Will Generation Z consumers drive the entertainment industry towards the metaverse?

Original Title: "Thinking About the Short-term and Long-term Impacts of Consumer Behavior in the Metaverse"

Author: Matthew Ball, former Head of Strategy at Amazon Studios

Translation: Rhythm 0x49

This article focuses on the evolving user and commercial behaviors within the Metaverse. By observing the younger generation of consumers and the changes in commercial behaviors, including consumption, investment, time, attention, decision-making, and capabilities, it becomes evident that these changes are either directly related to the Metaverse or contribute to it in other ways. This change can be positively described as a "trend," while negatively it can be termed a "fad." However, the Metaverse now possesses long-term global social significance.

Short-term Behavioral Changes

The most noticeable behavioral change over the past year is the increasing proportion of time we spend online and in virtual worlds. Moreover, investing time in online and virtual worlds is becoming "de-stigmatized."

For decades, "gamers" have spent their leisure time in virtual worlds, simultaneously completing various tasks and pursuing non-gaming goals. For instance, some design virtual rooms in "Second Life" instead of killing enemies in "Counter-Strike." A significant portion of society views this behavior as strange, wasteful, or even anti-social.

COVID-19 rapidly changed this perception, with millions of skeptics joining and even enjoying virtual worlds like "Animal Crossing," "Fortnite," and "Roblox." These skeptics had initially planned to engage in activities in the real world, but the pandemic forced them to stay indoors. This not only eliminated some of the stigma associated with virtual worlds and the Metaverse but may also have encouraged this generation of skeptics to participate.

It's akin to online supermarkets, where millions of consumers are aware of the service, yet some refuse to try it. They believe that not selecting items in person could lead to spoilage or damage upon delivery. For these consumers, the quality of items is not the key factor in their decision to use the service; rather, it's the belief that online supermarkets are "wrong." The emergence of COVID-19 prompted these individuals to try online supermarkets. As a result, some consumers retained their offline shopping habits, while others embraced online shopping.

More users and higher engagement have led to increased revenue for developers, which in turn has spurred more funding and better products.

Over the past year, substantial funds have flowed into two directions within the "Metaverse revenues" sector. The first is the rapid legitimization and investment in purely virtual assets through cryptocurrencies and NFTs. The second is investment in non-gaming brands and talents, such as luxury brands Prada and Gucci, automotive brand Ford, soccer star Neymar, and rapper Travis Scott. These investments help diversify virtual platforms, shifting from goal-oriented games focused on winning, shooting, and killing to activities with broader appeal, such as creation, exploration, expression, collaboration, and socializing.

Many companies are beginning to utilize different technological processes, resources, and new investment ideas to support the realization of the Metaverse. For instance, Hollywood is deploying real-time rendering solutions like Unreal and Unity engines, while Disney and Industrial Light & Magic are even developing their own engines. This shift provides greater creative flexibility and efficient shooting schedules, while also supporting Hollywood's "virtual backgrounds." Just as Disney's film sets are filled with Spider-Man costumes, Brooklyn streets, infinite stones, and various virtual backdrops, the Mickey Mouse stars are accumulating digital archives of virtual assets, such as the Navarro planet, Mandalore, Din Djarin's Razor Crest spaceship, Baby Yoda, and more.

At the same time, operators in architecture, construction companies, and automotive manufacturers are also transitioning to tools like Unreal or Unity, while the applicability of vertical-specific solutions represented by AutoCAD is expanding.

This transition means that items designed in the real world can be relatively low-cost transitioned into the Metaverse and reused indefinitely. This impact may currently be underestimated. For the Metaverse to reach a usable level, sufficient virtual content needs to be filled. However, the production costs of virtual content are high, and there is a lack of short-term successful business cases. But what if Disney has already produced a large amount of material? Then it only needs to be edited.

Moving Towards an Open Asset Economy and Sharing Model

"Economic appeal" will drive the entertainment industry towards the Metaverse.

This trend began with "Fortnite," a game that can be accessed and used on almost all platforms globally through proprietary online services and account systems, allowing players to use any game assets, including items, currency, achievements, and progress data, without paying for this form.

In fact, the reason "Fortnite" can achieve comprehensive cross-platform online play may be that the developer Epic paid some fees. At least in the early stages of the game and conceptually, it appears that Epic bore some costs.

Information from the Epic vs. Apple lawsuit indicates that Epic paid fees to PlayStation developer SONY for launching cross-platform online play, paid features, and data synchronization on PlayStation, ensuring players do not have to pay for cross-platform access.

While cross-platform online play, paid features, and data synchronization are beneficial for players, encouraging them to spend more time and money, this could lead to revenue loss for all participating game distribution platforms. For most platforms, in-game purchases from free games like "Fortnite" are a source of income. Generally, platforms take a 25%-30% cut from in-game purchases. SONY is concerned that the time players spend on PlayStation will exceed their spending. In other words, this is a monetization subsidy to competitors.

For example, if a player spends 75% of their time gaming on PlayStation 4 and 25% on Nintendo Switch, but 40% of their spending is done through Nintendo Switch, this means SONY's revenue is being taken away by Nintendo by 15%. To avoid this situation, Epic pays fees twice for overlapping portions, meaning Epic pays 25% of that 15% fee to both Nintendo and SONY.

