Month: April 2023

Hollywood’s flirtation with video game adaptations is still in its relatively early stages, but it’s shaping up to be a romance for the ages. Digiday spoke to the experts to figure out why gaming IPs have become the next big money maker for the film and TV industry. 

Here are five reasons:

1. Gaming has finally become a multi-generational activity

By now, popular gaming franchises such as “Mario” have been around for decades — which means multiple generations have grown up hopping on Goombas and defeating Bowser. When the live action “Super Mario Bros.” film came out in 1993, kids may have been excited, but their parents likely rolled their eyes at the concept of a video-game-based movie. 

Last weekend’s box office numbers show that parents and children alike showed up in force to watch the “Super Mario Bros. Movie” — and the film was chock-full of references to Mario games young and old, ensuring there was something for every generation of fans.

“There were all of these references that folks like me, who are in their forties, recognized from the game I played 15 years ago, even if it was only a passing moment in the movie,” said Jonathan Stringfield, vp of global business research and marketing at Activision Blizzard Media. “It had all these nice hooks within it, keeping even someone who is ostensibly not within the target demographic well-engaged with the film through nostalgia and familiarity with the IP.” 

2. Video game movies are actually good now

Critics might disagree, but the 96 percent Rotten Tomatoes audience score for the “Super Mario Bros. Movie” does not lie. As the storytelling of video games themselves improve, film and television studios are investing more resources into their game adaptations, creating a perfect storm for the development of genuinely high-quality adaptations such as “The Last of Us.” Audiences are rewarding this increase in quality by showing up at the box office.

“These projects are given more resources, and the creative teams behind them are given more freedom,” said Margaret Boykin, vp of Ubisoft Film and Television. “Where adaptations of games have suffered in the past is in their inability to deviate from the source material and make important distinctions between the right storytelling for games vs. films and television series. There is a misconception at networks and studios that gamers will reject anything that isn’t game canon. Now, adaptations are being applauded for their additions to the game lore.”

3. Gaming IP has ample potential for the creation of cinematic universes

The success of the Marvel Cinematic Universe has put film and television studios on alert for the next properties that might be adapted into a cohesive cinematic universe — but there are few forms of media whose long-term storytelling and cross-pollination of characters are as deep as comic books. But one form of media that could rival comics in its potential for the development of a cinematic universe is gaming; after all, the world of “Mario” is populated by dozens of memorable characters, only a fraction of whom showed up in the “Super Mario Bros. Movie.”

The next big cinematic universe may very well be the NCU — the Nintendo Cinematic Universe. “Not a lot of studios have that depth of IP to tap into, whereas video games are a huge body of IP that has been relatively unexploited,” Stringfield said. 

In addition to the wealth of characters and settings in the world of “Mario,” Nintendo owns a multitude of other popular franchises such as “Metroid” and “The Legend of Zelda.”

4. The COVID-19 pandemic boosted the popularity of gaming IP

This is no surprise, but it’s worth mentioning: The COVID-19-fueled bump in gaming activity has finally come to Hollywood. At the peak of the coronavirus pandemic, consumers’ engagement with gaming content ballooned, (< have any stats to support this?) creating a new crop of gaming fans familiar with IPs such as “Mario” and “The Last of Us.” In 2021, 227 million Americans told the Entertainment Software Association that they played video games, an increase from 214 million the previous year. The livestreaming platform Twitch saw a 67 percent increase in viewership during the same period.

Through adaptations such as the “Mario” movie, the film industry is simply reacting to this uptick in interest. 

5. Gaming IPs come pre-loaded with vibrant and passionate fan communities

Video game adaptations are a cheat code for Hollywood film studios because, like comic books, their fandom doesn’t need to be built from the ground up. For millions of “Mario” fans, it was practically fait accompli that they would put their butts in movie theater seats for the release of the “Super Mario Bros. Movie,” regardless of the quality of the film. 

And in the long term, gaming IP may have more legs than comic book IP. Sales of print comics have been declining for years, but interest in gaming is only growing.

“With the budget of Hollywood projects ballooning, everyone is looking for bankable cultural properties to mitigate risk. Comics provided this, and now it’s video games,” said Jason Chung, director of esports and gaming at New York University. “The ‘Mario’ movie’s success won’t be a definitive jumping off point or end to video game IPs as movies. The only difference is that studios seem to finally be understanding that they need to give appropriate budgets and support to these films.”

Malik Drabla, 24, and Riley Walz, 20, are among them. Drabla recently quit his job at Google to join an AI accelerator program founded and funded by tech entrepreneur Dave Fontenot, and run out of a Victorian mansion, in Alamo Square, San Fransisco. Walz also took a leave of absence during his senior year at Baruch College, to join the program, which has been dubbed the “monastery of hackers.”

