The Explosive Growth of Global Gaming Revenue: Trends, Insights, and Future Predictions
The gaming sector has seen exponential growth in the last decade, turning from a niche market of just a few thousand men to a multi-billion dollar juggernaut. The evolution was facilitated by outstanding technological developments, remarkable increase in access and raise of the gaming demographic. Gaming has become one of the major entertainment enterprises globally, from mobile games forms to virtual reality. This article gives a good account of where revenue in global gaming derives from, and the future for this sector at a global level. In addition, the article sheds light on the vital trends that underscores the dynamic nature of this sector, insights, and predictions for the international economy.
Historical Growth of Gaming Revenue
Early Beginnings and Initial Growth
Tracing back the history of gaming, it has been more than five decades since the concept of arcade games and also the era of the earliest home consoles made their appearance. Pong and Space Invaders, often reflecting the level of technological development prevalent before the explosion of modern web found cheers from the audience, paving the way for future developments. The years of 1980 till 1990s were a period of exponential growth, with better technology enabling for more complex games. In fact, the release of first-generation consoles such as Nintendo Entertainment System and Sega Genesis boosted video gaming into the mainstream. While by 1990s revenues of gaming industry started witnessing the increament of a billion dollar, it was just the beginning of the positive trend of skyrocketing that would persist after the boom of the new millennium.
Transition to Digital and Online Gaming
In these moderately prosperous first years of the 21st century, all of this would change. Digital and online gaming was destined to become a hot topic. As broadband became commonplace, multiplayer online games and the distribution of software online began to take off, followed by online play. Today’s Xbox Live and PlayStation Network platforms sprang from this fertile soil. No longer was it necessary to wedge a disc into a dashboard, and if you wanted to play against someone half a world away, it could be arranged. Enthusiasts could buy, sell, compare prices, and rate games as never before. Multiplayer online games known as MMOs (massively multiplayer online) took the world by storm. The first, EverQuest, released in 1999, may seem quaint today, but it created subscribers as it invited players to meet thousands of others in search of goblins and insight. (The launch subscription fee: $20 per month.) Like a fizzy drink that explodes in a child’s mouth, within a couple of years these systems spread around the world. MMOs such as World of Warcraft went on to attract millions of subscribers at annual charges of $50 or more. As gamers switched to digital sales, certain companies discovered that cutting out the retailer not only saved money, but actually increased their profit margin.
Current Market Segmentation
Console Gaming
Console gaming still accounts for a considerable segment of the total gaming market, helped by a small number of key players in the sector in the form of Sony, Microsoft and Nintendo. With every new generation of consoles, there are steps forward in graphics, processing power and gameplay mechanics and a corresponding commitment from an ever-captivated (and increasingly larger) user base. Console-exclusive titles and franchises also play a big part in actual console sales, as well as platform loyalty. Titles such as The Last of Us, Halo and Mario Kart have become so much more than games, becoming cultural phenomenons in their own right. Console gaming revenues remain steady, helped by a robust ecosystem of console hardware sales, software sales and paid online subscription services.
Mobile Gaming
Mobile gaming, driven by the ubiquity of smartphones and tablet computers, has become the fastest-growing segment in the gaming industry. The success of mobile gaming has involved a democratisation of the overall industry, lowering the barriers to entry to immense effect. Certainly, casual gamers or those who play a variety of titles but are not willing to splurge on a PC or console are attracted to this scenario. Candy Crush Saga (2012), developed by King.com, is one of the highest-grossing mobile games ever, generating several billion dollars in revenue for the developer by generating in-game purchases and using an ad-based monetisation model. The game was free to download and play, but then it encouraged gamers to buy these additional features. The same goes for Clash of Clans (2012), another mobile gamer by Supercell that generated a billion dollars in revenue in 2012 alone. Perhaps the biggest success story is PlayerUnknown’s Battlegrounds (generally known as PUBG Mobile), which grossed approximately half a billion dollars a month by 2022. Savvy developers such as the creators of Candy Crush and PUBG Mobile have taken advantage of the popularity of smartphones and tablet computers. This has democratised gaming and reduced entry barriers, which continue to fuel mobile’s maturity as a technological force for video-gaming entertainment. Today, mobile games account for more than half of total gaming revenue in the world.
Key Revenue Streams
Game Sales and Subscriptions
The old-fashioned way of making money in gaming is still a major part of the business: physical retail and digital are big business everywhere games are sold, with some of the biggest games selling the most copies in the first few weeks of their availability. However, there are other ways to make money in gaming as well. Subscription services such as Xbox Game Pass, PlayStation Now and EA Play provide gamers with access to vast libraries of games for a fixed monthly fee, enabling companies to make money in a much more predictable way while also providing a lot of value for money for gamers. This kind of ‘Netflix and chill’ gaming reflects broader trends in entertainment, where subscription services like Netflix and Spotify have been phenomenally successful.
In-Game Purchases and Microtransactions
In-game purchases (encompassing microtransactions and in-game currency) are a major revenue stream for free-to-play games in particular, providing players with a means to access skins, emotes, loot boxes, costumes, mounts, battle passes and so much more. As fortune has it for the games industry, this shift in monetisation has already proven to be highly lucrative, not to mention the monies developers make from advertising and other ancillary transactions within games. While there are certainly ongoing discussions about the ethical dilemmas associated with this practice and great concern regarding increasing regulatory attention, the financial reality is difficult to ignore. The perfect storm of convenience and consumer willingness to spend unprecedented sums of money has enabled the games industry to grow to mammoth proportions in a very short time span, while developers continue to develop new and innovative ways to monetise these experiences while also striving to satisfy players enough to maintain their interest.
