Games and esports analytics firm Newzoo released its highly cited annual report on the size and state of the video gaming industry yesterday. The firm is predicting 2020 global game industry revenue from consumers of $159.3 billion, a 9.3% increase year-over-year. Newzoo predicts the market will surpass $200 billion by the end of 2023.
Importantly, the data excludes in-game advertising revenue (which surged +59% during COVID-19 lockdowns, according to Unity) and the market of gaming digital assets traded between consumers. Advertising within games is a meaningful source of revenue for many mobile gaming companies. In-game ads in just the U.S. drove roughly $3 billion in industry revenue last year, according to eMarketer.
To compare with gaming, the global markets for other media and entertainment formats are:
- Pay TV: $226 billion in 2019 (excludes streaming services)
- Publishing: $261 billion in 2017, of which books accounted for $121 billion
- Film: $101 billion in 2019 ($42.5 billion from box office)
- Music: $62 billion in 2017 ($30 billion recorded music, $6 billion music publishing, $26 billion live music)
- Board games and playing cards: $12 billion in 2018
- Podcasting: $863 million 2020 advertising revenue (there is no good data on subscription and live events revenue in podcasting, but it is fair to estimate it at a fraction of the total ad revenue figure)
Counting gamers
Of 7.8 billion people on the planet, 4.2 billion (53.6%) of whom have internet connectivity, 2.69 billion will play video games this year, and Newzoo predicts that number to reach three billion in 2023. It broke down the current geographic distribution of gamers as:
- 1,447 million (54%) in Asia-Pacific
- 386 million (14%) in Europe
- 377 million (14%) in Middle East & Africa
- 266 million (10%) in Latin America
- 210 million (8%) in North America
Based on this, here is the percent of each region’s population who currently play games:
- Europe: 52%
- North America: 42%
- Latin America: 41%
- Asia-Pacific: 34%
- Middle East & Africa: 22%
Consumer spending
Newzoo broke down the global market by region:
- $78.4 billion (49%) from APAC
- $40 billion (25%) from North America
- $29.6 billion (19%) from Europe
- $6 billion (4%) from Latin America
- $5.4 billion (3%) from Middle East & Africa
Based on that, we can calculate the annual consumer spend per gamer from each region as:
- $190.48 in North America
- $76.68 in Europe
- $54.18 in Asia Pacific
- $22.56 in Latin America
- $14.32 in Middle East & Africa
Of consumer spending on games, 74% is on in-game purchases. Newzoo expects that to increase to 77% by the end of 2023. Twenty-one percent of spend is on upfront purchase of games (a majority of it for digital purchases rather than physical retail purchases of games).
Mobile
Nearly everyone who plays games plays mobile games, at least sometimes. Mobile gaming has a market size of $77.2 billion, according to the Newzoo report, up 13.3% from 2019 thanks to 2.5 billion mobile gamers. It’s an extraordinary size for a market that was effectively born only 13 years ago with the launch of the iPhone.
Most mobile games are free-to-play (F2P), generating revenue from in-game purchases and/or advertising. The percent of mobile gamers who spend money is 38%. According to Tom Wijman, senior market analyst at Newzoo, that is expected to reach 40% in 2023, up from 34% in 2015; the geographic variation in mobile gamers who spend money looks like this:
- South East Asia: 52%
- North America: 46%
- Western Europe: 36%
- Central & Southern Asia: 29%
- Sub-Saharan Africa: 28%
Console gaming
Console games earned $45.2 billion, up 6.8%, from an active customer base of 729 million people. Notably, 13% of that revenue will come via console subscriptions like the Xbox Game Pass.
Historically, console market growth varies considerably based on when new consoles are released and when new titles in the biggest franchises are released. For example, 2018 had 26.6% growth from 2017, but then 2019 grew at “only” 7.3% (which of course is still extraordinary growth for such a large, established market).
Consumers are likely more cautious about purchasing a new console in 2020 since a wave of next-generation consoles ― most notably the PlayStation 5 and the Xbox Series X ― are targeting November 2020 release dates in line with the Christmas shopping season in Western countries.
PC Gaming
Roughly 1.3 billion people will play PC games this year, generating $36.9 billion in revenue, up 4.8% compared to last year. Notably though, the market for browser-based PC games will continue to decline another 13.4% since 2019, to $3 billion globally.
Game monetization during COVID-19
Accurately predicting spending in the gaming market is particularly tricky this year given the effect of COVID-19 lockdowns. While most of the world is easing government-mandated lockdowns, remote work and remote school attendance remain widespread and the risk of another full lockdown due to a resurgence of the disease is high.
According to data from Unity, daily active users (DAUs) on console, PC and VR games surged 46% during the lockdown and mobile gaming DAUs jumped up 17%. “Pandemic gamers” ― mobile gamers who joined only since the start of the pandemic ― converted 27.5% more often to paying users, but generated 8% less daily revenue. In-app purchase (IAP) revenue for mobile games overall increased by 24%.
Further lockdowns are likely to only increase industry revenue, potentially surpassing Newzoo’s estimates.
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