“We do not stop playing because we grow old, we grow old because we stop playing!” ― Benjamin Franklin
The phrase “software eating the world” is a common refrain in the tech industry, and Battery has had a long history of committing to that investment thesis. Recently, we have noticed an interesting phenomenon in the media world in which online gaming is conquering consumer attention at the cost of other, more-traditional forms of media, like television and the Internet. Put more succinctly, gaming is eating media.
In the wake of rising cord cutting by consumers and other trends, gaming has become a major new media and societal force: 2.3 billion gamers across the globe were projected to spend $137.9B on games in 2018, representing an increase of +13.3% from the year before. Within that, mobile gaming has grown from the smallest segment of gaming in 2012 to driving over 50% of video game revenue in 2018. Seventy-six percent of worldwide app revenue comes from mobile games.
Gaming has become so popular that more people are now watching professional gaming teams—part of the larger trends of e-sports–than some major, traditional sporting events. Last year, for example, 14.3 million people tuned into watch the World Series involving teams from two of the biggest U.S. sports markets, Boston and Los Angeles. Meanwhile, 78.5 million people watched the e-sports League of Legends Championship Tournament. The two most popular video game streaming platforms, Twitch and YouTube Gaming, have larger audiences than HBO, Spotify, Netflix and ESPN.
This rise in gaming also has brought significant innovations in content (i.e. game design and experiences, including enhanced social features and the rise of esports). A quick look at the iTunes charts, however, shows that the medium of these games is largely similar: They take place in a small screen, and are consumed by people who are sedentary in shorter durations. One gaming app stands out from the crowd for truly innovating in terms of medium: Pokémon Go. In this much talked-about augmented-reality game, which drummed up a huge amount of media coverage when it launched in 2016, players use their phones to find, capture, fight and train virtual characters that seem as if they are in the real world.
The powerful combination of intellectual property, augmented reality and a truly fun game has driven extremely high engagement for players of Pokémon Go. The average user plays the game for over an hour a day, far surpassing other popular consumer apps.
Today, Battery announced that we have invested in Niantic*, a high-profile, augmented-reality gaming company and the creator of Pokémon Go.
Niantic* has pioneered this new form of real-world gaming and with a guiding principle of “adventures on foot with others,” which focuses on getting people outside, exploring interesting places and meeting new people. Playing these games can make people feel good, and not in the dopamine-seeking reward loop kind of way critics typically deride in games. Pokémon Go shows that there is a place for screens to intermediate the real world instead of being the world, and that “real-life friends” can be fundamental drivers of gameplay rather than a byproduct. It also shows that, like radio and TV in past media eras, immersive new mediums can inspire new kinds of stories.
Pokémon Go unlocked this category, but its creator has bigger plans. Niantic* has partnered with Warner Brothers to create a real-world Harry Potter game, and there are a number of other titles currently in development. Niantic* also announced earlier this year that it is opening up its underlying technology, Real World Platform, to outside developers to empower them to build their own real-world AR experiences. We think these moves will help Niantic push this medium forward in a big way.
We first met Niantic’s* CEO John Hanke back in 2015, and it has been clear from the start that he is a special CEO. He combines a tremendous background in mapping (as the leader of Google’s Geo division and creator of Google Earth) with roots in gaming (as a developer of Meridian 59, one of the original MMO games). His mission-driven ethos has brought together a world-class team in the industry, world class IP and a first-of-its-kind developer platform. We couldn’t be more excited to adventure alongside him.
*Battery Ventures provides investment advisory services solely to privately offered funds. Battery Ventures neither solicits nor makes its services available to the public or other advisory clients. For more information about Battery Ventures’ potential financing capabilities for prospective portfolio companies, please refer to our website. For a complete list of portfolios companies, please click here.