a16z Podcast - Gaming and Livestreaming: Connecting While Distancing

Episode Date: April 2, 2020

Since social distancing measures were first put in place, time spent gaming has gone up—way up. According to a recent report by Verizon, video game usage in the U.S. has risen 75 percent during peak hours. The "stay at home" movement has given way to an upswell of new and returning gamers—as well as new challenges, as online platforms struggle to keep up with the surge.In this episode, a16z partner Jon Lai joins host Lauren Murrow to talk about how game developers are grappling with skyrocketing numbers, why this may be an inflection point for VR, the surprising transition of professional sports into esports, and why live-streaming is having its moment.

The content here is for informational purposes only should not be taken as legal business tax or investment advice or be used to evaluate any investment or security and is not directed at any investors or potential investors in any A16Z fund. For more details, please see A16Z.com slash disclosures. Hi and welcome to the A16Z podcast. I'm Lauren Murrow. Since social distancing measures were first put in place, time spent gaming has gone up 75% during peak hours. In this hallway-style conversation, A16Z partner John Lai joins me to talk about how the stay-at-home movement is fueling gaming, what we're playing, and why live-streaming is having its moment. Playtime in general is up massively across every category of gaming. PC games erupts. Steam, the world's largest marketplace

for digital PC games. Steam has been around for 20 years, and it's never seen this level of user activity. Average concurrent users online typically hover around 15 million. It hit an all-time record high this past Saturday of 22 million concurrent users online. So that's a spike of almost 50%. Console games erupt massively as well. What is driving this spike? Obviously, we're all at home more. But what other factors are coming into play?

So I think what's special about games versus other types of media is that gaming is an immersive activity that a set of friends can engage in at the same time. There are moments of levity, competition, very emotional. highs and lows over the course of a typical gaming session. These are bonding moments for people, and they create really deep social relationships. It seems like smart game studios are also putting measures into place to encourage more at-home play. I know Pokemon Go changes mechanics a bit to make it easier for people to play from home. It changes events to make it easier for people to play alone. Absolutely. Blizzard of World of Warcraft, which is one of the largest and longest running MMOs of all time, launched a whole series of benefits during quarantine so that if you're playing,

right now, you actually get double experience as a way of incentivizing people to continue playing the game. What kinds of games are popular amid this crisis? Are there particular titles? One game that I'll highlight as an example is a fairly recent one, Call of Duty Warzone, which is a new Battle Royale game from Activision that just launched March 10th. It ended up being one of the most successful and fastest-growing PC console game launches in history. Over the course of three days, it reached 15 million players, and and I think it reached 30 million players after two weeks. I saw Infinity Ward, had 6 million players in its first 24 hours. I think a lot of games that are launching this month are seeing major spikes.

So Xbox Live, which is the multiplayer service for Xbox consoles, has had server outages twice over the last week as more users logged on than the infrastructure can handle. And Microsoft has some of the world's best cloud infrastructure. So if they're having trouble, well, it's got to be a lot of people logging on. I've read of developers experimenting with ways to include a higher player count and larger squads with all these new users. But that's also potentially risky, as you mentioned, Nintendo, Xbox Live, and Discord of all experience outages within the last month. How are game developers responding to this massive influx of players?

Yeah, it's a double-ed sword. On one hand, you have unprecedented numbers of users coming to your servers and you want to be able to support them, increasing the number of users concurrently in a session is one way to try to minimize the sheer number of servers or shards that you need to spin up for a game. But at the same time, that comes with its own technical challenges. And so I think everyone's just struggling to keep the lights on. Discord announced that they had increased server capacity by 20% to keep up with demand, and promptly, right after making that announcement, they had server outages themselves as well. And this isn't something that's just specific to games.

for example, just cap bid rates over in Europe. So in an effort to sort of keep bandwidth down, they're no longer streaming in 4K or HDTV. It's clearly an attempt to contain costs and continue maintaining the quality to service in the face of a lot of demand. Is there anything surprising that you've noticed in the types of games you're seeing played more

amid the coronavirus quarantine? Online multiplayer games are the ones that are seeing the most obvious and largest growth, which makes sense because they're fundamentally social games that you play with other people. I actually think that a VR virtual reality might be seeing a surge in popularity. How so? Well, the whole notion of VR is predicated and enabling people to escape the real world to a virtual reality, right? And even prior to COVID, there were early indicators that in-home consumer VR may be turning the corner.

So the Oculus Quest was estimated to have sold well over a million units before. at run-and-back order. The Valve Index, which is perhaps the most powerful headset to date, sold out in minutes upon initial release. So VR headsets seem to have finally reached a price point and a hardware quality that has mass market appeal. But then at the same time, you have exclusive AAA games coming to VR for the first time, titles like Half-Life Alex. And Half-Life is arguably Valve's biggest and most exciting IP, a sci-fi franchise that put them on a map initially. And it's famous for ending the franchise, essentially, on a cliphanger. And the resolution for the story is this Half-Life Alex game, and it's a VR exclusive.

