I like to take some time at the end of each year to look ahead for
the games industry and predict the important trends. As a bonus feature I’ll go
over my predictions for last year.
Some stats for 2019 to chew on: The global games market will
likely reach over $152 billion in revenue, with the US being the largest market
(at $36.9 billion) and mobile games the largest segment ($68.5 billion
worldwide).
What’s going to happen in the games industry in 2020? As you might
expect, it will continue to grow. The growth will be uneven, of course, with
some companies doing very well and others not so well. The biggest and oldest
publishers will find it hard to grow significantly, as they mostly rely on a
few proven brands and have very few new titles. The mid-range publishers like
Riot Games and Epic Games will have more potential for some breakout hits while
their mainstay games will continue to generate immense revenue.
A continuing issue that doesn’t get much open discussion is the
difficulty many publishers have in creating games profitably. Notably, a number
of companies are shying away from single-player games because they don’t easily
lend themselves to microtransactions. Why buy a slick costume for your
character if you’re playing a game by yourself? And yet single-player
experiences are compelling, and the top games can generate a lot of revenue and
attention (see God of War or Death Stranding, for instance).
The tough task here is to make a single-player game that looks
great, plays great, has a depth of story and great polish… and that doesn’t
cost far more to create than it seems likely to bring in. This is the reason
Telltale Games failed – they made beautiful games that sold pretty well and
garnered many awards, but they worked their staff beyond reason and ultimately
couldn’t make a profit. I hope the revived company can figure out where and how
the costs grew out of control, and figure out how to make story games that will
sell and at the same time generate a reasonable profit for the company, all
while letting the creative staff leave the office after a mere 8 hours of work.
We’ll continue to see strong brands extended, as that’s a clear
path profit. There’s going to continue to be new Call of Duty titles,
and you don’t have to see an announcement to know there’ll be a new Call of
Duty coming this fall. Now, though, we’re getting Call of Duty on
mobile – and it quickly hit a hundred million downloads, which shows the power
of a strong brand. Look for other major game brands to be extended into new
platforms and game genres. Riot Games, for instance, is extending its powerful League
of Legends IP into a number of other genres with the help of other game studios.
It’s impossible to say right now how well those games will do in the long run,
but the one thing you can be sure of is they’ll see a lot of downloads very
quickly because of the massive number of League of Legends fans.
There will probably be some acquisitions during the year, and some
surprise hits. Ultimately, though, more gamers will be playing more games and
spending more money, and more people will be spending time watching people play
games. This cultural force will continue to grow in power and influence.
And now, some specific predictions for the 2020 games industry.
1) The games market will continue to grow. It’s an easy thing to see, but gaming continues
to reach more people worldwide, and the growth shows no signs of stopping yet.
2) Both the PS5 and the Xbox Series X will
sell, but not in significant enough numbers to be a good market – but that’s
not important. Why won’t
their sales be important? Because both Sony and Microsoft will be making their
profit not from the hardware (which likely will, at best, show a small profit,
and perhaps lose money on each unit at launch) but from the software – and both
the new consoles will be backward compatible. Their launch should get people
playing console games more, and buying more console games – and buying more
game subscriptions.
3) Esports will continue to provide enjoyment
for fans and disappointment for investors. Not every esport is continuing to grow, and some seem to
have plateaued (like Hearthstone). There’s plenty of investment, but
it’s going to be a while before big profits arrive – and they won’t be evenly
distributed. Changes to games may help strengthen their esports appeal, or they
may weaken it. It’s still an open question as to whether any of the current
esports will even be played in ten years.
4) Streaming games and the streaming game
market will continue to underperform. Google’s Stadia is still trying to find the right features to
appeal to a mass audience, but it’s not clear at all if it ever will. It’s one
of those ideas that sounds appealing to executives who don’t know much about
the details – but it’s those technical details that have continued to trouble
every streaming game service that’s come out, and there have been more than a
few.
5) Game subscriptions will do well – with the
right content and features.
Apple Arcade is a good example of the right offering in the right market, and
it will grow strongly. This service is only $5 a month, and your whole family
can use it – and we’ll likely see it get bundled with other Apple services in
the future. It’s a great value, and that’s what a subscription game service
needs to have if it’s going to succeed.
6) 4K gaming will be used to sell hardware,
but it really won’t be significant – no billion-dollar games will be 4K only. We’ll hear a lot of hype about 4K – it
will be mentioned in lots of marketing – but still 4K TVs do not have huge
market share, and 4K monitor are even less popular due to their pricing. This is
all changing, but not as swiftly as some would have you believe.
7) Watching people play games will continue
to grow in popularity. The
popularity of game viewing continues to rise, but it’s not all evenly
distributed. Top streamers are finding lucrative deals to change platforms, so
Twitch has lost some of its top attractions. Meanwhile, Twitch is expanding
into non-game areas. Talented streamers will be more sought-after than ever,
but growing an audience from zero to ‘big enough to make a living’ will get
even more difficult.
8) E3 will continue to shrink, while true consumer-oriented
conventions will grow.
Sony’s leaving E3 again this year just underscores how unimportant E3 has
become – Sony clearly feels it doesn’t need E3 (and the expense, and the
hassle) to have a successful new console launch. And if Sony doesn’t need E3,
does anyone else? You can bet that’s the question each exhibitor is asking,
along with “if we took the money and time we spend on E3 and spent it
elsewhere, would we get a better return?”
Last Year’s Predictions
1) The market for games gets bigger. Yeah, that was an easy one, but it’s good
to start with a win. 100%.
2) Games will be increasingly scrutinized and
regulated by governments around the world. Another fairly easy prediction to make, and we have seen
more restrictions on loot boxes and China’s more strict approval process for
games. 90%.
3) The Digital Store Wars get into high gear.
Well, there’s still a
battle going on, but some of the combatants (like Discord) have stopped
fighting. Epic and Steam keep going on, with more effort being put into
marketing… but the fighting hasn’t gotten as bloody as it could have. 70%.
4) Mobile games will continue to grow
strongly and innovate.
Pretty much true, with more traditional categories like Call of Duty
coming to mobile and doing well. Growth is strong but innovation is still
underperforming. 70%.
5) VR/AR/XR will continue to underperform. Yep, we’re all still waiting for this to
become a major segment. It didn’t happen in 2019, despite new hardware
releases. 100%.
6) Game streaming will continue to be a
vision, not a viable market. Google’s Stadia launched to underwhelming reception, and it’s
still limping along. Like VR/AR/XR, lots of interest but not much in the way of
revenue or solid market reception. Yet. 90%.
7) Indies will continue to have difficulty
making a living until they put more emphasis on marketing. This will continue to be true, though more
frequently an indie game will do very well. 90%.
8) Games will continue to grow as a cultural
force. This is true, as
we see series like The Witcher become this due to the game influence, not the
novels. 100%.
Overall 2019 grade: 88.75%
Happy New Year!
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