Those who apply to this 12-week residency program, called or Hacker Fellowship Zero – or HF0 – get an injection of $250,000 investment in exchange for 2.5% in ownership of their company. The program takes care of everything they need, including food, amenities, and laundry. To get in, interested entrepreneurs can pitch their products in an online application process.

“My friends like to call it the ‘programmer Hype House,’” said Drabla.

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While more ad dollars are being spent on the short-form format, it’s now being allocated across more platforms than ever before. And this could become troublesome for TikTok in the long run even if it initially got marketers addicted to short-form video content.

“TikTok led the global short video field over the last few years — 2023 is the first time that run may be challenged,” said Jamie MacEwan, senior research analyst at Enders Analysis. “TikTok’s user base crossed a billion while ad revenue reached around $9 billion in 2022, up tenfold on 2020. We expect its ad growth to slow a bit to around 40% this year.”

If this happens, it could be a chance for a company like Meta to carve out a bigger share of those ad dollars earmarked for short-form video.

Reels is closing the gap

Momentum for advertising on Reels is building. Expect Meta will do what it can to sustain it. Marketers have told Digiday over the last few months that Reels is already in a strong second place to TikTok, and the gap between the two is narrowing.

Reels has already made inroads into those budgets over the last year or so. Its annual ad revenue run rate tripled from $1 billion in Q2 2022 to $3 billion at the end of the year, a rate likely to continue now that Reels accounts for 30-40% of Instagram usage, per Meta’s most recent investor call.

The amount of Instagram impressions from Reels in 2022 was 2.5%, which shot up to 10.8% whereas in the first quarter of this year. That’s around 5% up on last year — and noticeably faster than the growth of advertising on TikTok over the same period.

It’s a surprising — albeit not completely unexpected — turnout. Instagram Reels is growing from a lower base than TikTok. Of course, spending there is going to grow faster than at TikTok where there’s more money being spent. TikTok didn’t immediately respond to Digiday’s request for comment.

Even still, ad spending on TikTok this year at agency Tinuiti is expected to triple for its clients compared to 2022, which saw a similar rise on the prior year.

That’s as much down to TikTok’s dominance as it is the way ads on Reels are bought. Marketers don’t actually allocate ad dollars for Reels. Meta does that for them. Meaning when they buy ads on Reels they don’t necessarily know how many impressions they’re going to buy. Whereas on TikTok, advertisers decide how much they’re going to spend to appear around the content.

And a holistic short-form video approach has been favored by brands that were previously solely focused on TikTok, said Tim van der Wiel, founder of social tech agency GoSpooky.

“This indicates that brands are not necessarily pulling money from TikTok but are expanding their investments in other platforms as well,” said Wiel.

There are even shades of this trend happening at agency Influencer.

There, TikTok spend among clients increased from 10% of all campaign spend last year to 40% this, said Nik Speller, the agency’s vp of commercial. And among Instagram spend (which makes up 50% of all campaign spend this year), “over half” is devoted to Reels, Speller noted.

That’s approximately 35% of influencer’s clients’ overall spend going on Reels campaigns on Instagram, up from some 15% the year before.

At Incubeta, no clients were advertising on TikTok in 2021, that increased to 10% of clients in 2022, then to 25% of clients this year, said Craig Brown, svp strategy at Incubeta. Meanwhile, Reels spend has remained “very low” — and about 1% of Meta impressions are served on Reels, Brown said.

Short form is now a much broader consideration

As spending is more diversified among these short-form channels, the TikTok-focused mindset that shaped a significant amount of ad spending on short-form in recent years is evolving into something more holistic.

Even if marketers seem to only have eyes for Reels after TikTok, as players like YouTube, is still managing its new rev share deal, and Snapchat is dealing with its identity crisis.

But before we see any grand shifts on short-form ad dollar spend, the industry needs to get a better handle on how best to monetize short-form. And that goes for both platforms and advertisers. Given that creators are an increasingly bigger part of any media strategy these days, advertisers are still just getting to grips with the format, and how best to join in that conversation. Only then once they’re confident with that, can monetization really move to the next level.

There will, however, be a change eventually. 

Keep in mind what happened to Snapchat and the Stories format. For a time, the mobile messaging app blazed a trail in short-form video, ever before TikTok was on the radar. It was the first port of call for any advertiser wanting to use the format. But Snapchat just couldn’t keep up with those businesses.

And TikTok is arguably insulated from this happening as easily to its ads business. Its closely-guarded algorithm, which is how it keeps people so engaged with its videos, will make sure of that. Still, it’s only a matter of time before Meta and YouTube are able to find a way to replicate TikTok’s success. They do have form, after all.

“There’s obviously the potential that one of these other platforms which creates a similar format will just destroy TikTok’s core user base,” said Peter Czepiga, founder of Flighted.co. “If YouTube Shorts or if Instagram Reels does continue to work out, they can convince creators to post initially and invest most of their time into Instagram Reels, for example, instead of TikTok.”

