The State of Gaming: A Look Back and Ahead

Manatt Digital and Technology

The gaming industry continues to grow at a rapid pace, constantly reinventing itself along the way. In 2017, we saw the acceleration of mobile and free-to-play (F2P) games, especially in Asia, and the boom of esports lived up to lofty expectations. The rise of virtual/augmented/extended reality (VR/AR/XR) didn’t quite hit the high projections of the hype cycle, but great strides were made that should see 2018 as a key year for growth and innovation. SuperData’s 2017 report shows how some of these trends have fared over the past year, and makes some projections for what we can expect in 2018.

The $108 billion global gaming market is still dominated by mobile and PC platforms, which make up 85% of the revenue share. Over 60% of mobile digital games revenue comes from Asia, with almost 100% of that coming via F2P content. The F2P market reaches one in three people on the planet (2.5 billion), with $82 billion in revenue last year. This trend is expected to continue in 2018 as mobile connectivity continues to increase worldwide. One thing to note is that the mobile gaming market is extremely top-heavy, with the top ten mobile games accounting for 20% of all mobile games revenue. This makes content development extremely competitive, with major publishers spending millions of dollars in customer acquisition costs through marketing and cross-promotion.

For PC-based games, F2P also makes up a large portion of revenue, with 69% of the $33 billion market. League of Legends continues to hold the top slot, coming in with $2.1 billion in 2017 revenue as the biggest esports title in the space and the leader of all F2P PC games. While premium PC content does not bring in quite as much money, PlayerUnknown’s Battlegrounds (PUBG) became the year’s new golden goose, taking in over $700 million in just eight months of operation, almost double the revenue of the next best finisher, Overwatch. Check out PUBG as one of our “20 to Watch” in digital media for 2018, as we follow the game’s meteoric rise in the space. PUBG not only dominates in direct revenue, but it came in second on Twitch’s most popular streams, averaging over 100 million unique viewers each month behind League of Legends.

Twitch continues to rule the gaming video content (GVC) market with 54% of the revenue, even though it has less than half of the audience that YouTube Gaming commands. This shows that Twitch’s audience is more engaged than YouTube’s and that its users are more likely to spend money on subscriptions and donations to their favorite streamers. YouTube also hurt itself last year with its “ad-pocalypse” algorithm update, causing content creators to lose out on ad revenue and bringing a slew of bad press to the platform.

While 2017 saw a 10% increase in esports revenue from 2016, SuperData projects an enormous 50% revenue increase year over year for 2018. The launch of Overwatch League (OWL), the first city-based franchise model, should continue to provide unique excitement and a “canary in the coal mine” opportunity for future esports leagues. The continued push from non-endemic brands into the space should keep providing more capital to leagues and franchises, creating stability for players and helping the industry as a whole mature.

The consumer VR/AR/XR market was not as dire as the media may have presented, but there is still a way to go from here. While 2017 did have a 27% bump in VR revenue from the year prior, 75% of that cash came from hardware sales. The lack of compelling and serialized content kept software sales down overall amid some highlights such as Resident Evil. In 2018, SuperData is projecting big growth in both hardware and software, bringing the collective immersive space up to $7.7 billion in revenue, more than a 125% jump from 2017. The upcoming Harry Potter: Wizards Unite game from Niantic should be a big boost to the market, as the company looks to follow up on the Pokemon Go phenomenon that still keeps chugging along. Augmented reality integrations with next-gen mobile phones, such as ARKit and ARCore, will help make immersive ubiquitous in the coming years.

While it’s not news that the overall gaming market continues to grow at an impressive clip, it is notable how diversified the industry is making itself. Console games, once the dominant force in the industry, now make up only a fraction of the overall market. The market penetration and accessibility of mobile games bring the industry to a more global and addressable audience. Advancements in technology have created new industries altogether, including GVC and immersive reality verticals. Esports show no signs of slowing down as fans and brands flock to the space. It’s an exciting time to be a consumer, as the variety and depth of content are at all-time highs. This year will no doubt continue to push the limits of what is possible and what can be imagined.



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