Analyzing The Global Digital Games Market Spring 2016 & Beyond

The future continues to look bright for the worldwide digital games market. The market as a whole was up 11% from the previous year, now standing at six billion dollars as of May 2016, according to Superdata where we draw our Year over Year data. Newzoo Resources expect the global market to reach $99.6 billion in generated revenue thanks to eager gamer purchases throughout 2016. Growth is expected to continue with a CAGR of +6.6% toward 2019, with $118.6 billion expected.

High and Low Broadstrokes 

At a glance, the biggest takeaway after analyzing the worldwide digital games market is that original IPs are still very much worth the time, effort and investment capital. As companies like EA Games, Capcom and others shy away from original IPs in favor of tie-in properties, sequels and prequels, developing giant Blizzard took a wild chance on a game development project much smaller in scope.

Of course, we are talking about Overwatch, the company’s very first shooter which launched a month ago on PC and console gaming systems Playstation 4 and Xbox One. The game has earned $269 million in digital revenues across all SKUs. This helped bolster the PC games sector by 8%.

Conversely, subscription-based gaming on PC continues to suffer, taking a big hit in May and dipping under $200 million in total monthly earnings. We will also be diving into everything from subscription based gaming, to the global market, YoY sales (May), the impact of VR and the shift in Mobile games revenue.

Mobile Dips While Still Enjoying Growth

As a result of seasonal buying practices, in conjunction with many strong titles released on PC and console, mobile gaming revenue has continued to dip for its third month in a row, according to Superdata report, after reaching a high of almost $3 billion in monthly sales in February.

Mobile gaming revenue in May was at $2.6 billion, still up 9% from the same month last year. Newzoo also predicts Mobile gaming will overtake worldwide PC with games sold worldwide reaching $36.9 billion. You will note that is a hike of 21.3% worldwide.

Overwatch – Mechanics & Monetization Teaches Volumes

Blizzard’s Overwatch obliterates the charts, leaving Battleborn trailing far behind. The new shooter game has successfully made an indelible mark on gamers. But it has also garnered much attention among online spectators. It is now “the 5th most commonly streamed title across live streaming channels.” Superdata reports.

It is worth noting that Overwatch is not a Free-2-Play game. Yet the marketing folks at Blizzard have hashed out a protracted monetization strategy, which includes offering a wide variety of vanity items, including skins and in-game spray tags. NASDAQ shows that Take-Two’s Battleborn enjoyed a tremendously less fortunate performance earnings, at just $18 million.

Lucrative Exclusivity for PS4 

Let us turn our focus to latest in Playstation 4’s exclusive Uncharted series. Uncharted 4 ends on a $56M high note. This is reportedly the final installment in the quartet series. The highly anticipated ending did manage to supersede Call of Duty: Black Ops III. That made it the highest earning title on console in May.

Over the course of their lifetime, more games are sold through digital distribution and Uncharted 4 earnings reflect this as well. The title sold almost six times more digital copies at launch than Uncharted: Nathan Drake Collection.

Console Places New Importance on Social Connectivity & Online Multiplayer

Online gains new importance among console executives. While online play and services have been seminal in PC gaming for some time now, online multiplayer gaming is now a key element in console strategy. At E3 2016, Sony presented an impressive lineup that featured several key titles with online game play. 

Microsoft doubled down on improving its Xbox Live infrastructure and social layer, and released details on its upcoming pirate-themed title, Sea of Thieves, which is the latest console game to heavily incorporate online multiplayer elements.

The platform holders have started to notice that additional content sales and a high-spending user base make for a lucrative combo, with games like Smite earning roughly the same on both console and PC, and titles like Destiny and The Division requiring users to be online at all times. For 2016 the market for online multi-player gaming is on track to reach $17.4 billion in revenues, in part driven by console now offering cross-platform game play.

