I’ve been a gamer since I was little. I recall it started with the scrolling bullet hell styled games as well as the Pokemon series. Nothing was really quite like that initial experience of holding a Gameboy (and I’m talking about the original black and white brick, none of that coloured crap). And thus begins my boring story of my video gaming history (I swear to god, Pokemon is just a gateway drug). I will get to how this affects money very soon but allow me to indulge myself with the story of my ‘addiction’ first. Final Fantasy, Visual Novels (technically not a series of games but I’ve played far too many for me to name by series), Silent Hill, Dragon Quest, Tower Defence (a lot of different ones), Dota 2, Starcraft, Warcraft, L4D (it’s around this point where I wonder if I possibly overdone it in my last 24 years on Earth), Pokemon, Warhammer, Super Mario, CS, Red Alert, Half Life, and I honestly can go on for a lot more but I’d rather not give any more since my high school will probably want to ask questions (like where I was for an entire year or two rather than in class).

Regardless, the video game industry is huge nowadays. And the industry is not simply just producing games alone now. Derivative products like streaming (where you broadcast yourself playing a game), commentary (often done over streams where you comment on professionals or just simply others playing a game) are also massively popular. Sponsorships from both hardware and software companies allow professional gamers to live in relative comfort while doing something for a living that would make a teenager roll around in envy. Let’s start from the top though.

Games, in the traditional sense, simply makes money for a company from the revenue they generate through their sales numbers. If you think about it, it is similar to how movies are made nowadays. You have research into new technology, you have story writing, scripting, casting (for voice actors, or maybe actors for cut scenes in game), developing, and the sales it self. Of course I’ve given an incredibly brief overview, but you should get the idea by now. So you sit at home, in your soft yet supportive chair, leaning back, taking a quick sip of your dry red, and thinking about what this all means (please correct me if I’m wrong about how I imagine you guys). Quite simply, the size of this industry is starting an exponential growth. I like trends, and I sense a strong trend.

Skipping ahead a little, Dota 2’s The International (pretty much the international championships) had a total prize pool of a little over $17m. By comparison, Wimbledon (something we should all be fairly familiar with) has a total prize pool of approximately $42m. Now, this is a lot more than $17m, but I should also note that the total Wimbledon prize pool reflects both singles men, doubles men, singles women, doubles women, and the singles and doubles wheelchair etc. Not to mention that the winner takes home around $1.6m whereas the winner of TI took home $6.5m (so when divided among the 5 on the team, that’s around $1.3m each… EACH). This is a mind numbing amount of money from just one tournament. Now, Dota 2 has implemented seasonal multimillion dollar tournaments, spanning different continents generating millions for the company each time. How you ask? Quite easily. By selling hats!

I’ll get to the hats very soon.

So back to the original discussion. The concept of computer gaming has evolved past simply buying and playing. There are ‘freemium’ games where it is technically free to play but you can pay to enhance your experience (I’ll expand on it with the hats concept), and subscription games where you have to pay a fee periodically to continue playing, a good example would be World of Warcraft. Other notable ways they make money (other than selling hats) would be DLCs (downloadable contents) where they pretty much don’t release the full game and only a part of it and make you pay for the rest (I understand that I sound bitter but you’d be too if you’ve been where I’ve been… and why are things fundamentally essential to the game in a DLC anyways? Aren’t I essentially paying $100 for a $70 game? What is wrong with you?).

So what about hats? What are hats? If you meant something other than the $300 fedoras you wear, or the ridiculous lighthouse looking things that some women wear to horse races, then it must certainly be in game cosmetics. In game cosmetics are referred to ‘hats’ due to the fact that one of the most famous cases is from a red hat. Possibly the first time people realised that hats are worth hundreds of dollars. Then there are things worth thousands, and even tens of thousands of dollars (rare couriers in Dota 2). What drives people to these purchases? Well, apart from showing off your enormous e-penis and fat wallet, it is pretty much conditioning. Conditioning in the sense that you start with smaller purchases and then splurge big time once you pretty much lose sense of money within the game. I have personally spent a few hundred in it (every last cent was worth it I tell you!). Apparently, making around 50 million is pretty easy that way. They kept 75% of the money from selling hats and only 25% went towards the prize pool for TI. Well, by ‘they’, I meant Steam. Go check it out if you play a lot of games.

I should go back to the trend I mentioned earlier. That exponential trend that is. Using Dota 2 as an example again (I can use things like League of Legends but no), the very first TI only had a total prize pool of $1m. Doesn’t seem like much? It was the largest prize pool in video gaming history at the time (2011). In the next year, 1.6, then 3.8, then 11, and all of a sudden, 17. The growth is unexpected.

Rather, the growth expected.

Here is the issue, this trend is not only with Dota 2. LOL, Starcraft, CS, you only have to go to twitch.tv (no seriously, go there to check it out. The gaming society is amazing) to really understand the scope of gaming. Over 250,000 viewers are watching the streams at almost any time of the day. During large tournaments, there are over 1 million viewers. If we extrapolate to other platforms like Youtube, and we look at videos from famous streamers like PewDiePie (I’m using him because he’s the most famous who reportedly makes over $4m from Youtube revenue alone in a year, check Forbes if you doubt me), the advertisement revenue, the investment opportunities are substantial.

And only now do I realise that my word count is well over what is acceptable… So I’ll end this here. I will write more in a later article when I feel like digging through the endless pages of the secondary hats market (which I indubitably will). So I’ll just wrap this up ASAP.

Newer games, better technology, faster computer processing, it seems that the only way this can possibly go is up…

But… my wallet…