So you can only find out what happens if you buy a VR headset and you play in VR. Educational games are actually seeing tremendous growth as well these days. Teachers and schools are also holding online classes through Discord. I think that's an interesting use case. So rather than platforms like Zoom, some are turning to apps that were traditionally gaming platforms like Discord or Twitch. Yeah, I think they're picking the platform that their audience is already on. So if you're an instructor and you're trying to get kids to come online in order to listen

to AP bio or whatever subject matter you're teaching, it's going to be easier to convince them to come online if you pick Discord because chances are they already use Discord to play their favorite games. So Discord actually just made a number of moves specifically to help educators come on the platform. They raised the user limit on screen chain from 10 to 50 users so you can accommodate larger class sizes. And in this case, the actual friction is on teaching the instructors, the teachers themselves, how to use Discord. One thing in these gaming platforms is that, as we've seen with video conferencing, the natural rhythm of the conversation is off. It's difficult to respond without

interrupting. Sometimes it's difficult to interject. When it comes to learning how to have a live interactive conversation online. Ironically, I think gamers have received way more training in that area than almost any other demographic. Because the very nature of playing a game and chatting of someone

over Discord or interacting with a livestream, it's basically a constant act of juggling foreground versus background activity. And so being able to context switch from, okay, I'm listening to the lecture to now I have a question and we're going to talk about this question. This is something that gamers and then

livestreamers in particular have a lot of experience with. And I think it's interesting to think about how this might become an increasingly more critical skill in society as more teams and general folks start working and learning remotely versus in person traditionally. So you're saying gamers may actually be prepared for this future, whereas perhaps those of us who are not gamers may have a steeper learning curve. That's right. John, I want to talk about who is playing. I think I think a lot of people have the conception that, because schools are canceled in many places, a lot of it is teens and kids playing more video games. The average age of a gamer on League of Legends, for example, actually skews fairly old.

I think it's something in the 20s or the 30s. Over time, it's crept up. And so you have a mix of adults. You have a lot of kids that are definitely playing since they're out of school. And I think one of the neat things is that you have families that are coming together and playing games potentially for the first time as a result of quarantine. Dungeons and Dragons, which is a tabletop fantasy RPG, has actually seen massive growth as well over the course of quarantine. In these turbulent times, you end up having a lot of folks that are playing D&D together over Zoom and House Party. hours broadcast in the live streaming site, Twitch, is up 34% just in the last week, if you're not familiar.

It's a tabletop game where a group of people roleplay, a story, and that story is often created just by another player of the game. It's a giant improv party, essentially. Yeah, I think it's important to remember that there's this whole new audience that is rediscovering gaming as adults. Absolutely. A lot of people are coming back to games as a result of being housebound, and they're discovering that even though they may not have a concept, or a gaming PC, they actually already have an awesome gaming device on them. PubG Mobile, which is the mobile version of a player unknown battlegrounds, reported an increased revenue of over 50% just in the last week compared to the prior week.

One of the largest mobile games in the world, 10 cents, Honor of Keynes grew from an average baseline of 60 million daily active users to over 100 million plus in February at the height of quarantine in China. And that's 60% plus growth, which is a... pretty amazing given how large that game was to begin with. Essentially, you have a lot of new gamers rediscovering that they have a gaming device in a form of their smartphone. And some of these newcomers may be traditional sports fans. As in real life games and sporting events have been canceled, some of these leagues and teams have been moving online to a digital format. So about a

week ago, the NBA turned one of their canceled games. I think it was Phoenix versus the Dallas Mavericks. They took that game and they actually turned it into an NBA 2K game, which is the video game equivalent of the real NBA, and it was live streamed on Twitch forever you want to watch. It's very trippy for me when I see an NBA star play their virtual persona in a video game. Well, and as NBA players have been put in isolation, I think many of them have been turning to gaming. There was a Call of Duty tournament for Miami Heat players that was also broadcast on Twitch. And NASCAR just replaced their canceled races with the first ever E-Nascar series where you're essentially piloting virtual race cars, and they brought back a lot of

recent legends like Dale Earnhardt Jr. to drive those race cars. So professional race car drivers are competing against each other in racing simulation software. That's right. So could esports be a gateway to turn non-gamers into gamers? It's a bit of a hybrid between traditional video games and that live, crowd-driven, competitive event. It remains to be seen. I think yes, from the perspective that you're having an audience that may have never actually watched NBA 2K or FIFA, for example, any of these sports video games that are now exposed to that and might actually think it's pretty cool. It'll be interesting of how many of these NBA players, one, how many of them can build large e-sports followings, and then, two, if their e-sports

followings actually end up being larger than their real life following, I think that would be a real success story. It's a brave new world. Let's turn to live streaming. Absolutely. So the analytics site, Sully Nome, actually just released a couple of data insights. The high-level headline is that Twitch is essentially having the biggest month of its history. Broadcast hours also grew by 35% over the last week compared to the average of the prior three weeks. And Sunday ended up being an all-time record breaker where 47.7 million hours watched. Why this rise in live streaming? Part of that could be due to the fact that you have people that are checking out live streaming for the first time. Another interesting nugget was that downloads of the Twitch