But it’s clear that publishers are still working out the best approach to their events businesses in the wake of the pandemic that changed people’s perspectives on gatherings — and now, on top of that, an economic downturn. This is according to a Digiday+ Research survey of 112 publisher professionals.

Digiday’s survey found that, like the post-Covid-19 period, publishers’ attitudes toward their events businesses have seen ups and downs in the last two years. Throw in the state of the economy and it’s hard to know what to make of the events revenue category.

Overall, publishers grew their revenue from events throughout 2022. Sixty-three percent of publishers made at least a very small portion of their revenue from events as of Q1 of last year, and that percentage rose to 71% by Q3 2022. People were ready to be out and about again, and publishers were ready to capitalize on that. However, likely due to the downturn in the economy, the percentage of publishers who said they get even a little revenue from events fell significantly to 57% as of Q1 of this year.

Now, publishers who get no revenue from events (43%) make up the largest percentage in Digiday’s survey, followed by those who said they get a very small or small portion of their revenue from events (33% said this in Q1 of this year).

Overall, though, publishers do see events as an area for potential revenue growth. While 57% of respondents to Digiday’s survey said in Q1 that they get at least a small amount of revenue from events, 67% said they will have at least a very small focus on growing their events business in the next six months.

Although the focus appears to be much smaller this year than it has been in the past.

While two-thirds of publisher pros said they’re at least a little focused on building their events businesses, that’s actually a drop-off from 2022. A year ago (in Q1 2022), 71% of publisher pros told Digiday they would focus at least a little on building their events business. And that percentage rose to 78% by Q3 2022 before dropping to 67% in Q1 of this year.

Additionally, the number of those who said they will focus on building their events business soared six months ago before falling off at the beginning of this year. In Q1 2022, 29% of publisher pros told Digiday building their events businesses was a large or very large focus. In Q3 2022, that percentage jumped significantly to 40%, before plummeting to 25% in Q1 2023.

For large publishers (or those who made $50 million or more in revenue last year), the enthusiasm shown at the beginning of last year in the afterglow of the pandemic is clearly petering out as they wade into uncertain economic waters. A full three-quarters of publisher pros who work for large publishers (75%) told Digiday in Q1 2022 that they made at least a very small portion of their revenue from events. That percentage dropped to two-thirds (66%) as of Q1 of this year.

Meanwhile, of the large publishers who do make money from events, the percentage of those who said only a very small portion of their revenue comes from that category jumped in the last year — from 17% in Q1 2022 to 27% in Q1 2023. At the same time, the percentage of large publishers who said they make a moderate portion of their revenue from events has fallen from 19% in Q1 of last year to just 7% in Q1 of this year. And the percentage of those who said they make a large portion of their revenue from events has seen a similar drop, from 17% in Q1 2022 to 7% in Q1 2023.

But large publishers do still see the potential in events as a revenue stream. (Which can’t hurt in this economy, because any port in a storm, right?) Seventy-one percent of publisher pros who work for large publishers told Digiday in Q1 of this year that building their events business will be at least a very small focus for them in the next six months. This is a slight drop from the 75% who said the same in Q1 of last year, but it’s still more than the 66% who said they currently make at least a little bit of money from events — which indicates that large publishers see room to grow when it comes to events.

It’s worth noting that the percentage of large publishers who said building their events business will be a large focus in the coming months dropped from 17% in Q1 2022 to just 2% in Q1 2023. However, notably, the percentage of large publishers who said growing events revenue will be a very large focus shot up from 4% last year to 12% this year.

On the small publisher side of things (which includes those who made less than $10 million in revenue last year), events appear to not have as much potential, compared with their larger counterparts. For instance, the percentage of small publishers who said they get at least a very small portion of their revenue tanked in the last year, falling from 71% in Q1 2022 all the way to 47% in Q1 2023.

Additionally, not one small publisher respondent to Digiday’s survey in Q1 of this year said they make a very large portion of their revenue from events, compared with 10% who said so in Q1 of last year. And the percentage of those who said they make a large or moderate portion of their revenue from events fell from 22% last year to 11% this year, while the percentage of those who said they make a small revenue portion from events rose from 6% last year to 14% this year.

And small publishers likely won’t be betting big on events anytime soon. Digiday’s survey found that the percentage of small publishers who said they will put at least a very small focus on building their events businesses in the next six months fell in the last year, from 71% in Q1 2022 to 64% in Q1 2023.

However, nearly two-thirds is still a significant number of small publishers who will focus at least a little on building their events businesses. And of those small publishers who will focus on events, the ones who said they’ll put a large focus on that part of their business account for the largest percentage, at 22% (which is unchanged from a year ago).

Meanwhile, the percentage of small publishers who said they’ll put a moderate focus on building their events business in the next six months fell from 22% in Q1 2022 to 14% in Q1 2023. And the percentage of those who said they would put just a small focus on building events bumped up a bit in the last year, from 6% in Q1 2022 to 11% in Q1 2023.