Subscription content ecosystems: Online gaming

  • Online gaming is valued at more than the movie and music industry combined, expected to reach an estimated value of $315bn by 2026
  • PlayStation, Nintendo and Xbox continuously roll out new technologies and games
  • Gaming is a highly fragmented market

Our latest blog series explores the different streaming subscription content ecosystems: How much revenue is being generated? How fast are they growing? Who are the key market players? What are the growth drivers?

To scale revenue and boost user acquisition, more and more brands are embracing partnerships with resellers who act as distributors, bundling their products as promo offers with their own services. By leveraging the existing relationships and marketing power of resellers, brands are growing reach and subscriber numbers, while resellers differentiate and strengthen their offer, becoming more attractive and sticky.

Which content ecosystems offer the biggest opportunities? Following movies and music, our third ecosystem overview looks at the online gaming ecosystem.

Online gaming is no fledgling in the cyber world. This popular form of entertainment is almost as old as the invention of the computer. However, the true evolution of online gaming started during the 1970s, with long-distance chess paving the way for the online interactions experienced today.

Online gaming streaming market

The global digital media market has been growing consistently, with gaming accounting for the biggest share of market revenues (Statista). Now one of the most profitable industries on the planet, online gaming involves video games played over the internet, allowing a person to interact with other players in some form or another in real-time.

In 2020, the global online gaming industry constituted a value of $173.7bn. Financial analysts believe that the industry will continue to grow and reach a value of approximately $315bn by 2026. If these predictions are accurate, this will signify a CAGR (compound annual growth rate) of almost 9.64% (Mordor).

Experts believe that the COVID-19 lockdowns boosted the online gaming sphere as gamers invested more money and time during the forced periods of lockdown. The turn towards online gaming to pass the time during lockdowns resulted in a colossal surge in both players and revenue. All indications are that the trend will continue in post-pandemic times.

The major players

Microsoft and Sony was responsible for almost 75% of cloud gaming market revenue exiting 2021. But, their share is expected to decrease in the coming years as other services take off globally (Omdia). Gaming is a highly fragmented market, here’s a few of the key players:

  • Sony Corporation: Sony’s gaming segment drove full-year revenues to $81.7bn for the full year ending March 31, 2020. Digital downloads of full games accounted for 65% of all sales for the full-year, rising to 79% in the fourth quarter (Sony). Sony Interactive Entertainment (SIE) continuously roll out new games and adapt versions of games across multiple devices. They launched the PlayStation 5 in 2020, offering a subscription service called the PlayStation Plus Collection, with a one, three or 12-month recurring payment plan.
  • Microsoft: “Microsoft is building toward a future where the hardware you’re playing on almost doesn’t matter” – Verge. A few years ago, Xbox was basically just a video game console platform, but Microsoft has expanded into PC gaming, mobile gaming, and, more recently, subscription services like Xbox Game Pass. Microsoft says it is “exploring new subscription offerings for Xbox Game Pass so more players around the world can experience the most immersive and fun games across devices, geographies, and financial realities.” Best selling games includeMinecraft, Halo Series and Gears of War.
  • Nintendo: Nintendo is one of the largest video game companies, generating about USD 16 billion in net sales in 2021 (Statista). The Americas generated the largest share of Nintendo’s revenue contributing around USD 6.7bn for the fiscal year of 2021. In 2020, Nintendo Switch was the best-selling video game console worldwide, selling over 15 million units globally, two times higher than Sony PlayStation 4, and seven times higher than Microsoft’s Xbox One (Statista). High grossing titles include Super Mario, Pokémon and Wii Series.
  • Electronic Arts (EA): A developer, publisher, and distributor of video games, EA ranks third among the leading gaming companies worldwide based on market cap, at nearly USD 40 billion in March 2021. They have a history in producing best-selling franchises like Dragon King, SimCity, Tiger Woods PGA Tour and the FIFA Series.
  • Tencent: Tencent’s gaming sales soared in early 2020, with international game revenue almost doubling to USD $1.5bn in 2020. Tencent says it will increase investments in game development, focusing on large-scale and high-production value games that have a global appeal. Alongside investing more money in new games that target niche audiences. Key titles by Tencent include PUBG Mobile and Honor of Kings.

Market growth drivers

Today, gamers have a choice between various platforms, gameplay options and immersive technologies. The Asia Pacific region is anticipated to hold the largest market share in the gaming industry, where countries such as China, Japan, and South Korea show a high potential in market growth. There are several prominent and continually evolving trends in the industry:

  • Cloud gaming: Users can stream cloud-based games on mobile devices such as smartphones and tablets. Streaming media services, which include gaming, are typified as the next-generation market driver. Cloud gaming’s share of total consumer spend on games is expected to nearly triple, from 2.2% in 2021 to 6.1% in 2026. Subscription services such as Xbox Game Pass Ultimate and PlayStation Now are driving cloud gaming growth, generating $3.7bn in total in 2021 (Omdia). “North America and Western Europe will dominate cloud gaming revenues within the forecast period, but Asia Pacific, led by China, will nearly close the gap by the end of 2026.” – George Jijiashvili, principal analyst at Omdia.
  • 5G: 5G is expediting the shift towards virtual reality (VR) mobile games and supporting the growth in cloud gaming by enabling high quality games to be enjoyed on mobile devices.
  • Telco partnerships: The advent of 5G created an opportunity for telcos to leverage cloud gaming as a way to attract high-spending, dedicated gamers. Telcos bundling 5G plans with gaming subscriptions is becoming commonplace with new partnerships launching regularly. In 2020, three in four 5G tariffs were bundled with an OTT or a telco value added service. “We are positively surprised about the stickiness and how customers have stayed with the services and the retention,” including when rolling them over to paying service, said Hans Vestberg, Verizon CEO
  • Subscription plans: Subscriptions will remain the predominant business model for cloud gaming, responsible for around 80% of total consumer spend over the next five years, forecast industry analyst Omdia. The big benefit for the consumer is instant access to vast libraries of content
  • Interactive technologies: Immersive and interactive technologies are starting to take center stage. These are VR, augmented reality (AR) and mixed reality (MR) games. Companies such as BigScreenVR and AltspaceVR are prominent drivers of this niche. NewGenApps estimates that the AR and VR gaming subscriber base will exceed 216 million users by 2025. A global survey of technology companies, startups and investors support this notion and maintains that gaming will dominate investments in VR advancements
  • Mini games: There is rapid growth of mini-games, such as WeChat, which is aiding the growth of the gaming industry in China. Mini games are played within mobile apps, without having to install another application. They tend to be easy to play with strong social elements (Mordor)
  • Real-money games: Real-money online games are becoming increasingly popular, driving partnerships and agreements between key market players such as AGS and InTouch Games Ltd.

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Bango plc published this content on 23 February 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 23 February 2022 14:28:07 UTC.

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