Activision Blizzard (NASDAQ:ATVI) -- which owns eight games with at least $1 billion in lifetime sales -- reported that gamers spent about 43 billion hours playing its games in 2016, which was on par with time people spent on Netflix and about double the time spent on Snap Inc.'s popular Snapchat app.
What this demonstrates is that once a game company creates a deeply immersive gaming experience, it can create a very powerful competitive offering in the world of entertainment. Certain games like Activision Blizzard's Overwatch and Take-Two Interactive's (NASDAQ:TTWO) Grand Theft Auto can become very addictive, which creates a powerful network effect as millions of people gravitate toward the games they see everyone else playing on game streaming sites, such as Amazon.com's (NASDAQ: AMZN) Twitch.tv or YouTube.
Games offer compelling value relative to other entertainment options, and part of that value proposition is a single game's ability to tap into different markets where people like to spend their time, such as sports, social media, and watching TV and movies.
Video games offer compelling value
Video games don't compete with other games, necessarily. It's healthy for the industry to have several companies creating lots of high-quality games. The wider breadth of quality games available helps expand the audience for gaming, as Take-Two Interactive's CEO Strauss Zelnick discussed on the company's fiscal first quarter 2018 conference call:
In terms of the competitive landscape going forward, look, our view is that all entertainment titles compete against every other possible use of your time. And they don't compete specifically against our games or anyone else's games. They compete against everything, against text messaging, going to the movies, reading a book, doing your work, whatever else can occupy your time. Entertainment is nice to have, not a must have. However, when there is more than one title in the marketplace that compels people, the market also expands to take advantage of it.
The majority (52%) of the most frequent gamers feel that video games provide more value for their money than other entertainment choices. A typical new release game costs $60 -- and keep in mind the many free-to-play games available today -- which can lead to hundreds of hours of entertainment. This drives down the dollar-per-hour value of a video game to a pittance compared to spending $10 a ticket going to the movies, which only lasts a few short hours.
Video games combine different entertainment options in one package
Video games offer something unique compared to other entertainment options. The best-selling games typically feature some combination of immersive storytelling, social game streaming appeal, and/or the thrill of sports with multiplayer game modes. The social/multiplayer appeal is a big draw for many game buyers. In fact, according to Nielsen, 67% of gamers play games to be social.
Although there are many examples to choose from, we'll take a look at two games -- Activision Blizzard's Overwatch and Take-Two's Grand Theft Auto V -- that represent a good example of what drives the value proposition of video games in a world full of choices for gamers to spend their leisure time. Let's first look at Grand Theft Auto V, which has sold more than 80 million copies and continues to grow in monthly active users four years after its release.
Grand Theft Auto features a single-player story mode that looks and feels a lot like the movie Heat (1995) because of its crime/heist/action oriented gameplay. The single-player story takes about 30 hours to play through. The game also features an online mode where players can play with friends, or a random queue of other players to complete missions that go beyond the main story.
Grand Theft Auto V remains one of the most watched games on Twitch, primarily because of the online multiplayer mode. Four years after release, players are getting many hours of entertainment out of a $60 game.
Activision Blizzard's Overwatch is also one of the most watched games on Twitch. The game taps into the excitement of sports with its hyper-competitive multiplayer experience, which is designed to appeal to gamers of all skill levels, from seasoned professionals to beginners. Activision is starting a professional gaming (esports) league based on the game called Overwatch League, where the best Overwatch players in the world will compete for a championship, just like a traditional sports league. The first Overwatch World Cup was held in 2016 and was watched by over 100,000 people on Twitch worldwide, and the game has over 30 million registered players.
Video games' value and compelling content is driving up playtime
Overwatch and Grand Theft Auto are just a few examples, but these are representative of many of the best-selling games today. The industry has been branching out to new markets like esports and game streaming, where playing video games is tipping into the pull of social media. This explains why gamers' playtime has gradually increased in recent years. Gamers spent 12% of their leisure time playing games in the last year compared to 10% in 2010.
John Ballard owns shares of Activision Blizzard. The Motley Fool owns shares of and recommends Activision Blizzard, Amazon, Netflix, and Take-Two Interactive Software. The Motley Fool has a disclosure policy.