Data & Dimensions | Ep. 19 (Video) - The End of the Average Gamer

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Yohann Plantec   (Cold open)

But you really want to make sure that you become the #1 game for a few gamers versus try and be like #3 or #4 games for a vast number of players.

Neil Barbour   00:00:10

Welcome to Data & Dimensions, a podcast at the intersection of entertainment, industry and interactivity. I'm Neil Barbour, an analyst with S&P Global Market Intelligence Kagan. And today, we're discussing Bain & Company's latest report, The End of the Average Gamer, which explores how player preferences, spending habits and engagement patterns are reshaping the video game industry. The report draws on Bain's own consumer research and market analysis while also incorporating some of S&P Global's data and forecasts to help frame the industry's growth outlook. And we have a crack squad of experts on the call. Let's go around the table for introductions. Anders, why don't you kick us off?

 

Anders Christofferson   00:00:46

My name is Anders Christofferson. I'm a partner at Bain & Company in our Media and Entertainment practice and the Global Head of our video game sector.

 

Yohann Plantec   00:00:55

And my name is Yohann Plantec. I'm a partner within our gaming practice, and I spend a lot of my time looking at the gaming market and its trends. So excited to be talking with you today.

 

Tom Rowland   00:01:08

Thanks, Neil. I'll round this out. Tom Rowland, I'm a partner in our media practice here in L.A. I also lead our gaming practice within the Americas and, yes, excited for the conversation.

 

Neil Barbour   00:01:19

Great stuff. Yes, guys, really fascinating report. It was really great to read through it, I believe, a couple of weeks ago, something to that effect. But so fresh data for all of us gaming analysts to pick through. So the report opens with the idea that the average gamer kind of no longer exists. So gaming maybe held on to a monoculture for longer than film or TV, but you seem to suggest that era is over. Can you walk us through the evidence behind that?

 

Anders Christofferson   00:01:48

I'm happy to get us started here. So this idea that the era of the average gamer is over is a core belief we have at Bain. And you're right, it's the foundational assertion in our 2026 report, which walks through a little bit of what we're seeing. The data is very, very clear, and I'll share some of that in a moment. But I think importantly, it walks through the implications for this era shift. Developers, publishers, investors, gamers, the way that they consume and spend and invest in games is going to change over the next several years, and we're very excited for people to dig into that in the report. To answer your question very specifically, this idea that where gaming held on to a monoculture, I would slightly challenge that assertion. I think what we've had historically is more of a scarcity of experiences and that scarcity created some shared experiences. So if you rewind the clock 10, 20, 30 years, we saw a limited release calendar in games, finite shelf space, especially with physical distribution of games. There were a handful of platforms that really concentrated attention around a small number of gaming experiences. Today, that is totally different. With digital distribution of games, there is an infinite shelf for them. There's tens of thousands of releases. You see live service games holding attention for many years and a long amount of time. And so what that's enabling to happen is an underlying diversity of demand for game experiences to really be exercised. And in our report, we surveyed about 5,000 gamers globally in a number of different markets. And we asked them questions around what types of games they like, different game mechanics they're drawn to, social versus single player, how they like to spend. And what we found is that no single game experience accounted for more than 25% or so of answers. We also found that if you go into specific components, take open worlds, for example, massive differences amongst cohorts. For young gamers, teenagers, you find about one-third of them are attracted to big open worlds. If you go to gamers over 50 who are spending a lot of money, that's about 10%. It's a small number. And so the data is very clear that different game -- or different game preferences have existed for a long time. But now given the amount of content that's out there, those games that address the average are no longer succeeding. And that's what we get into the report and the implications of that.

 

Neil Barbour   00:04:36

Right, right. So not only the long tail of content, but all the new content, there's just a wider buffet, and then there's all these different customer personas coming into the market. So that kind of leads you to the conclusion that the big broad game doesn't really have a market anymore. And so let's get a little controversial right off the top. Here we are staring down the barrel of GTA 6, which is probably going to dog walk the market for the next few years, at least the console segment. How do you guys square that circle?

