Midia Research projecting global annual revenues exceeding $300 billion and 3.8 billion active players by 2030.
The video games industry is poised for substantial growth in the coming years, with a new report from Midia Research projecting global annual revenues exceeding $300 billion and a worldwide audience of 3.8 billion active players by 2030. However, the report's authors, Karol Severin and Perry Gresham, caution that the industry's growth rate may have reached its zenith.
The remarkable growth experienced by the global games industry was notably boosted by the "COVID bounce" in 2020, resulting in a 26.3% increase, and 2021, with a 9.8% surge. Unfortunately, 2022 saw a 5% decline in revenue. Although global revenues are predicted to rebound in 2023, it is anticipated that they will remain below the rate of inflation. Moreover, amid the inflationary backdrop, the industry is unlikely to witness more than low- to mid-single digit percentage growth for the remainder of the decade.
The authors suggest that the games industry needs a fresh catalyst for growth to thrive once again. They propose that in-game spending, particularly on cosmetic items, could be a potential saving grace. As consumers spend more of their lives in digital environments, their desire to define their digital image, personality, and identity grows. Unlike the fixed price of purchasing a game, in-game spending for image and identity definition can have significant potential for growth, providing developers and publishers with opportunities to capitalize on players' desire for personal expression and identity within the digital realm. This could involve finding innovative ways to engage players through personalized experiences, which could be the key to sustaining growth in the industry.
2023 in Numbers
In 2023, the video game industry is projected to exhibit the following key figures, as per the report by Midia Research:
Global Revenues: The industry is expected to experience modest growth, with global revenues forecasted to reach $223.1 billion. This follows a slight decline in 2022.
Inflationary Impact: It's important to note that this growth is taking place against the backdrop of a 6.5% global inflation rate, as anticipated by the International Monetary Fund.
Active Players: The number of active players in 2023 is estimated to increase to 2.88 billion, up from 2.73 billion in 2022, indicating continued growth in the gaming audience.
Game Subscriptions: The report identifies a rise in game subscriptions, with 180.6 million active subscriptions expected by the end of 2023, generating $11.7 billion. However, these subscriptions will make up only 5.2% of the global games revenue, with the majority (67.2%) coming from in-game purchases.
In-Game Spending: In-game spending is projected to reach $125.7 billion in 2023. Cosmetic purchases are anticipated to contribute significantly, accounting for $72.5 billion, surpassing "progress-based in-game spending," which is forecasted to generate $53.2 billion.
Platform Revenues: When examining platform revenues, mobile games are expected to be the largest source, generating $105.2 billion. In comparison, console and PC games are projected to generate $45.3 billion and $36.4 billion, respectively.
Console Hardware: Console hardware will reach a "delayed peak" for the current generation of devices, with revenues expected to reach $20.2 billion.
Virtual and Extended Reality (VR/AR) Hardware: VR and AR hardware are projected to remain relatively niche, with revenues at $4.3 billion.
Games Advertising: Games advertising is expected to generate $21.8 billion in 2023.
These figures provide an overview of the state of the video game industry in 2023, highlighting the industry's resilience and continued growth despite inflationary challenges and shifting revenue sources.
2030 in Numbers
The video game industry is poised for significant growth over the next decade, as projected by Midia Research:
2020-2030 Revenue Growth: The industry is expected to surpass the $300 billion mark, reaching $301.2 billion by the end of the decade. Several factors will drive this growth, including an expanding player population, increased in-game spending, a surge in advertising, and growth in the virtual reality (VR) sector.
Active Game Subscriptions: The number of active game subscriptions is predicted to grow to 318.5 million by 2030, although its share of global games revenues will increase to 7.5%. Revenue generated from this subscription model is expected to reach $22.7 billion.
Impact of Subscriptions: The authors believe that subscriptions will have a significant impact on the trajectory of global games revenue for the next decade, altering how gamers access and engage with games.
In-Game Spending: In-game spending is anticipated to increase to $176.9 billion by 2030, constituting just over 70% of all games software revenue. Cosmetic purchases are projected to remain the primary driver at $105.5 billion, with progress-based purchases expected to rise to $71.4 billion.
Drivers of Cosmetic Spending: The growth in cosmetic in-game spending is expected to be driven by older players' increasing participation in such purchases, as younger players who are accustomed to these purchases grow up. Modest growth in time spent playing games and rising average revenue per user will also contribute to this trend.
