2 weeks Ago
Sam Glassenberg is Founder and CEO of Level Ex , which makes video games to accelerate the adoption of new skills and treatments in medicine. In 2022, the video games industry surpassed $200B in revenue, following decades of double-digit, YOY revenue growth. We surpassed the music industry in 2002 and surpassed film a decade later .
This growth has been achieved by consistently expanding the market—bringing games to wider audiences and finding better ways to engage and monetize players. Fifteen years ago, social networks brought games to a billion new players. Then smartphones brought another billion.
Digital distribution, downloadable content (DLC), in-app purchases, in-game ads—increased per-user spend as the market grew. This drumbeat of new expansion opportunities gave the industry a naive sense that they would keep coming. The drumbeat was so loud that it pulled investment into “the next big thing” with the force of gravity.
“I mean the next phase of growth has to come from somewhere , doesn’t it? ...
it must be ...
NFTs!” NFTs. Blockchain. Headsets.
The metaverse. One massive money sink after another. Today’s NYT Mini Crossword Answers For Friday, November 8 Federal Judge Strikes Down Biden Program Offering Legal Status To Undocumented Spouses Of U.
S. Citizens Can Trump Fire Jerome Powell? Fed Chairman Says He Won’t Resign If Trump Asks The drumbeat was so loud that it drowned out the dissenters. It drowned out those who asked “Wait—where’s the enduring value here? Why would I want to strap a brick to my head and buy virtual Nike shoes and overpriced artificial real estate for a legless avatar in Mark’s Zuckerverse?” In the end—the next growth spurt didn’t come from any of these false starts.
It was delivered by a pandemic . Covid had forced people into their basements: And games would readily connect the world from a safe distance. This was an anomaly, not a new blueprint for growth.
Now the drum has skipped more than one beat and the industry reels from a wave of seemingly unending layoffs. Is this the “new normal” for the games industry? Is it just another entertainment-focused industry, like music and film, going through the brutal transition from growth to stagnation? Absolutely not. There is unquestionably another $100B in annual revenue available for the taking over the next decade.
As an industry, it’s ours to lose. Let’s explore the paths in front of us: Headset-Based AR/VR Experiences There’s still a good $10B to $20B a year to be found here—especially as the form factor improves. Continuing trends in optics and semiconductors will yield augmented reality headsets that feel more like a pair of sunglasses.
Branded Advertising Brand advertising spend continues to favor broadcast, web and other forms of media disproportionately over games. Games occupy an order of magnitude more engagement time relative to their share of ad dollars. With their unique capability to strategically trigger the release of neurochemicals, only games can offer advertisers a way to get their message across at the moment of optimal impact.
In the meantime, the only category that is taking advantage of this high-quality real estate? Games. The industry must find a way to move beyond this circular economy, where casual games primarily monetize by advertising other games. If they do, there’s another $20B to $30B a year to be found here.
Professional Games This is the greatest untapped opportunity. To unlock its potential, as an industry we must approach the problem with first-principles thinking, recognizing that games are unparalleled tools for learning and behavior change. Humans have evolved to learn through play.
As a result, measured on a per-minute basis, games are by far the most effective way to drive learning and behavior change at scale. Games are the most efficient way for humans to develop mental models of complex systems—from how to predict parabolic flight (Angry Birds) to how to manage a growing metropolis (SimCity). There are hundreds of billions of dollars in economic efficiency and value to be created from this capability—tens of billions of which could be captured by the games industry.
The U.S. spends roughly a trillion dollars per year on healthcare alone.
If doctors could catch rare diseases and cancers earlier, the system would save billions. If novices ramped up more quickly to approach the performance of experts—billions more. Newer and better treatments and medical devices take years or decades to become broadly adopted—not because doctors are luddites but because the only opportunity we give them to “play” with these systems is on live patients.
For good reason, no one in their right mind is truly interested in that. Rare disease diagnosis? That’s a reductive reasoning puzzle game. Ultrasound? That’s a shadow puzzle game.
Managing a complex patient? That’s a strategy game. Effectively configuring a ventilator? That’s a rhythm game. And this is just healthcare.
The same patterns emerge in all industries that require employees or customers to develop mental models of complex systems at scale: travel, oil and gas, government, utilities, the list goes on. “But wait—we’ve heard of this before—isn’t this gamification?” Actually, no. Not in practice, at least.
For the difference between game design and gamification, see my prior article here . Bottom line: The most effective way to learn to manage a ventilator isn’t taking a quiz and earning a badge. It’s playing a well-designed rhythm game that enables the player to develop the mental model they need to master the device.
The games industry is going to need to make a few changes to make this genre a reality—or else it’s going to be an ugly horizon of continued layoffs. Games industry leaders need to commit their best pattern-matching abilities and business savvy to turn these opportunities into business value. Then they need to put the top resources and talent to work on it—providing them with a clear vision.
Don’t compromise on gameplay and production value because you’re worried that professionals want “boring.” They don’t. They want to compete.
They want to have fun. They’re professionals, but they’re also human. Create environments where game designers, artists and developers can do their best work—flexing their skills with the latest technology, tools and design methodologies to create real game content that drives real-world value.
No badges. The opportunity is there. And the talent, conveniently, is available.
For the games industry to realize the next $100B in revenue, they need to build my competition. Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?.
