What does the growth of video-game streaming mean for TV?

Millions of people tuned into live broadcasts of the electronic entertainment expo (E3) this week on Alphabet Inc.’s YouTube and Amazon.com Inc.’s Twitch.tv. It’s an event whose viewership has soared on the heels of a phenomenon that has been building for years, spawning a lucrative business that’s attracting competitors, inducing acquisitions and could be affecting traditional television. Hundreds of millions of viewers now watch video of both amateurs and professionals playing various games. Video-game live streaming is an industry that “has truly become a phenomenon,” Toronto-based Cormark Securities Inc. analyst David McFadgen noted in a recent report. Twitch alone is worth a billion — in 2014, Amazon paid $970 million US for the company. It commands 100-million monthly unique viewers and 1.5 million broadcasters, according to Cormark’s research, and makes money partly by taking a cut of the $5 subscriptions users pay their favourite channels to obtain exclusive content. McFadgen serves up two reasons for Twitch’s appeal in the report: it’s authentic in its presentation, allowing “content creators’ real personalities to shine through, something millennials prefer over scripted screen stars.” It also gives viewers the opportunity to interact with the broadcaster via a chat system built into the channel, which “allows personal connections to be formed” and leads them to “support the content creator and community financially.” For example, it’s common for streamers to show their live facial reactions in an overlay. Felix Kjellberg, the user who owns and runs YouTube’s most-subscribed channel, “Pewdiepie,” uses his facial and visceral reactions (especially to horror games) as a way to generate buzz for his videos. When YouTube launched YouTube Red, the fee-based program that gives users ad-free access to participating channels and to exclusive shows, it gave Kjellberg his own show called “Scare Pewdiepie.” The ascent of the genre can be traced back nearly a decade, when a niche section of YouTube emerged in which users would post video game footage with commentary. Commentators, as they are known, would either talk about in-game strategies to guide the viewer or talk about unrelated topics with gameplay in the background. With the advent of video monetization, it quickly emerged as a force in the online world, with more viewers tuning into, and subscribing to, gaming channels. YouTube created its own dedicated gaming channel in August 2015 to curate the gaming content. VidStatsx, a website that tracks stats for YouTube channels, ranks YouTube’s gaming hub as its second-most subscribed channel (after music), with about 77 million people subscribed. According to the same website, 22 per cent of the top 50 channels are gaming related. Solutions Research Group Consultants Inc. president Kaan Yigit explained YouTube was the entry point for gaming’s accessibility. “Gaming, generally, has been a big category for years,” he said in an email. “But the rise of YouTube made recorded gameplay accessible to a wide audience and created a strong point of engagement.” But the popularity of on-demand gaming videos is taking off beyond what YouTube initially bred and has graduated to the live experience. So when Twitch emerged onto the scene in 2011, it flipped the script on how video game commentary is consumed. “YouTube may be the king of recorded digital video,” the Cormark report read, “but live-streamed programs are catching on, and the battleground for the next live-stream video platform is heating up and may usher in an era of content-creation democratization.” Twitch’s success spawned a competitor in gaming-focused live-streaming website Hitbox in 2013. In 2014, Valve Corp.’s Steam, its digital games distribution platform with over 125 million accounts, launched its own streaming platform called Steam Broadcasting. Activision Blizzard Inc.’s Major League Gaming, a website that hosts competitive video game events, also live streams its competitions. The competitive gaming scene further builds the brand of live game streaming. E-sports events, which include live broadcasted competitions with cash prizes sometimes in the millions, are a hot market. According to stats tracker Newzoo.com, over 800 million e-sports hours were watched on Twitch between August 2015 and May 2016. The biggest live-streamed events include games like League of Legends, which according to the developer Riot Games’ website boasts 27 million daily and 67 million monthly players. According to Newzoo, e-sports made $194 million in revenue in 2014 and that number is projected to grow to $465 million in 2017. In Canada, SRG estimates that about five million Canadians watch and play some form of e-sport, Yigit said. The growth of live-streaming generally seems to have forced companies to take note. In recent months, a flurry of acquisition activity has swept up small streaming houses. New York-based Neulion Inc., which has been powering the live streaming capabilities of pro sports for years, bought competitor Saffron Digital Ltd. on June 6. Earlier in May, AT&T Inc. bought Toronto-based streaming service Quickplay Media Inc.; IBM Corp. purchased Clearleap Inc. in December and then video streaming service Ustream in January; and Disney Walt Co. is looking to own the streaming capabilities of MLB Advanced Media. “It’s just going to continually get bigger,” McFadgen said in a phone interview. “Every single piece of content will eventually be available on over-the-top or TV-everywhere service or both. I think the future is every single thing you watch, it’s going to be streamed — sooner or later.” Given its growing popularity, live game streaming may be taking some of the wind out of traditional televisions’ sails. “Does have some kind of impact? Well, it has to,” independent broadcasting consultant and lawyer Peter Millersaid in a phone interview. “The trends aren’t necessarily catastrophic, the numbers indicate a decline in television consumption among a demographic that already watches less television than the average.” According to the CRTC’s most recent Communications Monitoring Report, between 2010 and 2014 the average weekly viewing hours for traditional television steadily declined, while viewing hours for Internet television increased continually between 2008 and 2015. From 2009 to 2014, traditional television viewership for the 18-34 age group consistently and steadily declined, while traditional television consumption in the 50-64 age group increased between 2012 to 2014. “For live television, it’s another potential point of distraction or a fragmentation factor for the younger viewer,” Yigit said. Troy Crandall, an analyst at 3Macs, said in a phone interview that he doesn’t believe broadcasters are worried, “and if they were, they can do what they’ve done in the past and make a channel for it.” He used TechTV, a U.S. 24-hour cable and satellite channel that merged with G4TV, owned by Comcast Corp.’s NBC Universal, as an example. Both TechTV and the U.S. version of G4TV have since been dissolved, though Rogers Communications Inc. still operates a Canadian version. Yigit noted that cable channels in the U.S. are also currently adopting live-streaming capabilities. He is “not certain that it will translate well, but it’s worth a try.” Still, if there are obstacles in the path of the live game-streaming juggernaut, it may rest with how copyright complaints are handled. An article in the Penn Undergraduate Law Journal of the University of Pennsylvania last year examined the right of game publishers to “prevent video-makers from uploading and making a profit off of videos that include copyrighted in-game content,” which Nintendo Co. Ltd. has done in the past, but “the real conversation lies in whether companies are better off enforcing copyright or letting video-makers upload in-game content without consequences.” Regardless, traditional media companies have been paying close attention to where the eyeballs are fixed. In 2014, Disney bought YouTube channel operator Maker Studios Inc., a network that includes Pewdiepie (who recently created his own network under Maker) for $500-million US. In the same year AT&T and the Chernin Group acquired a majority stake in Fullscreen Inc., one of YouTube’s largest multi-channel networks. “We are seeing greater awareness of e-sports as a way to reach the younger audience,” Yigit said. “Some of the live experiences online will probably provide learning for how the rest of the sports worlds may migrate online over the years.” — With reporting by Ahmad Hathout at ahathout@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

What does the growth of video-game streaming mean for TV?

Broadcast | June 17, 2016

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