Remember being a kid and ignoring your parents’ concern over the amount of time you spent playing video games, making comments about applying yourself to more practical ventures or wasting your time with a useless hobby? No? Neither do we, because we were too engulfed in Metroid to play and listen at the same time.
But the point is that the gaming industry did end up taking off, and expanding the video game market in a huge way. It continues to see exponential growth, to the point that video games and related media have actually become a mainstream form of entertainment and a thriving market. That’s a true revenge of the nerds story if we’ve ever heard one.
But why is the growth of the video game industry important to the global market? Well, you only need to look at the numbers. With the popularity of gaming as a form of entertainment steadily growing, the increasing fan base and acceptance of esports, and the mainstream adoption of gaming, it’s a huge advertiser-friendly market to hit.
If you’re thinking about investing in a new sector, looking for an industry with global reach, or just trying to find ways to integrate your marketing to new demographics and extend your advertising, you might want to think about the value that likes in the video game industry market. Let’s dive into the numbers.
Total Market
Recent video game industry market reports indicate that interactive entertainment – including video games and surrounding media, generated over $100bn in revenue just in 2017. The SuperData report shows that of the $100bn, mobile games were the largest sector, raking in $59.2bn, followed by PC with $33bn, and ending with consoles earning $8.3 bn.
Under the canopy of interactive entertainment, extended reality was the largest category, with augmented reality and virtual reality bringing in a total of $4bn. Gaming video content wasn’t far behind at $3.2 bn, with esports rounding out the gaming industry with an earning of $756m.
This earned a total industry revenue of over $108bn last year.
PC and Mobile
Unsurprisingly, the driving force behind mobile and PC sectors of the video game industry was free-to-play titles. A whopping $82bn was spent in this sector by 2.5b players, or one out of every three people in the global population.
Additionally, the total money spent on mobile games saw a $14bn increase since 2016, with Asian titles including Fantasy Westward Journey and Arena of Valor largely contributing to the 31 percent increase over the year. And that’s no surprise – Asia has been, and remains the largest mobile gaming market, having generated $36bn in 2017 and an expected revenue of $38.4bn by the end of this year. That’s a huge leap from North America’s $9.1bn and Europe’s $5.9bn in earnings last year.
Console
Don’t let the mobile earnings fool you, however, as the Western gaming market boasts a strong chokehold in the console space. Last year North America spent $4.2bn and Europe spent $3.1bn on console games. Asia was left far in the dust with just $200m and no growth expected for next year, unlike the $200m expected increase for Western markets.
But there was definitely an MVP of the traditional space with PlayerUnknown’s Battlegrounds generating $712m within its first eight months of release. That’s almost twice the revenue of Overwatch, the year’s second most successful title, and 12 percent of PC revenue for the year!
And despite its age, four-year-old Grand Theft Auto was considered the most lucrative game of 2017, having generated $521m, beating out Call Of Duty: WW2 by $9m. However, with the three COD titles (WW2, Black Ops III, and Infinite Warfare) combined, the franchise earned a total of $951m.
Monetization
Over recent years, the primary income in the games industry has undergone several changes. Increasingly better technology led to improved graphics, large open-worlds, and higher expectations from consumers. However, the prices of games have remained relatively stable, with AAA titles debuting at no more than $60 USD for the past decade.
From this, developers and publishers took many different approaches. Smaller indie games gained a huge upsurge in popularity with titles such as Undertale (2015), Journey (2012), or Super Meat Boy (2010). In the mobile gaming scene, “freemium” became the norm. The games were free, but often came with several hidden costs: in-game currency that was required to play more, energy-based games that required gamers to wait a few hours before playing again, or increasingly scaling difficulty that pushed gamers to purchase power-ups.
The advent of streaming platforms and Lets Plays also allowed gamers to experience titles without purchasing the games themselves. From this, many AAA games steered away from narrative-focused single-player games and focused more on online multiplayer features. Another popular revenue stream were lootboxes. In-game cosmetics, weapons, or accessories were often only unlocked through random drops. Players could purchase more of these to unlock all of the game’s extras sooner. Lootboxes practices have been heavily criticized, such as with EA’s recent Star Wars Battlefront 2 (2017) controversy.
However, some games have found success with a free-to-play model that includes micros-transactions. Riot Game’s League of Legends is completely free-to-play. While only a portion of the full character roster is available for free, new champions can be obtained without needing to pay with real money. Most of their revenue comes from selling in-game cosmetics. More recently, Fortnite has also adopted the free-to-play model with optional cosmetics. In Fornite, players are able to purchase dance moves, outfits, and weapon skins.
Esports
With a total revenue of $756m last year, SuperData anticipates esports to become a $1bn business in 2018, creating another huge win for the video game industry market. Unbelievably, 70 percent of last year’s revenue came from ads and sponsorships, while a mere nine percent was earned from merchandise and ticket sales.
And it’s likely that these numbers will continue to rise. With the number of colleges, and even high schools adopting esports leagues and many offering scholarships, and new MLG arenas popping up in places from Las Vegas to Columbus, the industry doesn’t seem to be plateauing anytime soon.
In fact, with the new opportunities esports are offering teen and college-aged kids, we’re probably just now seeing the beginning of a viable “path-to-pro”, similar to that of traditional athletes going straight from high school to playing professional basketball or football. And if we’re to be taught from our past, the revenue and fanaticism of professional sports should tell us that we’re on the brink of a new fan craze in competitive esports.
Gaming Video Content
It’s no surprise that Twitch helped drive the revenue of gaming video content, accounting for more than half of this sector’s income. Despite having twice the audience of Twitch, YouTube came in second, earning $690m from streaming activities. Both channels bring in impressive numbers though, which speaks volumes about the video game industry. This shows us that what was once considered a solitary activity, or at least one that was confined to how many controllers your console could support, has now grown into entertainment for an audience.
We’re likely to see these numbers increase as new streamers join the platform, influencers continue to play an integral part of marketing, and video game content continues to grow in popularity – all of which are on upward trends. If you’re looking to cash in on the full value of the video game industry market, the next logical step is to increase the number of live events and tournaments, that would bring in revenue from ticket or pay per view sales, ads, and sponsorships.
So we’ll say it again in case you’re still not convinced the video game industry is the market of the future: THE VIDEO GAME INDUSTRY IS THE MARKET OF THE FUTURE. There’s a built-in audience that is practically begging for more content, people are being incentivized to play video games – something they’d happily do for free – for income and education, and gamers have no problem shelling out money for their favorite titles or events.
If you’re one of those people who imagine going back in time to tell yourself to buy stock in Disney or Apple, wishing you knew the right time to invest in the right market, well, you’re living in a golden age right now. The numbers speak for themselves and the gaming community is growing by leaps and bounds. Now is the time to jump into the video game industry market.
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