In June, video games officially became the world’s most popular form of entertainment. According to Reuters, gaming grew by 10.7% during the last year alone, while television continued its steady decline with an 8% drop globally. These days, gaming is such a valuable engine of content creation that, instead of video games being made out of movies, video games are now becoming source material for blockbuster films like “Assassin’s Creed” and “Angry Birds”.
The total gaming revenue for the past year amounted to an estimated $116 billion, compared to $105 billion for TV and TV streaming services. Ever-skyrocketing sales continue to propel the industry to greater heights as, in May alone, game sales rose 25% year-over-year to an estimated $9.1 billion. Mobile gaming, the largest segment of this growth, was up 36% YoY.
In the midst of this growth, gaming continues to adapt and change at a rapid pace. The most prominent and transformative change comes in the form of increased digitalization. The digital drive for games is more of a when, as opposed to if, and a recent Piper Jaffray report predicts that all video games could be 100% digital within just 5 years. This is especially significant for investors since an all-digital revenue future for video games could increase the operating margins of companies like Activision Blizzard and EA by 10% by 2022. “Applying modest (5% or less) top line growth and the positive margin impact mentioned above, 2022 publisher earnings per share would be more than double what each just reported for 2017,” they wrote.
In 2017, the global Cloud Gaming market size is estimated to be around $45 million and it is expected to reach $740 million by the end of 2025, with a CAGR of 41.9% during 2018-2025. Digitalization has largely taken the form of downloading from the cloud thus far. However, many see streaming as the next logical step. As MRP wrote in March, Microsoft, Amazon Web Services, and even Google are already competing for space in the cloud and streaming arena. Google is a company that would not usually be interested in gaming beyond their Google Play store, but a game streaming platform provides a huge opportunity to boost its main revenue generator, advertising. The video game advertising market in the United States was estimated at $1.4 billion last year.
However, streaming may be further from the horizon than it seems, as streaming continues to struggle with latency issues. The delay between a player pressing a button in a videogame and the time it takes for a cloud-based machine to process each action and send graphics and sound back is called latency. A crucial difference from over-the-top video is the technology and code underneath: since games are interactive, it’s impossible to, for example, send chunks of a show ahead of where the viewer is, as Netflix does. Called buffering in industry jargon, it means slight network disruptions won’t impact viewing. But that’s impossible for videogames. While this could potentially throw a wet blanket on the hopes of Google and other tech giants, it is positive for pure-play gaming companies that will buy themselves some extra time to pivot from console-based business models.
Demand remains strongest in the developed world, but emerging markets will contribute strongly to the next generation of gaming:
In India, 86% of mobile users have a minimum of one game on their phones, and around 37% of these players have three or more games on their phones. Interestingly, Indians have roughly the same number of games whether they use an inexpensive phone or the expensive variety.
China is expected to account for a quarter of all global game revenues, bringing in $37.9 billion this year. The country is anticipating the arrival of PC gaming giant Valve, a digital platform with 33 million daily active users. At the same time, homegrown giant and Valve rival, Tencent, is preparing to take its own PC games marketplace global. A Hong Kong version of the company’s WeGame platform is currently in development, and will be used to target players outside China, as well as try to recreate local titles’ successes in overseas markets.
Southeast Asia is easily the market where the most explosive growth is occurring as mobile game revenues are growing at a CAGR of 45.3% between 2015 and 2019, well above the global average of 14.6%. Google is currently supporting the launch of a special edition ‘Launchpad Accelerator’ that will accelerate domestic game development by training developers across India, Pakistan, Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam.
The trend that video games are following is one of increasing interconnectivity. The digital expansion presents opportunity for existing developers, but eliminates barriers to entry for new ones. This vision for the future sees access to new markets where billions of people in the developing world’s continually growing middle class can access countless gaming titles with only a smartphone or PC.
MRP added Long Video Gaming to our list of themes on October 19, 2017. Since then, the Video Game ETF (GAMR) has generated a return of 10%, slightly outperforming the S&P 500’s 9% return over that same time period. Investors can also gain exposure to cloud computing via the cloud computing ETF (SKYY).