Regional Revenue Contributions
North America and Europe
North America and Europe continue to remain the key markets for gaming globally. The region contributes a major percentage of revenue to the gaming industry. The regions are highly penetrated with consoles, PC, mobiles and a deeper culture and infrastructure for gaming. Conventions, tournaments and championships take place repeatedly in the US and European countries. Major gaming companies are headquartered in these regions, for instance, Activision Blizzard, Electronic Arts and Ubisoft. The region has a high disposable income and tech-savvy population. This generates a steady demand for gaming products and services.
Asia-Pacific Region
The Asia-Pacific region is the single largest and fastest-growing market for gaming, accounting for more than 55 per cent of global revenues. This reflects both China and Japan’s role as tech powerhouses, and the prominent position that South Korea holds as one of the PC and console-gaming capitals of the world. In 2017 only, these three countries had revenues totalling $41.7 billion, $37.7 billion and $10.1 billion, respectively. Mobile is one of the prime drivers of growth in the region thanks to high smartphone penetration, fast-rising incomes and a preference for on-the-go entertainment. China has become a gaming powerhouse due to being home to the world’s biggest online gaming company, Tencent and the runner-up, NetEase. South Korean eSports and Japanese console and arcade megagaming legacies all also contribute to the region’s revenue growth. In addition to the magnitude of revenues and reputations, government policies and cultural factors associated with this area can create interesting challenges and opportunities for developers and publishers attempting to establish or expand a presence in the region’s gaming markets.
Emerging Technologies and Their Impact
Virtual Reality (VR) and Augmented Reality (AR)
VR and AR gaming technologies (hereafter referred to simply as VR) can take us to places without leaving home. With VR technologies such as the Oculus Rift, PlayStation VR and HTC Vive, and AR games such as Pokémon GO, excitement about what’s possible for future gaming is rife. While VR technologies have attracted substantial attention and investment, actual adoption rates are very low for the currently available products. Aberdeen reported in 2016 that 42 per cent of retailers are considering using VR in their marketing campaigns and customer service strategies in the next two years; but currently that number is very close to zero, in part because of high costs and hardware requirements. Even so, VR is likely to contribute substantially to future gaming revenue, especially as hardware technology improves and costs decline, opening up VR worlds of experience to more consumers.
Cloud Gaming and Streaming Services
The next round of disruption to the gaming landscape looks set to be from cloud gaming and streaming services. Provided a decent internet connection, you no longer need to pay for, or manage complex game software on expensive local hardware; fans will be able to stream high-performance games on any device. Though still very much in its early infancy, cloud streaming services such as Google Stadia, NVIDIA GeForce Now and Microsoft’s xCloud enable gamers to play AAA titles on everything from their smartphone to a smart TV. Just as cord-cutting disrupted the viewing habits of millions around the globe, expect cloud gaming to democratise high-end gameplay and make access more readily available to anyone with a connected device – these services are still at an early development stage. However, as 5G networks continue to develop and become more widely deployed, cloud gaming will become more viable and performant, presenting a fairly low barrier to entry, which could help to further drive growth and expand the global audience for all forms of gaming.
Future Predictions and Trends
Growth Projections and Market Dynamics
Based on current trends, industry analysts project that total gaming revenue will continue growing at a brisk clip into the next decade. Technological improvements will continue to fuel growth, as will expansion into new economies overseas. This includes much of Asia and many parts of Latin America, where internet and mobile device penetration is growing. The incorporation of artificial intelligence and machine learning tools into the game development process will continue to improve the way that games tailor themselves to each individual player. Games will continue to cross-fertilise with other forms of entertainment, like film and music, creating new revenue streams and cross-promotional opportunities. With these trends at work, the future looks bright for gaming – revenue growth should remain robust for years to come.
Challenges and Opportunities
Despite the grounds for optimism outlined thus far, it’s worth noting that the gaming developments sketched out also hold inherent challenges for the industry’s continued revenue growth, most prominently – regulatory pressures on in-game purchases and data privacy, content restrictions, competitive disruptions and the emergence of new technological and market entrants. This plurality of tensions also provide an opportunity for several types of innovation: the competitive environment will force companies to differentiate themselves. As long as they efficiently manage the various trade-offs inherent to gaming (consumer trust, quality and fairness), creating content people actually want, and as long as this yields attractive returns to the shareholders, the game will continue – with some bumps along the way, for sure.
Conclusion
The explosive success of the global gaming industry over the past few decades shows that it is here to stay: it now forms a material part of the global economy and culture. It is hard to believe that the sector is still young, and that the way we play games will continue to transform in the next few decades, with seemingly endless sources of new technologies pushing its surprising growth. Anticipating the dynamic changes brought by new technologies and shifting market dynamics is particularly crucial for stakeholders in the gaming industry. Fortunately, understanding the groundbreaking historical context, current trends and near- and mid-future projections will help map the ever-evolving, dynamic landscape of the gaming industry.
