Deloitte: Games and streaming services fight it out during pandemic

U.S. gamers and movie watchers are binging on entertainment during the pandemic, and game companies and streaming movie services are vying with each other to get consumers to sign up for their services, according to Deloitte‘s 14th annual Digital Media Trends report.

The data from the world’s biggest accounting and financial services firm is a clue as to new habits that are being formed during the pandemic as people stay in lockdown for a long time. Gaming has benefited from people being forced to stay at home, but the question is how long that extended interest in gaming is going to last.

“We saw a surge in esports in terms of virtual games and virtual sports during the pandemic,” said Kevin Westcott, vice chairman and U.S. telecom, media and entertainment sector leader at Deloitte, in an interview with GamesBeat. “Do those become permanent parts of the entertainment package that people consume at home? Or is that really just a phenomenon of being locked at home and they had to find alternative entertainment? I expect that at least some portion of that will continue. We’re going to be watching very closely.”

Deloitte found in a survey of more than 2,000 people that 29% of consumers binge on games on a weekly basis, with the average session lasting 3.3 hours. But 38% of consumers said they binge-watch streaming video services, with the average binge-watching session lasting 4.2 hours.

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But when Deloitte dug deeper into the data, it found that 52% of Gen Z consumers (born from 1997 to 2006) and 46% of millennials (born from 1983 to 1996) binged on games, compared to only 46% of Gen Z consumers and 45% of millennials binge-watching video. That suggests that while streaming video is dominant now, it won’t be when the demographics change in the future.

“A lot of this new generation is binge-watching content,” Westcott said. “And the social aspects of gaming have been increasing. People tell us they play games to connect with their friends and family.”

Above: Gaming vs. video streaming in the pandemic.

Image Credit: Deloitte

Earlier this year, 24% of consumers surveyed listed playing video games among their top three favorite entertainment activities. For Gen Z and Millennials, it was 44% and 37% respectively.

But since the crisis began in early March, nearly half (48%) of U.S. consumers have participated in some form of video gaming activity. For millennials, it is 69%, and for Gen Z, it is 75%. In fact, 29% of U.S. consumers said they are likely to use their free time to play a video game than watch a video.

Seven percent subscribed to a video gaming service for the first time during the pandemic. Among those participating in video gaming activities during the pandemic, 34% are playing video games at home with their families much more, and 27% are playing to socially connect with others.

Deloitte surveyed 2,103 people in January and it interviewed 1,101 more consumers again in May to get both pre-COVID-19 and post-pandemic sentiments.

Pandemic accelerates subscriptions and cancellations

Above: The average consumer now has four streaming video subscriptions.

Image Credit: Deloitte

Meanwhile, COVID-19 has accelerated subscription sign-ups and cancellations as consumers search for value during the pandemic. Consumers have loaded up on paid media subscriptions and sampled free services, before and since the COVID-19 pandemic began. As costs, competition, and subscription fatigue set in, consumer choices today could shape the industry for the next decade, Deloitte said.

At the end of 2019, consumers were adding, sampling, and cancelling services in search of the best value for their time and money. They subscribed to an average of 12 media and entertainment services, while also seeking more free and subsidized entertainment, such as ad-supported streaming video. With so many entertainment options, competition to attract and retain customers was fierce.

“The No. 1 reason people actually sign up for a service is for some exclusive content,” said Westcott. “So they’re chasing content someone has told them about. They go sign up for that. But then during the COVID-19 crisis, the No. 1 reason that people actually cancelled services was either costs or the free trial ended. We continue to continue to see a lot of new subscribers, but also we continue to see quite a bit of churn.”

In May, Deloitte launched a second survey to assess the impact of COVID-19 on U.S. consumers and their media consumption. By this time, nearly 95 percent of the U.S. population had been under “shelter in place” orders, business activity had been widely restricted, and more than 20 million Americans had lost their jobs.

Westcott said that media consumption is now more fluid and round-the-clock. Customer acquisition has accelerated, especially in paid streaming video, music, and gaming subscriptions. People have more time on their hands to watch, listen, and play games, and they are adding new services to get new content. More are trying new media and entertainment options that have been enabled or accelerated by the crisis. Social viewing, livestreaming, and first-run movies that release directly to digital services have all shown strong engagement during shelter-in-place guidelines.

At the same time, it is harder to keep customers — more are cancelling services. Introductory offers of free or reduced rates, along with compelling original content, are attracting subscribers. But they’re likely to cancel service if the content dries up and they can’t justify the full price. For instance, people might subscribe to Disney+ to watch The Mandalorian. But once they do so, they may quickly cancel.

“My expectation of the evolution of the streaming platforms is we will end up with a handful of dominant players who not only have their own exclusive content, but they’ll aggregate a lot of content,” Westcott said.

Cost issues

Above: Ad-supported video streaming is gaining ground.

Image Credit: Deloitte

The emergence of free, ad-supported alternatives makes it even more critical for subscription services to deliver value, especially since they’re up against growing competition from livestreaming video services and video gaming, Westcott said.

Cost is a big issue. 39% of COVID-19 survey respondents reported a decrease in their household income since the pandemic began.

How the pandemic and resulting economic repercussions will unfold is hard to predict, and it remains uncertain how much of these behaviors will persist afterward. But the opportunities and challenges facing media and entertainment companies are getting clearer, along with the questions executives should ask themselves.

The pre-COVID-19 survey also found that subscription fatigue was adding up. Consumers were juggling more costs and content, with a strong correlation between feeling fatigued and the desire to reduce subscription services.

Since the COVID-19 pandemic began, consumers Surveyed have been adding and cancelling subscriptions. For example, 20% of U.S. consumers made changes to their streaming music subscriptions: 12% added at least one service, 5% cancelled at least one, and 3% added some and cancelled others. That means they’re searching for new entertainment but staying conscious of costs, Westcott said.

In the pre-COVID-19 survey, 27% of U.S. consumers said they had planned to add a new streaming video service in the coming year. Since the COVID-19 pandemic began, 23% have added at least one new paid streaming video service. With this leap, 80% of U.S. consumers now subscribe to at least one paid streaming video service, up from 73% in the pre-COVID-19 survey.

Subscribers now have an average of four paid streaming video subscriptions, up from three in the pre-COVID survey. Not only do more consumers have streaming video services, the average streamer pays for more services than ever. However, as more media providers join the fray — including Disney+, Apple TV+, and HBO Max — competition is growing and putting pressure on content and pricing. Since the COVID-19 pandemic began, 9% of consumers have both added and cancelled at least one new paid streaming video service, suggesting more churn as consumers seek value.

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