Tencent Mobile Goes Global 

The big shakeup in the mobile sector was Tencent Mobile acquiring Supercell. Until now, Tencent’s mobile operations have largely been limited to China, but the $8.6 billion acquisition of Softbank’s majority stake in Supercell is about to change that. Supercell’s titles consistently excel in mobile revenue rankings: Clash Royale and Clash of Clans earned a combined $193 million the past month, ranking 2nd and 3rd respectively.

While Tencent already has international clout through its majority stake in League of Legends publisher Riot, the company is positioning itself as the dominant publisher in the $32.8 billion mobile market. Early signs of declining growth in the mobile games market is pushing the industry toward consolidation.

Latin America

After suffering from a period of severe economic headwinds and falling exchange rates, Latin America will see healthy growth again, reaching $4.1 billion in 2016, an impressive 20.1% YoY increase. Mobile games will generate $1.4 billion, up significantly from $900 million last year. Other market research reports have mentioned far higher revenues for this part of the world but, despite a huge mobile gaming audience of more than 190 million consumers, spending has remained low.

North America 

North America is the second largest region with estimated revenues of $25.4 billion in 2016, a YoY growth rate of 4.1%. This growth is mainly driven by the mobile segment. Console revenues remain stable as the segment moves toward digital and continuous monetization. Western Europe will see a slightly higher growth rate of +4.4% which can be mainly attributed to the fact that the region has seen slower adoption of mobile gaming to date. Eastern Europe, meanwhile, will even grow a bit more, from the past year’s crisis with a 7.3% YoY growth rate.

Asian Pacific

APAC territories will generate $46.6 billion this year, or 47% of total global game revenues. This growth represents a 10.7% YoY increase. China alone accounts for half of APAC’s revenues, reaching $24.4 billion this year to cement its place as the largest games market in the world, ahead of the US’s anticipated market size of $23.5 billion.

China’s PC market is showing signs of slowing growth, with a 4% increase compared to the previous 16% as the success of “core” mobile titles is starting to cannibalize PC game spending. However, the mobile segment in China is growing even faster than estimated and will reach $10.0 billion this year, up 41% from $7.1 billion in 2015. China will remain the largest games market for the foreseeable future, growing to $28.9 billion by 2019.

Facebook Gaming – Beyond Farmville & Casual

Facebook goes after $4.3B gaming video content market to compete with Amazon and Google. Having signed an agreement with Activision Blizzard that will allow players to log into Battlenet using their Facebook accounts and directly stream gameplay to its main canvas, Facebook has entered the market for streaming video. 

Starting with Overwatch, Facebook is poised to play an important role in connecting users with content. Despite being a latecomer, Facebook thinks its network infrastructure and massive user base is enough to close the gap with established streaming platforms Twitch and Youtube Gaming. 

Facebook’s entry into this sector may serve as a catalyst for competitive gaming, which is a major content category across live streaming channels, and on track to earn $892 million this year.

Growth Forecast & Wrap Up Worth 

It is worth noting is that Newzoo expects game software revenues from VR to remain marginal for the near future and to largely substitute other game spending on console, PC and mobile. As the uptake of VR hardware plays out, game software revenues will automatically be absorbed into current PC, TV/console and mobile revenues. 

VR and AR will in the long term change how consumers communicate with each other and interact with content. In the short to medium term, Newzoo expects the lion’s share of VR revenues to be generated by hardware sales, spectator content, and live viewing formats.

To fulfill the need of its clients to size and profile VR target groups on a global scale, Newzoo is currently performing a VR research project in 26 countries. As Newzoo recently reported, the games industry shows signs of accelerated growth following global alignment of business models and platforms.

The biggest driver going forward is the convergence of games and video on a global scale, with sports at the epicenter. This trend is transforming games into all-round entertainment franchises, opening up new ways of engagement and complementary revenue streams. This is good news for the games industry, which was already on a healthy growth curve through success on mobile.

Image graphs are courtesy of Newzoo Resources and Superdata Research.

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