Global gaming on the path to post-pandemic recovery

Colin Campbell, Wednesday, August 9th, 2023 10:27 am

Newzoo’s latest report on the game industry – released yesterday – forecasts 2.6% global growth for 2023, mainly driven by demand for the newest generation of consoles, which are now in ready supply. The report said that console sales will rise by 7.4%.

Total industry revenue will hit $187.7 billion this year. This stands in contrast to a post-COVID revenue drop of 5% for 2022. The number of people paying to play games will grow by more than 7.3% globally to 1.47 billion, and is forecast to continue growing to 1.66 billion players by the end of 2026.

Mobile gaming is dominant across the world, with an expectation of 2.8 billion players by 2026. PC gamers make up 892 million people, followed by 629 million console players. Global gamer numbers are now at more than 3.3 billion people.

Turbulence diminished

The game industry’s “turbulent” experience during and after the pandemic – huge short-term growth followed by contraction, as well as production pipeline difficulties – will stabilize within three years. By 2026 “the global games market will generate yearly revenues of $212.4 billion”.

Newzoo pointed towards this year’s release of “many highly anticipated delayed titles” as a positive sign. Games that were delayed from 2022 include hits like Hogwarts Legacy, The Legend of Zelda: Tears of the Kingdom, and the forthcoming Starfield. Console game publishers “embracing live-service strategies to ensure stable growth” was also cited as a positive trend.

Newzoo pointed towards game-based movie and TV releases as an indicator of industry health, and a source of potential growth, including hits like the Super Mario Bros. Movie and HBO’s The Last of Us. The long list of “transmedia” productions currently in development include movies based on Minecraft, Borderlands, and Death Stranding, as well as TV shows based on Assassin’s Creed, Final Fantasy, and Mass Effect.

Mobile struggles

However, mobile gaming continues to struggle with the fallout from Apple and Google’s policies that are making user-acquisition more expensive, and more challenging. This will “somewhat limit growth” for the next three years. Mobile gaming saw year-on-year revenue growth of just 0.8% in 2023, far lower than growth rates in prior years.

The report notes that mobile developers and publishers “have been forced to course-correct their strategies and experiment with new ones, stopping the segment’s trend of immense growth in its tracks”.

The one positive in comes from emerging markets, although much of the benefit appears to be going to those established companies least affected by Apple and Google’s changes, as legacy hits are the most successful among new consumers. “Mobile will remain gaming’s most significant segment by consumer spending by far, accounting for just under half of the entire global market,” writes Newzoo’s lead game analyst Tom Wijman.

Industry-wide, the Middle East and Africa region is delivering the most growth this year in terms of player numbers, up 12.3% to 574 million, or 17 percent of the global market, the second largest in the world. Asia remains the biggest region with 1.78 billion players (53% market share) trailed by Europe (13%), Latin America (10%), and North America (7%).

In terms of revenue, North America carries a 27% market share ($51.6 billion), with Europe taking 18% ($34.4 billion). Both regions are showing modest, single digit growth this year, while revenues in the Middle East and Africa are up 6.9% to $7.2 billion, representing a global revenue share of 4%.

Positive trends

Newzoo’s report acknowledges “a challenging macro environment, resulting in headwinds for revenue growth,” in the PC and console markets, while noting opportunities in live service games, subscription services and cloud gaming.

“Game makers across console and PC are experimenting with several new strategies to monetize current players further, diversify their revenue streams, and increase their total addressable market,” writes Wijman.

The highest 2021-2026 growth numbers will come from in-game subscriptions and downloadable content such as expansions, further driving the move towards fully digital gaming. In the PC market, boxed games now account for only 0.5% of sales, almost completing a trend that is also playing out in console gaming.

Third-party live-service games continue to dominate monthly active user and revenue charts on console and PC – a trend that has shifted the market enormously over the past decade. Asian giants and mobile gaming companies have taken note of the success of games like Fortnite, Apex Legends, and Sea of Thieves and are making in-roads with the continued growth of more recent introductions like Genshin Impact.

Meanwhile, console makers like Microsoft and Sony continue to tweak and heavily promote their subscription offerings, as they seek to move to steady and predictable revenue streams that mitigate against gaming’s traditionally volatile monetization models.

Cloud gaming is “a growing market dominated by a few services that account for most paying users,” which will generate 43.1 million paying users by the end of 2023, and 80.4 million by 2025.

Newzoo’s data – gleaned from thousands of gamers around the world, as well as game company financial statements and other sources – is also broadly positive about virtual reality. Noting the recent announcement of Apple Vision Pro, and Meta’s continued (albeit diminished) investment in the sector, the report states that VR is beginning to recover from a post-pandemic dip. “Overall, we expect a lot from the future of VR, including a clearer path toward more widespread adoption of augmented reality devices.”

“Overarchingly, 2023 will be an exciting year for the global games market,” writes Wijman, adding that the industry’s post-pandemic recovery is “an achievement given the many macroeconomic factors at play”.

You can download the free sample report here, which offers paid upgrade options to more detailed data.

Colin Campbell

Colin Campbell has been reporting on the gaming industry for more than three decades, including for Polygon, IGN, The Guardian, Next Generation, and The Economist. © 2024 | All Rights Reserved.