 

Tom Rowland   00:05:02

I mean, clearly, Neil, there's a handful of platform-type games that have earned mass audiences, and they own a huge amount of player time and engagement and dollars, and everyone else is left to sort of fight over what's left. And there's been a little bit of movement in those sort of big platform-type games over the last 12 months or so. But relatively speaking, it's a reasonably ossified sort of part of the market. We also acknowledge the same within video, some of the video games and same within what we saw with our data in the survey that people want franchises. They want more of what they're kind of used to playing and the types of game mechanics that they are used to and they love. So the report is less around that, but more around sort of the marginal bet, right? Where does the next $50 million go? Where does the next $100 million go, acknowledging that there are -- there's a part of the market that is sort of out of bounds, right, and there's somewhat being ring-fenced sort of broader platform types of games where people maybe have one or two most sort of big live service games that take up a decent proportion of their gaming time.

 

Neil Barbour   00:06:04

Right. So Grand Theft Auto really isn't a symptom of what you're talking about. It's more like the kind of the exception that proves the rule or the cause of some of the market diffusion. So maybe that we could talk about where -- while preferences are fragmenting and spending is concentrating, how should publishers think differently when a relatively small group of highly engaged players accounts for such a disproportionate amount of play time and spending?

 

Yohann Plantec   00:06:30

Yes, Neil, so maybe I can take this one. I think it means 2 things. One, as a developer publisher, you need to really, really understand who these super engaged players are -- what do they play? What do they like? What do they do in the games? How do they spend? So that's one. And then two, you need to really design your games and experiences around these players. And you need to make sure that you cater to them and not cater to the average gamer. So we talk a little bit about that in more depth in the report, but a couple of numbers for you. I think Anders mentioned it, there is no single player, like no single criteria that is above 25% of our respondents in the survey that are like this is the type of game that I want to play. So very fragmented needs on the player side. And then we have about 20% of the player base that represents 60% of the time spent on games and 75% of the dollars spent. So highly concentrated. And so I think as a developer, your job is not to chase the whole market. It's really to identify these players. and to be able to serve them. And the good news is that we start to identify some patterns around these like very engaged gamers. For example, the gamers that use UGC features or create content for others, they tend to spend 2x more money than other gamers. So that's one. There are many more you need to understand. It's going to be different for each game or each type of gamer. But you really want to make sure that you become the #1 game for a few gamers versus try and be like #3 or #4 games for a vast number of players.

 

Neil Barbour   00:08:23

Right. It's tough to be everything to everyone. The report says that 2/3 of players want more of what they already like, while only about 1 in 5 are actively looking for something genuinely different. That seems to be largely built on stated preferences rather than revealed. Is it possible players don't know they want something new until they see it?

 

Tom Rowland   00:08:43

It's fair. I think we acknowledge clearly, it's self-reported, it's stated. And any work that we would do, the same work you do, you use that as one of many data points. And clearly, there's a ton of other increasingly great kind of player data out there in the market. But I think even if you look at actual play time, engagement time, dollars where they're being spent, we know it's really hard to break through. I mean I think back doing work like this five to 10 years ago with some sort of bigger developer publishers and running a lot of that initial analysis on like how many studios have had a repeat success. So it is a hard business to win in. And certainly, if you look at any of the data from Newzoo or the other plenty of credible sources out there, clearly, there is this sort of, as we mentioned before, ossification of time and spend in a certain number of parts of the market. So we know it's hard to sort of break through. What we're also not trying to say is don't innovate, right? Video gaming is an intensely creative industry, right? And I think all we're trying to say here is that with innovation, making sure you're clear on who is this for, like how you describe that end player in a single phrase. So it's a hard industry. It's hard to break through. It requires creativity, but just making sure that people still have sort of clear on like the end player and the strategy that sits behind the game. And if you are sort of targeting some sort of -- the best way describing it, like latent demand that you think is out there, a game mechanic or a world or a piece of IP that you think could break through, making sure you're doing it in the appropriate manner, right? You are actually building and greenlighting effectively.

 

Neil Barbour   00:10:28

Right. So it's not necessarily that a passion project won't work, but you may need some better data to underpin what you're doing or how to build to that market that you're looking for.

