When Netflix CEO Reed Hastings acknowledged the streaming media giant's growing list of competitors in his latest annual shareholder letter, he didn't cite Disney or HBO as the biggest threats. "We compete with (and lose to) Fortnite more than HBO," Hastings wrote in January.
Call it the rise of the gamers.
Publisher Epic Games and megastreamers like Ninja turned Fortnite into a sensation, the esports industry continues to grow, and the biggest names in tech — Apple and Alphabet among them — revealed their plans to dive deeper into gaming. Apple unveiled its new Arcade subscription gaming service and Alphabet's Google its own streaming platform for gamers called Stadia.
Amid the changing gaming industry landscape, mobile gaming has taken an increasingly bigger chunk of the pie. In 2018 the mobile gaming market, which encompasses smartphones and tablets, grew to $63 billion in revenue, according to research firm Newzoo. This accounts for almost half of the global games market. Mobile gaming is getting closer to overtaking both console and PC platforms, with Newzoo estimating more than 50% market share between tablet and phone-based games in 2020 and 2021, and over $90 billion in annual revenue.
Mobile esports — competitive gaming with mobile-based titles — has also become more established. Newzoo projects the global esports market will exceed $1.6 billion in revenue by 2021 and will rake in more than $1 billion in revenue this year. Esports teams are now raising their own venture capital, too, with one team worth $310 million, according to Forbes, and a total of nine esports teams worldwide worth at least $100 million.
One of the key leaders of mobile esports growth is Skillz, which ranked No. 31 on the 2019 CNBC Disruptor 50 list. It hosts about 2 million tournaments, featuring online games of solitaire, mahjong and a number of sports-related mobile titles for amateur gamers who earn cash prizes based on their performance. Back in November, Skillz revealed that collectively, players on the platform earn, on average, over $675,000 in daily prizes.
And not only are they earning more, they're playing more during a time that Skillz CEO Andrew Paradise calls "the beginning of the most prolific media environment ever."
"Skillz is delivering 65 minutes a day per person," Paradise told CNBC. "It's more prolific than Facebook at its peak, YouTube and Snapchat."
In fact, the average Skillz user is spending more time on the platform than Netflix subscribers spend watching content, with the average subscriber for the streaming site clocking in at about 50 minutes per day. The boom in Skillz' platform, according to Paradise, is in large part due to the competitive element that results in a higher engagement number.
Paradise believes that the increasing focus on mobile is blurring the line between casual and so-called "hardcore" gamers.
"The casual gamer is becoming a hardcore or mid-core gamer, and it's reflective of this evolution in media usage," said Paradise, who specifies that a Skillz user in the past would spend an average of about 30 minutes a day on the platform.
Many of those users are women — seven of the top 10 earners on Skillz last year were female players, a group that took home $8 million in prize money. According to a study released by Newzoo earlier this year, 46% of all gamers are female and it is a market that may include more than 1 billion women around the world.
Paradise told CNBC last November that the Skillz player base should balloon to "hundreds of millions" in the next two years, judging by the company's current rate of growth. In September, Skillz revealed that the company had also doubled its revenue run rate from $200 million to $400 million over the course of five months.
The rapid growth of mobile gaming-based companies like Skillz will only accelerate, especially as big tech companies roll out their gaming platforms and services, says Wedbush Securities' head of technology and media trading, Joel Kulina. The announcement of Google's Stadia platform and Apple Arcade in particular led the analyst to believe that the acceleration of cloud-based gaming, as well as the gradual rollout of 5G networks, are among the biggest catalysts for the space going forward, even though both are still in their early stages.
Apple is reportedly planning to spend over half a billion dollars on new games for the subscription service, according to the Financial Times. Even prior to the Arcade announcement, games were already a significant revenue driver for Apple, with Mirabaud Securites' Neil Campling estimating in June that more than 80% of revenues from the App Store actually came from gaming.
Facebook has also expanded its footprint in the gaming space. In 2016 the social media giant launched its Instant Games platform, which allowed users to play games through the Facebook app and Messenger. During its F8 conference in April, Facebook revealed in a blog post that it was rolling out new features for the platform, which received a new hub under the Facebook Gaming tab that was launched earlier this year.
Streaming giant Netflix also revealed on Monday that it will host its own panel at the annual Electronic Entertainment Expo conference, known as E3.
A tweet on Netflix's Twitter account confirmed that the company would discuss their upcoming "Stranger Things" game and "definitely more to come" in their dive into gaming.
"The big tech giants see the opportunity here," said Kulina. "Gaming remains a huge percentage of spending as far as services go, and I think it just further supports the opportunity and the continued trajectory of mobile gaming."
This, coupled with the higher-quality games that have emerged in recent years for mobile, also lead Paradise to stress that the gap between the more casual games a user would see on Skillz versus those more "hard core" by definition is closing as mobile devices take over with consumers.
"The so-called casual gamer is actually engaging the same way a hardcore gamer would; they're just doing it on different media," he said.
That's against a backdrop where the number of smartphone and tablet owners worldwide could hit about 11 billion units collectively by 2025, according to a report by Chinese telecom giant Huawei.