We’ve also summarized the following articles related to this topic…
Video Games: Gaming is Now The Most Popular Form of Entertainment in the World
According to Reuters, gaming grew by 10.7% during the last year alone, while television continued its steady decline with an 8 percent drop globally. The total gaming revenue for the past year amounted to an estimated $116 billion, compared to $105 billion for TV and TV streaming services.
Compared to movies and music, gaming absolute the dwarfs the competition though. Just $17 billion was made from digital music sales and streaming, while movie box office totals for the past year amounted to $41 billion. So to clarify – gaming is now worth almost three times as much as the movie industry.
Gaming’s big then, no surprises there, but where’s the increased coming from? Growth in China is one of the leading answers. In China, game sales increased 14% per year on average and we’ve seen this with the huge increase in the number of Chinese players using Steam. The other answer, of course, is Fortnite. Epic’s battle royale shooter is single-handedly response for a chunk of the growth of the games industry. 125 million people have played Fortnite, and over 40 million are playing every month. Grand Theft Auto V, too, continues to do insane numbers. It’s now coming up to 100 million copies sold, making it more successful than any single movie in history. GD
Video Games: Digital Game Sales Top $9.1B In May; ‘Pokémon GO’ Surges For Summer
Global video game sales rose 25 percent year-over-year in May to an estimated $9.1 billion, according to the latest figures by SuperData Research.
Pokémon GO enjoyed one of its best months ever in May. Niantic’s hit AR game generated $104 million last month, an increase of 174 percent year-over-year. The player base increased to the highest level since the game’s peak in 2016, SuperData noted, just in time for the usual summer bump that comes when warm weather meets Pokemon hunting outdoors.
While multiplayer and battle royale sweep global platforms and drive revenue, Sony proves once again that single-player isn’t dead. In April, God of War sold an estimated 2.1 million digital units at launch, becoming the largest console exclusive digital launch to date. Kratos’ father and son tale slipped three spots to number five in May.
And Epic Game’s Fortnite hit a new high in May, bringing in a whopping $318 million across all platforms in May—and increase of seven percent from April. AList
Video games: Anstream will stream retro games so you won’t have to pirate
Instead of streaming popular and recent titles, Antstream will instead provide access to over a thousand games you can no longer buy or play. That is, those long “out of print” retro games.
Of course, that will depend on whether there’s actually a market for such retro games. Antstream claims that they have over 1,000 fully licensed titles and are adding more each week. The website teases a few titles you may or may not know about, like Fatal Fury (which gave way to King of Fighters), Speedball, Joe & Mac, Gods, and more. The only way you’d get your hands on these, if you don’t own the originals, would be through questionably-acquired ROMs and emulators.
Antstream wants to remove the need for that and add a bit of modern gaming culture on top. Yes, that means leaderboards and multiplayer challenges, both asynchronous and, in the future, real-time. The service will be initially available on Windows PCs and Android tablets. There is no word yet on when Antstream will fully launch and how much the subscription will cost. SG
Video games: Tencent plans to take WeGame worldwide as Steam rivalry grows
Chinese games giant Tencent is preparing to take its popular PC games marketplace beyond its home nation with a global version of WeGame in the works. WeGame launched back in September, replacing the Tencent Games Platform, and has been likened to Steam. Its catalogue currently only consists of 220 titles, encompassing a mix of Chinese titles and a selection from international companies. But Tencent is hoping it will be able to expand on this significantly once the new site has launched.
While WeGame has a much smaller catalogue than Steam at present, it does have one major advantage in being owned by Tencent: the Chinese corporation has invested or acquired multiple major games firms around the world – including Riot Games, Epic Games, Glu Mobile, Activision Blizzard, Ubisoft and more – potentially granting access to their portfolios once the site goes live. And by launching games via a Hong Kong-based site, which is accessible to Chinese gamers but not under the restrictions of the government, Tencent can rapidly expand WeGame’s catalogue.
Neither WeGame Hong Kong nor Steam China has a release date, so the race is on to see who can change the game in the region. GI