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As Video Game Companies Shift Their Focus to User-Generated Content, Automation Takes on New Importance

User-generated content may be critical to profitability for video game companies, but they’ll need to ensure they have the right incentives in place to retain developers. Here’s how automation can draw in more creators (and keep them around).

As the video game industry marches toward $300 billion in annual revenue by 2025 and adds to its base of 2.5 billion gamers worldwide, it’s also undergoing an interesting evolution.

The COVID-19 pandemic has led all of us to seek authentic connection through digital spaces. For some people, that means Zoom calls. For many others, it means interacting around a shared love of video games. By August 2020, gaming sales had surged 37% year over year, and between January and September, almost $30 billion worth of video games were sold in the U.S. People aren’t just playing more games, though. They’re turning to games as a source of community, creative collaboration, and human connection.

User-generated content (UGC) was already becoming a larger part of the gaming world before the pandemic. Twitch took in more than $1.5 billion in revenue in 2019 alone. Netflix has even stated it considers “Fortnite” to be a bigger threat than HBO Max because of its massive popularity and deep content creation tools. Months spent at home learning to love specific games while also developing an appetite for fresh content and experiences will only increase UGC’s demand.

The company behind “Roblox” plans to increase the amount it pays developers for UGC to $250 million. Others should follow this strategy as UGC becomes increasingly important to the profitability of gaming companies. The customer is always right, and their demand for UGC is clear. But seizing this opportunity to grow the video game industry will require a careful strategy to address a complex problem.

Understanding the Implications of UGC

Building a business strategy around UGC doesn’t happen instantly. First, developers need to create more content and give users more ways to create content, which is no small feat. It will mean developing more content in the form of streams and gaming shows, improving learning tools to bring in new content creators, and giving experienced content creators more to do. It’s a process on par with developing a game itself.

With new content out in the wild, developers must develop an affiliate network and cultivate influencers who can make audiences aware of the content. Affiliate network marketing is especially important in the video game industry, where mega-popular streamers can single-handedly make a product or platform.

Next, developers must monetize the traffic coming in either by selling subscriptions or running ads. Success at either requires a sophisticated strategy, and gaming companies aren’t necessarily adept at optimizing ad revenue or refining the pricing strategy around a multitiered subscription model.

Finally, a system needs to connect the payment portal with the gaming company’s back-office payout platform. Most often an ERP, this system will ideally streamline the complex structures of incoming and outgoing international payments while keeping core accounting updated.

If game companies get all these elements right, it promises to pay huge dividends. Gamers flock to experiences that make UGC fun and easy to create. Likewise, streamers choose whatever platform makes it worthwhile to create and post content — and massive audiences follow them. The whole endeavor depends on creating a community that people want to participate in.

The Role of Automation in Community-Building

Automation plays an important role in building vibrant communities of human gamers. Using automation to make life easier for content creators makes a platform enticing to be on and stay on. As more UGC appears, competition for streamers will heat up, leading some platforms to feel full and others empty. Automation can draw more creators in and keep them around. Here’s how:

1. Automate Manual Processes

Automating the payments onboarding process removes a common point of friction for streamers. Fewer manual inputs on either end mean the process moves quickly, smoothly, and without error — making it easy to get up and running on a platform and removing a major barrier to entry.

2. Prioritize Partner Needs

With many options to choose from, streamers will congregate around the platforms that put their needs and wants first, especially around international payments. Automation makes it efficient to offer many payment options (PayPal, automated clearing house, wire transfer, etc.) and communicate when payments are sent.

3. Expand Worldwide

UGC communities aren’t isolated to one country or region of the world. Streamers and audiences exist globally. Automation allows for a payout platform that can handle the complexities and compliance issues of global payments.

4. Streamline Payments

Tools like direct integrations, CSV files, or APIs can connect a network tracking platform to automated payments software. Once linked, gaming companies can instantly pay streamers when they hit performance goals, which creates an incentive for the most popular streamers to get involved.

The appetite for UGC isn’t going anywhere. Automation lets companies adapt to this evolution sooner to lay the groundwork for the next era of gaming.

Chen Amit is the co-founder and CEO of Tipalti, a payments automation software that helps businesses manage their entire supplier payments operations by streamlining all phases of the AP and payment management workflow in one holistic cloud platform. Formerly the CEO of Atrica and Verix, Chen is a veteran high-tech executive and repeat entrepreneur.

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