Netflix’s biggest competitor is Fortnite
“We compete with (and lose to) Fornite more than HBO.”
Netflix, in a letter to shareholders
This might seem paradoxical at first, since one is a live service video game and the other a film and series streaming platform. But it is only confusing if you are thinking of them competing in the arena of “who can capture the most TV users?” instead of in the arena of digital entertainment or maybe even entertainment as a whole.
The attention economy as we know it is reaching maximum levels of saturation. People only have so much time after accounting for sleep and work. When they come home and want to relax, they might have somewhere between 2 and 4 hours to spare. In this time they can only allocate a set amount of time to consumption of entertainment products. And if children are the customer group with the largest expected lifetime value and expendable time, then Netflix, Hulu, Disney and cable (lol) are losing badly.
YouTube is a slightly different case which we will look at separately as it deserves its own article.
Fortnite is taking up much of the same category of free time as Netflix, sports or movie theatres did. It is where you go after school to meet your friends, where you measure your skills against that of your peers, where you express yourself through customizing your character and where you spend most of your allowance on micro purchases to impress others.
What Fortnite is exceptionally good at is locking in users. There is a vast array of incentives provided to users who log in every single day and play for a certain amount of time.
There is a heavy social component, which creates a network effect. Fortnite is where your friends are today, where they were yesterday and where they are going to be tomorrow. Fortnite is where you have a reputation: where you can show off your superiority or just have fun with friends.
You just log in and meet and compete with people from around the world. In societies where mainstream culture dictates that children should be sheltered in order to “protect” them from proper experiences and competition, this fills a bitterly empty void.
In a world where parents strive to control most aspects of their children’s lives, video games are a refuge.
When I think back to my own teenage years, MMORPGs were where I had my first management experience — where it was hard to reduce me to my age in order to “shelter” me from experiences deemed inappropriate.
Online you can look however you want, there is no discrimination based on age (as long as your voice holds up on Discord).
I took on my first organisational leadership positions when I was 13 and while I was growing up in a small village in the countryside. I was responsible for a team of 8 people from all over Europe to show up on time, prepared and ready to perform in “Elite Instances” that could only be solved through the cooperation of 8 people who knew exactly what they were doing and the use of expensive, in-game, performance enhancing assets that an entire organisation of 30+ people had to play for to gather them. Where one person slacking off for just a minute could mean 4 hours wasted for the entire team and a re-try many days later.
I had to keep morale up and people going after struggling with the same boss enemy for more than two hours, while most players had to get to work in less than 6 hours. (“Raid Times” are generally in the evenings, 2–3 times a week)
As I was terribly bored with school living in a tiny, countryside village, I poured time into games like Guild Wars, Warcraft and Starcraft that taught me the importance of focus, efficiency and honesty whilst evaluating your own performance, that of your team mates and of your opponents. Online you have to learn that success can indeed be measured, but that you need to understand the nuances involved in doing so. You have to set a defined goal with clear deliverables, understand where you are at a precise moment in time, plan out the best path between these two points and then execute it efficiently.
After you are done, you have to analyse your performance both during planning and execution.
You quickly learn that you should always keep close those people who are honest and capable. Those who are straightforward and think before they talk are the most precious.
Online your competitors are not the best from your school or city, but the best. Period.
Now the industry has matured a lot over the past 15 years and it seems like I’ve gone on quite the tangent here.
What I am trying to explain through this personal story is the biggest appeal of online video games. They are places that people who got stuck in their own generation’s media don’t understand and therefore hardly influence. They are safe havens that allow for an escape from expectations of the currently dominant generation. For some this might mean escaping the pressure to perform, for others the thrill of having to perform. They allow young people to have experiences and learn what they would otherwise never have been able to.
To better understand this dynamic, look at the markets with the highest engagement for video games. Early on it was Korea, nowadays the largest market is China, with Taiwan and Japan looking similar with regards to screen time of those under the age of 20.
These are conservative societies with very rigid and time-consuming educational systems that allow for very little experience based learning.
Adolescence is a time of character development through resistance and distancing from the parents, which is why internet café’s, as gathering spots still flourish in these markets and League of Legends is by far the most popular sport in China. Every action begets a reaction and if you push your children into ever tighter structures, their drive to escape grows proportionately.
All of this time spent in digital worlds creates loyalty towards brands way beyond that which e.g. Disney has ever achieved. If you think that Star Wars or Marvel are valuable brands due to their fans’ loyalty, you’ll be surprised at what is to come.
We are at the dawn of a new paradigm for engagement.
Global “Superbrands” will eclipse everything we have seen so far, or even thought possible.
Imagine combining FC Bayern Munich and Disney and then dialing up the Fan engagement by about 50%.
Merchandise, sold out stadiums with millions of people watching at home and tournament price pools regularly in the 8-digit area are only the beginning for an industry that is still belittled by decision makers in organisations that have already been disrupted and are not even realizing it.
Riot Games, the developers of League of Legends, are taking their first observable foray into Superbrand territory by producing music, designing their own influencers and super stars and then monetizing them by allowing players to buy their outfits in-game.
Simultaneously they are launching an exclusive collection with Louis Vuitton in the style of the enormously successful Supreme.
These are just the very first experiments by one of the large players. This is not even the tip of the iceberg.
Despite it being one of the world’s most popular e-sports with a solid 10-year run in the spotlight, League of Legends is miniscule compared to Fortnite, and is nothing compared to the next mainstream conquering, massive entertainment phenomenon in gaming that is always on the horizon.
Unlike in football, baseball or basketball, almost 100% of fans actually play the games themselves.
After all, games have one thing no other media has:
They are interactive worlds and the player is a real part of them.