime-sales/list.
- Michelle Yan & Kevin Webb, Nintendo Switch is the fastest-selling console of the current generation — here's why Nintendo is dominating video games, BUSINESS INSIDER (Dec. 2, 2019), https://www.businessinsider.com/nintendo-winning-video-games-fastest-selling-console-2019-3.
- Dean Takahashi, Tencent's TiMi J3 studio cracked the code on adapting Call of Duty for mobile, VENTURE BEAT (Jan. 16, 2020), https://venturebeat.com/2020/01/16/how-tencents-timi-j3-studio-created-a-hit-with-call-of-duty-mobile.
- Mattha Busby, Loot boxes increasingly common in video games despite addiction concerns, GUARDIAN (Nov. 22, 2019), https://www.theguardian.com/games/2019/nov/22/loot-boxes-increasingly-common-in-video-games-despite-addiction-concerns.
- Ben Gilbert, The latest major 'Star Wars' game finally dropped its most controversial aspect — but it may be too late, BUSINESS INSIDER (Mar. 16, 2018), https://www.businessinsider.com/star-wars-battlefront-2-drops-loot-boxes-2018-3.
- In September 2019, a committee of the U.K. House of Commons issued a statement calling for loot boxes to be regulated as gambling, citing various reports by cognitive psychologists. Alex Hern & Rob Davies, Video game loot boxes should be classed as gambling, says Commons, GUARDIAN (Sep. 12, 2019), https://www.theguardian.com/games/2019/sep/12/video-game-loot-boxes-should-be-classed-as-gambling-says-commons.
- Nick Brown & Steve Blickensderfer, Insight: U.K.'s Loot Box Report Tangles a Web of Global Gaming Regulations, BLOOMBERG LAW (Oct. 3, 2019), https://news.bloomberglaw.com/us-law-week/insight-u-k-s-loot-box-report-tangles-a-web-of-global-gaming-regulations.
- Tom Warren, Microsoft and Sony are teaming up for the future of gaming, VERGE (May 20, 2019), https://www.theverge.com/2019/5/20/18632374/microsoft-sony-cloud-gaming-partnership-amazon-google; Patrick Klepek, It Seems True Cross-Play Is Finally Coming to PlayStation 4, VICE (Oct. 2, 2019), https://www.vice.com/en_us/article/mbmp4v/it-seems-true-cross-play-is-finally-coming-to-playstation-4.
- All figures from IMDB.com.
- Rick Porter, 'The Witcher' Breaks Netflix Series Viewership Records — With One Big Catch, HOLLYWOOD REPORTER (Jan. 21, 2020), https://www.hollywoodreporter.com/live-feed/netflix-4th-quarter-2019-viewing-data-1271741.
- James Cook, Twitch Founder: We Turned A 'Terrible Idea' Into A Billion-Dollar Company, BUSINESS INSIDER (Oct. 20, 2014), https://www.businessinsider.com/the-story-of-video-game-streaming-site-twitch-2014-10.
- Kevin Webb, This 28-year-old makes $500,000 every month playing 'Fortnite' — here's how he does it, BUSINESS INSIDER (Aug. 13, 2019), https://www.businessinsider.com/ninja-tyler-blevins-twitch-subscribers-fortnite-drake-youtube-2018-3.
- Jeff Grubb, NPD: The top 20 best-selling games of the decade in the U.S., VENTURE BEAT (Jan. 16, 2020), https://venturebeat.com/2020/01/16/the-top-20-best-selling-games-of-the-decade-in-the-u-s.
- Will Partin, The 2010s were a banner decade for big money and tech — and esports reaped the rewards, WAPO, (Jan. 28, 2020), https://www.washingtonpost.com/video-games/esports/2020/01/28/2010s-were-banner-decade-big-money-tech-esports-reaped-rewards.
- Derrick Bryson Taylor & Niraj Chokshi, This Fortnite World Cup Winner Is 16 and $3 Million Richer, N.Y. TIMES (July 29, 2019), https://www.nytimes.com/2019/07/29/us/fortnite-world-cup-winner-bugha.html.