Here at Futuresource Consulting, we expect the gaming industry to deliver global sales of $199 billion in 2021, once the final figures are in. It’s a diverse sector, drawing revenues from hardware, software, gaming accessories, XR and Esports. While software commands the lion’s share, accounting for more than 85% of the total, Esports is currently bringing up the rear. And although XR continues to gain a foothold in the market, content availability is still limited.
Looking at the wider entertainment landscape, gaming consistently captures around one third of global consumer entertainment content spend and is steadily growing. That’s despite the rising popularity of free-to-play (F2P) games, with their convenience, accessibility and inherent affordability.
Accounting for 37% of global home entertainment spend in 2021, gaming has proved to be the most resilient entertainment segment during lockdown. We expect it to average a CAGR of 8% between 2019 and 2022, while music and video will both have to contend with heavier tumbles over the period.
Drilling into the gaming ecosystem detail, over half of all spend is on mobile gaming. That’s no surprise, as the global installed base of mobile devices has now surpassed the four billion barrier, with spending heavily skewed towards APAC consumers. Meanwhile, digital software delivery is hitting new highs, accounting for 68% of total console and handheld spend, and rising.
Across all platforms, downloadable content (DLC) is a key revenue driver. It already accounts for 90% of all mobile and tablet gaming revenues, with paid mobile games fading from the picture, at just 4% of global revenues. Futuresource expect this small proportion to continue to shrink away further, as F2P exerts its influence as a substantial driving force behind DLC spend.
The transition from physical disc to digital content delivery continues apace. Our research shows a current digital to physical revenue split of 61% to 39% for consoles, in favour of digital delivery. Yet there are still strongholds of interest for physical disc purchases, predominantly within the hardcore gamer community. Many of these gamers continue to buy discs for a combination of collectability, nostalgia and trade-in reasons. However, this group is an ever-diminishing minority in an expanding maelstrom of gamers from all walks of life.
It’s not all going digital’s way. Nintendo handheld games are bucking the wider trend, with physical games accounting for 56% of revenues. That’s partially down to Nintendo’s tendency to maintain prices on their IP releases, with very few price reductions.
As a result, physical games and consoles hold their value extremely well when compared to their counterparts. Combined with a strong trade-in and gifting aspect to their games, there’s a raft of compelling motivations that is persuading consumers to stand clear of the rising digital tide.
PlayStation and Xbox are both making strong inroads into digital content, with COVID-19 acting as a further catalyst to an already shifting marketplace. Yet while PlayStation is treading a relatively soft path into digital delivery, Xbox is leaning hard into its strategy, effecting a long-term play with Game Pass.
With its compelling value-for-money proposition for hardcore gamers and the newly initiated alike, Game Pass now has a player base of around 30 million. Plus, with strategic partnerships in place with telcos for exclusive bundle deals and a firm eye on 5G providers, its star continues to rise.
Beyond the tech, there’s an increasing drive in the industry to cut out the middleman, with retailers a prime target for the freezeout. Many publishers, including Ubisoft/EA, are offering subscription-based access to play their catalogue of games, delivered through a launcher via the PC.
The increasing interoperability of games across multiple platforms is also becoming a key theme within the sector. Gameplay convergence is a lucrative and pivotal concept for publishers, as it unifies all consumers, bringing them together in one place. This opens up a new world of engagement, as players are released from the constraints of device. They can select the platform that suits them in the here and now. More importantly, they can choose to play on the go. And the power of networks comes into play as well. Players can connect with friends who may own a competing platform. As a result, publishers are accessing a wider player audience and reaching deep into their wallets.
The ecosystem is already here. Games like Fortnite, Rocket League and Minecraft allow users to play across different devices, and these brands are beginning to touch upon the makings of a metaverse. This embryonic metaverse is likely to materialise within the gaming ecosystem first, as gamers have shown to be open and responsive to innovation and change. From there, we expect it to extend to the rest of the internet.
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Futuresource Consulting is a market research and consulting company, providing its clients with expertise in Professional AV, Consumer Electronics, Education Technology, Content & Entertainment, Professional Broadcast and Automotive. Combining strong methodologies and unsurpassed data refinement with in-depth market knowledge and forecasting, Futuresource deliver the latest insights and technological developments to drive business decision-making.
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