 

Tom Rowland   00:10:38

And we've seen tons of examples over the last few years of like successful smaller titles breaking through with intense creativity, right? But it is hard, like the number of breakthroughs that actually reach decent level of thresholds if you study any sort of Steam-related data, it is hard to succeed.

 

Neil Barbour   00:10:57

Right. Yes, we talked about the sheer volume of games that come to Steam every year. Just to be found in that haystack, you really have to -- things have to really break your way. Like a lot of areas, AI is sometimes positioned as kind of a cure-all for game development. Your report is more measured. I wrote down a few lines from the report as I was reading it. AI is an accelerant, not a rescue plan and AI scales bad bets faster. Spool those ideas out for me, if you can.

 

Tom Rowland   00:11:24

Yes. Maybe it's worthwhile to start at the outset. Clearly, we believe that AI has a ton of potential within the video game space. So probably start with that blanket comment before we move too much further. And I think there's this argument there often that AI makes production cheaper, makes sort of mid-budget games more viable, companies can place more bets and it sort of saves the middle, I think maybe the way that people have often described it. But I think our sort of concern is that with that, you're also going to have to get a lot more content into the market, right? So you're going to be chasing the same engagement hours, the same spend, right? So demand is still going to be -- follow the curve we're talking about, but actually the supply side probably gets infinitely more -- infinitely higher. And so actually, you're still competing for that same opportunity. And I think our concern is that it helps compress the time line between placing a bet and knowing if that bet is going to succeed, which is great if you've got like a clear hypothesis on who that player is and what's required. But actually, if you haven't got a clear hypothesis on who you're building for, it actually can create problems, too. So clearly, there's potential out there. But I think certainly, it's not a silver bullet saver that I think often is positioned for some of sort of the mid-market scale games.

 

Neil Barbour   00:12:49

So the report includes a forecast showing gaming software content revenue continuing to grow, but at a relatively modest pace. And I would note that you use some of our data to shape this market sizing. So we're in general agreement on that point. We use the word mature in a lot of our coverage to describe this TAM. Is that how you're thinking about it as well? Or what else is sort of shaping your expectations of the market over the five- to 10-year period?

 

Yohann Plantec   00:13:16

Yes, that's exactly how we are thinking about it, Neil. I think the industry is still a bit the aftershock of going so rapidly from the growth era to a mature era. We're expecting a 3% year-over-year growth for the next 5 years, in line with the last 4 to 5 years. I think that what's interesting now, it's like you have to look at the market in a averaged way. You have to look at it by segment, right, because the growth profile is very different depending on where you're looking, right? So if you look at U.S. domestic gaming markets. It has already been relatively flat over the last few years in terms of real growth when you adjust it for inflation, whereas in India or China or PC, you're starting to see like really fast growth. So you're still seeing very fast growth. And I think the implication as a developer publisher is you want to understand in which segment you're playing and like the growth profile of that segment because the implication of your strategy are going to be important, right? If you are in a flat market where you're basically competing for share against your competitors, you need to control your costs, you need to be very mindful about you're going after the growing segments of the market, you probably can innovate a little bit more, as Tom was saying and try to be a bit more nimble with your investments. So I think that's how we are looking at the market now.

 

Neil Barbour   00:14:52

Do you think the PC gaming growth in India and China, which we've also sort of observed in our tracking of individual companies and sort of sizing up this total addressable market. Do you think that is taking away from mobile's opportunity? Is it sort of cannibalizing that growth? Or are these 2 segments, can they still grow in tandem?

 

Yohann Plantec   00:15:14

I think the answer is a little bit different between the 2 countries. I think China, we're still seeing growth in PC, but interestingly enough, it's more now at the ARPU level versus the actual player base. Mobile is struggling significantly. And so I think there is definitely cannibalization there. India, both segments are growing very fast. I think in India, it's still one of the countries where like we're just gaining players, right, on a regular basis. And so I think all segments are growing relatively fast there.

 

Neil Barbour   00:15:47

Right. So circling back to this idea of a mature market, the answer the report kind of gives to push back against the idea that it's the growth would be difficult in this market is player personalization. So let's talk about the contextual bandit algorithms, which I remember first reading maybe in a Nate silver book a few years ago, one-to-one personalization. Can you explain in practical terms what these systems actually do and why they're suddenly becoming so viable?