Platform Revenues: Platform-wise, mobile is expected to see revenues grow by 32.4% to reach $139.3 billion by 2030. Consoles will grow by 35.1% to $61.2 billion, while PC will increase by 39.3% to $40.7 billion.
Console Hardware Revenues: While specific numbers for console hardware revenues in 2030 were not provided, the report predicts a decline from 2023 to 2027, followed by growth from 2028 onwards during the next generation of consoles.
Games Advertising: Games advertising is projected to grow by 46.3% to reach $31.9 billion in 2030.
Resilience and Subscriptions: Despite inflation affecting the industry's growth pace, video games have historically demonstrated resilience during economic challenges. Many consumers perceive subscriptions as a cost-effective way to access games, potentially mitigating the impact of rising prices for standalone games on sales and engagement.
These forecasts indicate that the video game industry will continue to be a dynamic and rapidly evolving sector with multiple revenue streams and an expanding global player base. Subscriptions, in-game spending, and advertising are set to be major drivers of growth in the coming years.
The growth of the player population
The growth of the player population is identified as a pivotal factor for the video game industry's expansion between 2023 and 2030, as outlined by Severin and Gresham. Several key elements contribute to this anticipated growth:
Rising Global Population: The increasing global population plays a significant role, with Midia's prediction suggesting that the world's population will rise from 8.1 billion today to 8.9 billion by the end of the decade. A larger population inherently leads to a broader player base for the gaming industry.
Emerging Markets and Technology Penetration: The proliferation of the internet and smartphones in emerging markets is expected to have a direct impact on the number of players. Improved access to these technologies, especially in regions like Africa and Southern and Southeast Asia, will contribute to the growth of the player population. As these areas gain better connectivity and device accessibility, more individuals will become gamers.
Aging Generations: The aging of generations who grew up with video games is another factor. As these individuals grow older, they continue to engage with games, contributing to an expansion of players among older consumer segments. This trend is already underway, with the number of older consumers in the US playing on consoles increasing from 5% in 2019 to 9% in 2022.
While this growth in the player population is expected to bolster games revenues, the authors caution that the average revenue per user (ARPU) is likely to experience a slight decline between 2022 and 2030. This might be due to a more diverse player base with varying spending habits and preferences, including a growing number of players in emerging markets and older demographics who may not spend as much on games as the traditional gaming audience. Nonetheless, the overall growth in the player base is expected to offset this decline, resulting in continued industry growth.
The rise of subscription models
The rise of subscription models in the gaming industry is expected to have a transformative impact on the commercial dynamics of the sector, according to Severin and Gresham's observations in the report. While subscriptions are projected to contribute only 7.5% of global games revenues in 2030, they are considered the "single most important catalyst" driving changes in the industry over the next seven years.
Here are some key takeaways regarding the rise of subscriptions:
Changing Commercial Dynamics: Subscriptions will reshape how players access and engage with games. While consumers are likely to embrace subscriptions, their impact on the industry varies depending on the type of gaming company. Traditional premium game publishers and developers may face challenges due to subscriptions, while those embracing in-game spending and advertising models may benefit.
Dilution of Individual Game Purchases: Subscriptions will reduce the necessity to purchase individual game titles, particularly at higher price points. However, the broader availability of game libraries means that more titles are likely to be played. The longer lifespan of games on subscription services allows for easier updates and reengagement of players.
Value Proposition: The value proposition for gamers in subscriptions is compelling, especially when compared to other media forms like music and video. While a $10.99 subscription in music competes with $10-$20 CDs or $20-$30 DVDs in film, a AAA game can cost between $50-$100 today. A subscription costing less than $20, offering access to hundreds of games, presents an unprecedented value proposition.
Dependence on Subscriptions: Developers are expected to increasingly rely on subscriptions for their titles to be discovered and played. This shift may reduce their negotiating power with subscription service operators.
Impact on Traditional Publishers: Traditional publishers will continue to play a vital role in terms of funding, but subscriptions are likely to absorb some of their power in marketing, user testing, and distribution. The growth of subscriptions and the impact on individual game purchases will also influence the funding publishers can provide to developers.