There is no evidence that this payment model still exists today, as "Fortnite" has been running on SONY's platform for three years. Currently, "Fortnite" still supports cross-platform play on PlayStation. In fact, since 2018, SONY has unlocked cross-platform features for several games without any news of charging for cross-platform access. Therefore, it can be inferred that SONY may have determined that cross-platform gaming effectively encourages users to increase spending, and that the amount exceeds the aforementioned time-based revenue loss.

Regardless, cross-platform online play, paid features, and data synchronization have become bargaining chips for game development companies, and removing these features could lead to user loss for game distribution platforms.

In addition to cross-platform and paid features, there is also cross-IP interoperability. As virtual games like "Fortnite," "Minecraft," and "Roblox" grow into significant cultural drivers in society, consumer marketing, brand building, and multimedia franchises are increasingly intertwined with them. Over the past three years, "Fortnite" has collaborated with the NFL, FIFA, Disney's Marvel Comics, Star Wars, Alien, Warner Bros.' DC Comics, Microsoft's Halo, SONY's God of War and Horizon Zero Dawn, Capcom's Street Fighter, Hasbro's GI JOE, Nike, Michael Jordan, Travis Scott, and more.

For cross-industry collaborations, IP owners must accept what they previously rarely agreed to in marketing campaigns:

• Perpetual licenses, with in-game outfits permanently retained by players;
• Overlapping marketing windows, with some brand activities occurring in short intervals or completely overlapping;
• No real control.

In summary, this means that there could be scenes in games where players dressed as Baby Yoda, carrying Air Jordan bags, wielding Aquaman's trident, and resembling Neymar explore Stark Industries.

Finally, Epic launched the Epic Online Series (EOS) to promote cross-platform gaming services and virtual items. Shortly after acquiring game developer Psyonix, Epic announced that Psyonix's "Rocket League" would be free and transitioned to the Epic account system. A few months later, Epic held the "Llama-Rama" event, allowing "Fortnite" players to complete challenges in "Rocket League" to unlock limited outfits and achievements, which could be worn in any supported game.

Earlier this year, Epic acquired "Fall Guys" parent company Tonic Games Group as part of its investment in building the Metaverse. Clearly, Epic is promoting the "Rocket Game" experiment in Tonic and Epic Games Publishing's games. Epic Games Publishing provides funding and distribution for independent studios' games and helps them launch on the Epic Games Store. Epic has integrated the social networking service Houseparty, meaning players can transfer goods, identities, and even personal avatars to the Epic Online Series network and apply them in games that support this feature.

We can view Epic's testing of cross-platform assets and achievement unlocking as its early work in cross-platform gaming and IP mixing. It seems that Epic believes that reducing friction between different games helps attract more players and encourages them to spend more time and money in games.

Interestingly, more noteworthy than these tests are the blockchain community's experiments. Based on blockchain, players have the economic potential for transferable, truly owned, and interoperable goods. If this trend continues, revenue may become an irresistible attraction for developers.

The world's largest multiplayer online creation game

Long-term Behavioral Changes

While the changes mentioned above are significant, they pale in comparison to the shifts in mindset and behavior.

In the first two years after the iPad's release, news reports and videos frequently showed infants and toddlers picking up magazines or books and attempting to interact through touch. While this is understandable, we cannot grasp the differences in the reference frameworks behind these behaviors.

Now, those who first encountered the iPad are over ten years old; children who were four in 2011 have now entered their teenage years. They now directly purchase content online, a behavior that was previously not understood. As this group ages and gradually gains influence, industry transformations are quietly occurring.

One important case is the virtual platform Roblox.

Although Roblox was launched in 2006, it only gained a substantial user base a decade later. Thirteen years later, Roblox began to attract attention from non-core players. Today, fifteen years later, Roblox has become one of the largest platforms in history and has started to influence the world.

Part of this fifteen-year progress can be attributed to technological advancements, such as upgrades in CPU, GPU, server technology, network infrastructure, and services. However, it is noteworthy that Roblox's core users are children aged 9-12, a group that has been using iPads since childhood. This is not a coincidence; according to data disclosed by Roblox, over 75% of children in this age group in the U.S. frequently use Roblox.

The younger generation using iPads has different social expectations, behaviors, and forms of interaction compared to the previous generation. Those outside this generation do not find Roblox particularly novel; it does not leave a strong visual impact, and its narrative logic lacks sufficient persuasion. Even its social features are worse than those of platforms like Snapchat, Instagram, and FaceTime, which are commonly used by Generation Y and X. To the non-young generation, social platforms should possess robust social tools.

People in the entertainment industry view Roblox as akin to playing with Lego or watching Nickelodeon, a behavior that is beneficial for education. The activities we engage in are often categorized as practical, such as car repairs and home renovations, or recreational, such as watching HBO or playing "The Last of Us." All of these are considered time utilization, and there is no inherent good or bad compared to playing Roblox.

Hollywood has long believed that millennials would grow into paying television viewers or lose interest in YouTube. In reality, they have not; while these users also watch Netflix and Disney+, the proportion of video in their leisure time is declining with each generation.

The latest generation of children is socializing, learning, and expressing themselves through virtual worlds. Currently, this behavior shows no signs of stopping; on the contrary, as usage increases, the functions of virtual worlds will expand in tandem, and their usability and importance will significantly rise. Most importantly, this generation of users will continue to grow and become the backbone of society. This means that their usage habits will guide the occurrence of this transformation.

Source link: www.matthewball.vc