 

Anders Christofferson   00:16:16

Sure, sure. And we love talking about personalization and contextual bandit, which are probably one of the best names of technology that we've seen in recent years. But we definitely believe that the next era is going to be defined by personalization. That is what is going to be required to win. And what we mean by that is developer publishers creating personalized experiences for individual players. versus a broad-based approach. And what a contextual bandit is in simple terms, it's a decision engine, a piece of technology that asked the question, what is the next best action for this particular player in this particular moment based on all of the context that we know about this player. And these engines that are most effective and successful are the ones that take in all of the data that exists around purchase history, gameplay dynamics, social interactions and so on, and we will come up with an action. And that action can be a recommendation for a new game. It could be a piece of marketing or messaging targeted at a particular player. It will deliver that action and then learn from it and watch what happens, what does the player do and then get better and better over time. And so it's really interesting in that the organizations that use contextual bandit to deliver personalization, it's not broad-based campaigns going out to a large swath of consumers. It's very, very focused strategies at individuals in a continuously learning environment that gets better and better over time. And now this idea of contextual bandit and decision engines has been around for ages. We're just now entering this period where they're getting really good. There's a couple of reasons for that. One, there's a lot of first-party data that exists out there around players, not just within games, but when they're logged into systems and their entire gaming experience. Two, the models are getting really good. The ability for these engines to do things, ingest new information, learn, iterate and get better is improving by the day. I think importantly, another thing we're seeing is the technology that's required to orchestrate this technology across a number of different game experiences also getting very strong. So for a company that has a portfolio of games and a number of different ways in which they engage with their players via e-mail, web, push notifications, all these things, the ability to orchestrate those in an aligned manner is getting very, very good. And so we're in an exciting era. I think we're all feeling this shift as gamers and expect it to be a defining characteristic over the next several years.

 

Neil Barbour   00:19:13

Sure. So my next question there would be if personalization becomes a core competency, and it sounds like it already has, what are the organizational framework changes that publishers need to be thinking of or that they maybe have already enacted?

 

Anders Christofferson   00:19:26

Yes. Like we can tell you that publishers are actively thinking about this right now because employing a decision engine to do things differently is a dramatic change, and it has implications for the processes they run, the governance, the structures, accountabilities really, really across the board. There's a couple of things I would say that are important to be thinking about. First, this is a player-focused strategy, and it requires cross-functional accountability and touch points across the entire organization at the highest levels. So first and foremost, if you are going to be going full force at a personalization strategy using contextual bandit style decisioning engines, this has to be elevated to the very top, have real executive sponsorship and a cross-functional team that touches everything, live ops, monetization, community management, marketing and so on. One mistake we see is that this is viewed as a bit of marketing technology and gets kind of tucked away under a CMO with a small team. That is probably not going to work in the long term. So we do think it has to be a very central organization, executive-led with touch points across the business. A couple of other things that we think are important as companies employ this. One, very clear about what you're trying to do and guardrails to set your intention and objectives. The thing with these engines is they're very, very good, and they will optimize whatever goal you're telling it to optimize. But it will do things differently. If you're trying to attract new users versus retention versus increasing LTV, you have to be very, very clear on these guardrails. The second, and I mentioned this a little bit in the beginning, very clear about organizational ownership. What we see works best typically is sponsorship from a CMO with a cross-functional team, but it can roll up to the CEO, but it has to be executive-led and it has to be central with local execution when you get down into the individual games portfolio. There's an organizational tech component that needs to be dialed in. And that's having common player data across the portfolio to drive the decisioning engine. And a lot of organizations struggle with this, especially when you have a portfolio with games and experiences of different vintages, but you need to be able to look holistically at your players to feed the engine with rich data, which really is the lifeblood of the engine. Fourth, what we say is there's a process or approach dynamic that needs to change around test and learn. And so we used to do A/B testing on campaigns managed by a marketing team. Now we have to get into this world where every part of our business is trying things, identifying priority use cases, allowing these decisioning engines to offer personalized experiences and iterating on top of that. And then lastly, and one of the things that we work with a lot of our clients on is how do you actually do this as an organization where you may not have the capabilities to build the full tech stack required, you may not want to take the risk of doing that. There's a lot of good partners out there who have solved solutions. And so this is where organizations who typically like to do things internally, we sometimes recommend learning from others, and there's often opportunities to partner to get this to market faster. So massive implications. It is really going to change the way that companies deliver marketing and deliver game experiences, presents a lot of challenges, but I think also a lot of really exciting opportunities.