Challenges to the Unit Sales Model: The combination of the rise of subscriptions and the ongoing growth of free-to-play games poses significant challenges to the traditional unit sales model. The games industry is becoming increasingly reliant on time spent in games, making it a zero-sum game where companies need to capture time away from competitors to grow.
In essence, the gaming industry is undergoing a significant shift in revenue models, and subscriptions are poised to play a central role in the evolving landscape. This transformation has implications for how games are monetized, distributed, and funded, ultimately reshaping the industry's dynamics.
Midia's report offers valuable recommendations for both developers and distributors in the gaming industry. These insights help both parties adapt to the evolving landscape and capitalize on emerging opportunities. Here are the key takeaways:
Early Adoption of Subscriptions: Developers considering subscriptions are advised to join such services sooner rather than later, as negotiating power and funding opportunities may diminish over time. Exceptions may apply for niche premium titles with loyal and high-spending user bases, making them attractive to investors or potential buyers.
Niche Premium Games: Premium games are expected to become more niche, with high-price point titles finding it challenging to reach broad audiences. Developers should focus on niche, high-premium, and hard-to-replicate titles, such as simulators, to maximize growth opportunities in the premium games sector.
Embrace In-Game Identity: Developers are encouraged to prioritize identity-building through in-game items and experiences. Cosmetic in-game spending is predicted to witness significant growth over the next decade, making it a valuable revenue source.
Advertising and Product Placement: Embracing advertising and product placement within PC and console games can help improve margins in the face of growing subscriptions and declining premium sales. Diversifying revenue streams is essential.
Focus on Time Spent: Recognize that time spent in-game is more valuable than games that can be quickly finished. Games are evolving into entertainment platforms themselves, and understanding players' needs and behaviors, and enabling these within the game, is crucial.
Power of Subscription Services: Subscription services are poised to become the most influential digital distributors. They can build strong end-to-end relationships with gamers and developers. Traditional distributors that do not enter this space may struggle to reach players effectively.
Algorithmic Recommendations: Algorithmic recommendations are becoming increasingly vital for publishers, developers, and distributors. They help ensure players make the most of their subscriptions. However, caution should be exercised to prevent overwhelming players with too many choices.
Direct Collaboration with Developers: As subscription distributors assume ownership of player relationships, they must provide services traditionally offered by publishers, including funding, marketing, quality assurance, testing, and benchmarking. Collaborating directly with developers will be crucial for the success of these relationships.
These recommendations highlight the need for adaptability and innovation in the gaming industry, particularly in response to the growing influence of subscription models and the changing dynamics of player engagement. Developers and distributors that embrace these shifts are likely to thrive in this evolving landscape.
The insights from the report, co-authored by Karol Severin, provide a valuable perspective on the state of the gaming industry and the need for adaptation and innovation to sustain growth. Several key points are worth emphasizing:
Mature Industry: The gaming industry has reached a level of maturity, and as industries grow in absolute terms, their relative growth rate tends to slow. Recognizing this and adapting to the changing dynamics is crucial for companies within the industry.
New Growth Drivers: The industry requires new growth drivers, particularly as time spent and consumer spending patterns evolve. The focus should shift from convincing consumers to play longer or spend more on existing game propositions to embracing the broader digital entertainment lives of gamers.
Consumption Platforms: Games are transforming into consumption platforms, and companies must understand that gamers organically spend time and money on various digital experiences like music, video, sports, and social media. Integrating these aspects into gaming experiences is essential for driving growth.
Learnings from Other Industries: The gaming industry can draw lessons from the music and video streaming industries. Streaming services in these sectors commoditized access to content, which affected unit sales of physical media. Similarly, the gaming industry is experiencing a shift with subscription services, which can decrease the need for high-priced individual game purchases.
Adaptation and Embracing Change: Rather than resisting change, companies should adapt and explore new opportunities to be a part of consumers' digital lives. Embracing the changing landscape and finding ways to integrate various entertainment forms within games can be a key to future growth.
In summary, the gaming industry is at a juncture where it must navigate the challenges of maturation, changes in consumer behavior, and the rise of subscription models. By being proactive and innovative, companies can position themselves to capture growth opportunities and remain relevant in this dynamic and evolving landscape.
Source: adapted article by James Batchelor, Editor-in-chief for GamesIndustry biz.