[Rick Gibson is a director at Games Investor Consulting, which provides commercial check-ups, strategy and data to games, media and finance companies.]
When Nintendo commandeered the ads on some Let’s Play YouTube videos featuring its games in May, it drew a line in the sand: you cannot make money from our copyright. When the least online-savvy console wakes up to the threats and opportunities of online video, you know games video has become a major issue for the industry. This month, let’s take a look at the rise, impact and potential of games video online, and what Nintendo discovered.
Video now outstrips games as the fastest-growing entertainment medium, driven by stratospheric online growth rates. Online video revenues grew 60 per cent each year from 2010 to 2012 to hit £7.4 billion, and could reach £19 billion by 2017 as half-a-billion homes watch video and television online (Digital TV Research). Powered by advertising, this booming market encompasses everything from video on demand and internet-delivered TV to the user-generated video sub-sector.
Eighty per cent of online video viewers use YouTube and gaming is its second most popular genre. With usage rising 30 per cent every year, video of video games reaches huge audiences and tens of billions of video views. Games companies’ video output currently wins only a small fraction of that audience. Most console manufacturers and publishers simply upload existing marketing footage to pretty static YouTube channels. Some, like Activision, Sony and Bethesda, are more adventurous. Sony, for instance, is innovating with a gamified PS4 campaign featuring badges and themes won by finding Easter eggs buried in the video.
The vast majority of games videos are watched via new channels, most but not all on YouTube. Alternative video networks like Daily Motion, Vimeo and Twitch, which marries Korean Starcraft tournaments with sports commentary, reach millions per day, but YouTube still dominates and its largest games provider is Machinima.
Over the last decade Machinima has evolved from creating animations using game engines to be the most watched multichannel network in YouTube’s history, with over 4.4 billion views from a total of over 20,000 videos from around 5,000 video producers. It has added original programming, cut-scene movies, film tie-ins, coverage of every core game genre and community features. Its sheer scale attracted investment from Google and the company has repeatedly partnered with games publishers and console manufacturers.
These days, most games videos watched on YouTube however are Let’s Play videos. Tens of thousands of players (‘LPers’) screengrab in-game footage to provide game reviews and walkthroughs, often with humorous commentary. YouTube’s second most subscribed up-loader is Swedish PewDiePie, whose bizarre commentary over horror and action games has won him over two billion views. Yogscast, a 40-strong UK-based collective, is larger, with over three billion views and a three million-strong daily audience.
THEY PLAY, YOUTUBE PAYS
Yogscast, PewDiePie and countless others do what they do because YouTube shares ad revenues, which can generate anywhere from 30p to £5 for the uploaders for every thousand views depending on performance and ad type. This is the revenue that Nintendo targeted, arguing successfully with YouTube that uploaders infringed copyright by making advertising revenue from videos featuring its games. Nintendo began fingering popular examples of such videos to YouTube which then reallocated all the uploader’s ad revenues.
LPers were up in arms, starting a campaign to kill the policy, which apparently lasted a total of eight days. PR-sensitive NoA may have relented after coming under sustained social fire from influential vloggers. It is also likely that the modest ad revenue it gained during the period could not outweigh the cost of trying to identify thousands of new infringing videos every day.
The volte face probably came too early to reveal any negative impact on sales but there would have been one in time. Billions of Let’s Play videos have had a significant and measurable impact on games sales, a prime example being Minecraft. A 2011 academic study found that one third of Minecraft players found out about the game via online video; the same proportion discovered via friends. If that trend continued, and with 83 million YouTube search results there’s no reason to fear it hasn’t, that equates to seven million sales of Minecraft on all platforms.
Nintendo, after some legally-advised blundering, made the right play, following a well-worn path taken by other publishers who figured out belatedly which side their bread was buttered on. YouTubers are now treated no differently than other media that make money from covering games. They may well be more influential, particularly for certain demographics. What was technically a breach of copyright turned out to be the best kind of marketing – the free kind.