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Gaming Software Market Analysis and Commentary
21 Apr 2020 - Gaming has provided a healthy distraction during the COVID-19 outbreak, promoting social connection and interaction during a particularly unsettling time. While many consumer-focused industries have struggled during the first half of 2020, gaming has shown itself to be resistant to the global pandemic. Following a record-breaking year in 2019, with gaming software generating $143 billion of consumer spend, the industry is now poised for further growth, with captive audiences worldwide acting as a catalyst.
Entertainment spend overall is expected to increase, not least due to a bumper year for home entertainment but also as a result of social distancing measures. Music achieved a market value of $24 billion in 2019, while the TV and video markets saw a total of $290 billion during the year, with both forecast to grow over the next five years. However, gaming is the shooting star of the entertainment industry and is projected to grow faster than the entertainment market’s average, expanding from a 31% share of entertainment value* in 2019 to 36% in 2023.
Much More Than Child’s Play
“Gaming is no longer just child’s play,” says Morris Garrard, Research Analyst at Futuresource Consulting. “For decades, we’ve seen gamers grow up and carry their passion with them as their lives unfold. Meanwhile, younger generations continue to feel the craving for gaming. And these segments have been joined by a new demographic of older users, who are rediscovering casual gaming or experiencing it for the first time, reaching for Candy Crush Saga or similar hyper casual games when they need a quick on-the-go fix.”
Over the last few months, as Coronavirus has altered the way we all live and communicate, a new captive audience has evolved. The beginning of lockdown in China coincided with Lunar New Year celebrations, a key period for games marketing and usage. Futuresource research shows that mobile and PC gaming spend skyrocketed during isolation, driven primarily by popular titles like the Chinese esports phenomenon Honor of Kings. This resulted in billions of yuan being spent on a daily basis at the peak of the initial outbreak. As a result of these conditions, mobile gaming spend is expected to increase by 12% worldwide in 2020, a 5% increase relative to previous forecasts. Similarly, Western markets have seen peaking demand for games featuring a social element, including Animal Crossing: New Horizons and Call of Duty: Warzone, with lockdown conditions promoting strong userbase engagement. Call of Duty Warzone has seen particular success, thanks to its free-to-play access and cross-platform social functionality. The title has already rocketed to 50 million active users within just a month of release, bolstered by the current lockdown conditions.
The Rise of the Grey Gamer
“We’re also seeing the rise of the Grey Gamer”, says Garrard. “With movement restrictions, time-rich retirees are isolated and turning to mobile games. It’s a substitute for meeting up with friends and playing games face-to-face. In China we’ve seen a significant increase in engagement, with virtual versions of traditional table-top games. Mah-Jong, a tile-based game popular among elderly Chinese people and often played in groups of four, has had a pronounced gaming boost.”
Mobile the key to Unlocking Emerging Market Potential
There is also a rising opportunity for vendors to leverage the colossal installed base of smartphones, which reached 4.1 billion active units in 2019. Mobile connectivity, combined with the expected proliferation of cloud gaming services such as Google Stadia, will allow consumers to access the latest and greatest AAA titles while sidestepping costly investments in gaming PCs and consoles. The industry continues to transition to a digital reliant ecosystem, with digital downloads making up 80% of full game purchases, and in-game DLC spending progressing at an 8% value CAGR from 2020 to 2024 according to Futuresource forecasts. Despite this, cloud gaming services have seen slow initial uptake, with subscription revenue expected to account for less than 1% of gaming software spend globally in 2020. Long term, however, uptake is expected to build, developing alongside infrastructure and consumer acceptance of subscription-based entertainment.
“Longer term, increasing 5G penetration will accelerate the uptake of game streaming services, culminating in heightened mobile spend,” says Garrard. “The growth of these services will also change the composition of titles available on mobile platforms. We’ll see an increased alignment of mobile with console and PC platforms, rather than the traditional arcade-style, short-form content currently associated with mobile gaming. This will help to stimulate the growth of mobile gaming worldwide, with the segment forecasted to progress at a 7% 2020 to 2024 value CAGR.
“While India and other key emerging markets such as Brazil lag behind in terms of network development, the roll-out of 4G networks and cheap data has opened up these geographies too. In 2020, gaming software spend in Brazil is expected to grow by 17% thanks to the proliferation of mobile platform. While cloud gaming will flourish with faster network speeds, the appeal of cutting-edge gaming content without the initial investment in games hardware will be hard to ignore. Expect games like GTA V and Cyberpunk 2077 to expand their reach into these new markets. As the barriers fall, where traditional gaming once struggled to gain traction due to high entry costs, mobile will prevail.”
Penetration of gaming into emerging markets and older age brackets via mobile gaming, combined with significant upgrades to dedicated gaming hardware, is a significant growth driver for gaming content spend globally. Worldwide, the market is expected to grow by 40% over the Futuresource forecast period, achieving $200 billion by 2024.
*Entertainment spend includes the retail value of both physical and digital media across gaming software, music and TV & Video. Gaming spend includes full game purchases, arcade game purchases, DLC spend and subscription spending. Music spend includes both physical and digital purchases as well as spend on subscription services. TV & Video spend includes spending on SVoD, Pay-TV, Online Video, Packaged Video and Box Office.
Futuresource Consulting’s new Video Games Insights report provides detailed analysis of both gaming platform developments and global and regional trends, as well as a comprehensive accompanying dataset. For further information on this report, please contact Kailash Morjaria via firstname.lastname@example.org
Here at Futuresource Consulting we deliver specialist research and consulting services, providing market forecasts and intelligence reports. Since the 1980s we have supported a range of industry sectors, which has grown to include: CE, Broadcast, Entertainment Content, EdTech and many more.