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July 18, 2019

Digitalization in the Gaming Industry

Mobile game companies are born digital. They offer a digital service, accessible through digital distribution channels. They also closely monitor the data they get from their users, and then develop games based on user feedback and analytics.

Nonetheless, one might argue that the biggest digital revolution in the gaming industry is yet to happen. Fondia has interviewed 40 companies in 13 industries, over the last two years, to learn from their digital experience.

The upcoming development for the children of the digital age

As the mobile game industry is relatively young, there have not been any traditional routine tasks to automate. However, the interviewees believe it’s likely that certain tasks such as game design will be automated in the future. The interviewed companies also recognized eSports as a market of its own that will probably continue to grow.

The companies believe that over the next 5 to 10 years, they will be able to analyze even more data with the help of advanced technologies. The gaming companies mentioned that digital trends in the future will be live game operations supported by cloud service architecture, which would allow event and content updates to be applied instantly to games. The biggest market disruptors and experimentalists in the near future will come from the VR and AR side, they foresee that next generation VR games might be able to shake up the industry. The use of artificial intelligence (AI) in game development might bring considerable benefits to those companies that are able to exploit it.

“We should get more psychologists to study what makes a good game. A psychologist combined with AI is almost like cheating. AI would first study how people react to certain things and what people are ready to pay for, what makes them stay in the game, and then psychologists would analyze the results. That would be the perfect combination to hook people.”

Companies believe that links between the gaming and entertainment industries will increase. Entertainment houses are eager to expand their IP to gaming, now that playing games is perceived as ‘cool’. It’s also possible that over a longer period the game industry will become consolidated into a few giant studios that take a lion’s share of the market, and a bunch of smaller entities.

Biggest challenges in the industry

The biggest challenges relate to creating a profitable business model and acquiring users in the highly competitive market. The game developers need to come up with new ways to attract players in the industry. The current free-to-play model is becoming a challenge, because there are not enough players to keep it profitable. In the Finnish gaming industry, the challenge is to find skillful employees. Which leads to Finnish gaming companies invest in recruiting abroad.

All interviewed companies noted the challenges of privacy regulation, especially how European General Data Protection Regulation (GDPR) and Children's Online Privacy Protection Act (COPPA) effects. Common issues such as behavioral advertising, young players and consent mechanisms are causing tremendous trouble both sides of the Atlantic. For example, even if a company’s terms and conditions prohibit children from playing their game, the authorities in the US can still rule that the style of the game is so childlike that the company is obliged to assume the players are children. Such rulings affect on how the companies can collect user data and target advertising or content to users.

Is your business related to gaming industry? How do you stay legal in a digitally disrupted world? On our Digireport, you can read more of our key findings and recommendations for companies to follow from a legal perspective. We hope that you find something useful that can help your business on your digital journey. Download the full report from here.

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