app increased by about 30% just in the U.S. alone between the weeks of March 8th and March 15th. So you have a lot of people that are checking it out for the first time. I think a second thing is that live streaming is unique as a media format and that it combines the reach of of a public broadcast of the intimacy of small group community. And what I mean by that is essentially, as a live streamer, you can reach hundreds of millions of people of a single live stream. So it is a public broadcast media just like TV or radio. But because of the fact that it's interactive,

your viewers can type at you and you can have a conversation with them, and you can adapt what you're doing in real time to what your viewers demand. It feels like a smaller group conversation. And you can monetize in real time, right? That's right. People tip in real time if you're doing something that's very popular. If you've answered a request, people can subscribe to your channel. And the subscriptions cost money anywhere from a couple of dollars to way more.

So it's interesting as both an engagement and a monetization model for influencers these days. So it's kind of a hybrid of YouTube and TikTok in that you can amass this online following. You can be streaming live, but you can also be monetizing. instantly. That's right on YouTube and TikTok, for example. You produce content and then you upload it and then you have to wait and see what happens and you're not actually getting that much in terms of real-time feedback. TikTok is slightly more real-time than YouTube, simply because the video is a shorter and people can like and comment very quickly after you upload something. But live streaming platforms are unique in a sense that you are literally

performing in real-time for a live audience and you're getting their feedback just as if you're a stage performer in real life in real time, given either clapping or throwing tomatoes at you, right? But digital tomatoes. That's right. And I think that's one of the things that makes live streaming work so well right now in COVID times. It's because people are actually able to get a sense of community online

through live streaming that may otherwise be hard to find in the real world because we can't get together in large groups anymore, right? Like you can't go to church, you can't go to school, you're not at work. So a lot of the communities that people on ordinarily members of, I think, have sort of fallen by the wayside. And Twitch has been able to provide that sense of community for a lot of its viewers. As opposed to passively binging Netflix, people want this more interactive way of being social with their friends and family. I mean, speaking of relationships, it's a bit of a personal story, but video games actually saved my marriage and totally not kidding here. How so?

So when my wife, Jen and I first started dating, we were actually long distance for the first year of our relationship. I was in San Francisco. She was in New York. So we actually met at a New Year's Eve to get together. And then I had to fly out literally two days from afterwards. And it was really tough. We didn't know each other that well.

But we started playing an online game called League of Legends together. And that completely saved the relationship. When we didn't feel like talking about serious things, we could just play the game. game and there were enough sort of highs and lows and moments of tension and drama that we also got to know each other better as we played together. I love that story. Yeah, so who says you can't find love in video games, right? So you've been married 10 years now. Are you still playing League of Legends together? We still are. It's one of the mainstays of our relationship, actually. It's a lighthearted way to spend time, and I imagine that's what a lot of people these days are during in quarantine as well.

You know, if you're at a small apartment or a house with members of a larger extended family, there's only some sort of conversation you can have before a fight start breaking out. So maybe, you know, you break out the Xbox, play some mobile games, play some party games, and it helps generally improve the quality of life in the house. I think there's definitely a social dynamic at play. A lot of people aren't necessarily comfortable, face-timing or video chatting and seeing their own face. reflected as they talk to family members. So I think gaming provides this distraction. You're doing something else while you're connecting with your family or your friends. Yeah, I think one of the

best ways I've heard it described by a live streamer is actually that games can switch back and forth between foreground and background activity. So you're not really thinking too hard about the game, but you're actively conversing, and you might actually be talking about something that's like very serious. But then you can just switch the game back into the foreground and you both concentrate on the activity. And so it provides activity to fill in the gaps that are very natural in conversations. And it doesn't feel like just long periods of silence if you don't have anything to say to each other. Yeah. I think that's something we're all familiar with. The point is social distancing quarantine, it's lonely. And I think a lot of people are rediscovering gaming as a way

to connect with others. So after we weather this crisis, what will this mean for the games industry? What is the bigger picture? The bigger picture here is that gaming is unique as a media type and that it's real-time and it's fundamentally social. When you're playing a game, you're partaking in an immersive activity of someone else. And so I think that's one of the reasons why gaming has seen such explosive growth since the start of coronavirus. And so, you know, I think games and live streaming are offering a lot of the social connections that people are missing as they're staying at home these days. And I think that will only continue over time. So once this crisis is over, do you expect these new gamers to stick around? I hope so. It's easier than ever to get

into games today with just so many different platforms that you can play on. If you have a console or a gaming PC, that's great, but you don't need one. You can also play phenomenal AAA quality games in your mobile phones these days. And so, um, The barriers to entry for people coming back in the game to discovering games for the first time is lower than ever. Great. Well, John, thank you so much for joining us on the A16D podcast. It's been a pleasure. Thanks for taking the time.