 

Neil Barbour   00:23:25

Yes, it's interesting to say because it touches every part of the business from the gameplay to the marketing. So one can't not be aware of what the other side of the house is doing, so it has to be integrated and sort of plugged into the central executive function. So -- moving on to the final chapter argues that direct-to-consumer distribution is becoming much more important, particularly on the mobile side, which is something we started highlighting on our quarterly tracker, but the report seems to imply this isn't really a story about payment processing or app store fees. What's going on under the hood here? What's you guys' big brain take on it?

 

Yohann Plantec  Yes. I think what struck us this year, Neil, is the scale of this trend. We've run the numbers. And in 2019, I think we had 12% of the top mobile games globally that had a D2C store, so web store, app store. Now it's 75% -- and in our survey, it was 50% of the gamers basically said that they had once or several times used a D2C app store or web store to actually buy content. So it's really not a tomorrow thing. It's really a today thing at this point. And I think there are a few reasons for that. Obviously, the economics are extremely appealing, right? You get 15%, 20%, 30% higher margin on any sales that you do through this. So that was -- that's significant for a lot of developers. But also, the technology is here now. And so you can rent the technology to several vendors. You can relatively rapidly integrate it. So we are starting more and more to see developers like rapidly developing these stores and putting them online. And to your point, I think it was interesting to see also what's driving this trend on the player side, right? What are they looking for to actually move from the Apple or Google Store to the actual D2C stores?

Neil Barbour   00:25:38

Right. Because they've been able to do this for a while. There was just a sense of inertia that they weren't doing it for some reason, but they -- the stores have managed to overcome that somehow.

 

Yohann Plantec   00:25:47

Yes. No, exactly. But I think what's interesting is that actually, it's not necessarily the discounts that are driving people off the Apple, Google stores into the web stores. It's more this idea of having personalized offers. So we -- in our survey, we run a small test. We were asking people, if we give you a discount at 10% and then we increase that to 30% on any offer that you would buy, would you go direct with that 30% versus 10% and people were mostly saying, not really, like it didn't materially change. results...

 

Neil Barbour   00:26:28

Interesting.

 

Yohann Plantec   00:26:30

But when you actually say, well, and if we give you this new skin for free of that character that you've been playing with for the last six months and that you love, then 85% of people actually were swayed toward buying direct, which was…

 

Neil Barbour   00:26:47

That is fascinating.

 

Yohann Plantec   00:26:48

Very interesting. Yes. And I think it comes back a little bit to this highly engaged player base, right? They want to be part of the community. They want to know that you care about them as a developer. They want to have personalized offers. They want to see that you care -- that you like tailor the experience to them. And so I think that that's a big shift that we're starting to see. And back to your previous question on personalization, getting that direct access to the players also enables more personalization. You get more data, you understand -- it's kind of like a virtuous cycle that you're putting in place with these D2C stores, and that's why I think adoption is just going through the roof.

 

Neil Barbour   00:27:32

That's great. Well, that's all the questions I had, guys. Is there anything you want to touch on that I didn't bring up before we move on here?

 

Anders Christofferson   00:27:40

The only other thing I would say, Neil, is this report that just released is our 2026 version. We've been doing it for a number of years. And one interesting thing is we're starting to see a lot of the data that we're asking folks about on a longitudinal basis. And so a lot of shifts have been very slow and gradual over time. Some have been a bit more dramatic and have led us to define this as the end of the average gamer era, but we're excited for people to go in and read and learn. And we're looking forward to continuing to deliver this report every year. We hope that people enjoy it. Thank you.