Predictions for the Video Game Industry in 2023
The video game industry grew at a furious pace in 2020–2021 — its revenue ended up being tens of billions of dollars higher than analysts had predicted before the pandemic. But in 2022, once the lockdowns were over, the video game market lost 4.3% of its revenue due to the general economic downturn and changes in consumer priorities. What can we expect for the industry in 2023? Let’s take a look.
Analysts are predicting that, despite the correction in 2022, the video game market has a bright future ahead of it, with steady growth in terms of revenue and number of users. The following factors point to this:
- Technological advancement and a reduction in the prime cost of gaming devices, making them more accessible to gamers
- An increase in the number of computer and smartphone users
- The development of telecommunications networks and stable internet access for most users
- The release of highly anticipated AAA projects for game consoles
- Advancements in cloud gaming and VR
- The opening up of the Chinese video game market to foreign publishers
Newzoo’s experts expect revenue from various segments of the game industry to reach the following numbers:
- $211.2 billion for the worldwide market as a whole
- $103.1 billion for the mobile game market
- $8.2 billion for the cloud gaming market
- $3.2 billion for the VR gaming market
The mobile game market has retained its position as the most profitable segment ($92.2 billion in 2022) and is expected to see even more active growth in the future. Experts predict that revenue from mobile games will reach over $250 billion by 2030. Let’s take a look at the primary tendencies in this segment.
- Subscription-Based Monetization
The market for games that use subscriptions as one of their monetization tools is on the threshold of intense development. It is expected to increase by 12.8% per year over the next seven years. Researchers believe that in 2030 total revenue from this market will reach a staggering $24.1 billion, and the greatest growth will happen in the Asia-Pacific region.
- The Growth of Developing Markets
According to data from Newzoo, in 2022 revenue from mobile games increased by 3.4% (up to $8.4 billion) in Latin America and 6.6% (up to $6.8 billion) in the Middle East and Africa. According to experts from the Financial Times, video game developers and publishers should be especially interested in the latter region, since its economy is showing high rates of growth.
- A Drop in the Popularity of Hyper-Casual Games
According to the portal Pocketgamer.biz, the number of hyper-casual game players dropped by over a third in September 2022. The number of installs of “hardcore” games also saw an increase in Western Europe. This is linked to the technical development of smartphones and increased interest in the mobile game segment on the part of major publishers.
- Innovations in App Stores
There are two trends at play here. First of all, the leading mobile app stores (the App Store and Google Play) have been forced to allow the sale of cross-platform games. Second, following a series of lawsuits, mobile device users are now allowed to download apps from third-party sources. This has created new possibilities for owners of independent stores that offer lower prices with more payment options and a larger focus on specific users.
PC and Console Games
Interestingly, the correction seen in 2022 had no effect on PC games, which actually increased by 0.5%. On the other hand, the console market lost 4.2%. Newzoo’s experts attribute this situation to the small number of releases for video game consoles. However, this is going to change in 2023.
- Support for Existing Titles
Many older video game franchises have found loyal fans who want to immerse themselves in their favorite titles again. Because of this, the market has been flooded with sequels, remakes, and remasters of cult franchises.
Some developers and publishers are going a step further and creating additional content for existing titles instead of new games in a given series. For example, Ubisoft has been releasing updates to games in the Assassin’s Creed franchise for a long time now. According to Newzoo’s experts, this approach will become a trend in 2023 and attract even more publishers.
The primary factor behind this tendency is financial. Games have become a lot more complicated over the last decade, and they’ve also become more expensive and time-intensive to develop. So if an expensive new projects bombs, this can spell death for developers and publishers, whereas releasing new content for existing games allows them to reduce these risks.
This tendency also has another benefit. Once a publisher has permission to publish a given game, it can update that game’s content without having to appeal to regulatory agencies again. This is particularly important for the Chinese market, with its harsh censorship and strict requirements for publishers.
- Hybrid Monetization Strategies
Hybrid monetization strategies, including built-in ads, are expected to gain more footing in PC and console games. This will create additional marketing platforms for third parties and make it possible to reduce the cost of subscriptions for players. This model has been used successfully in mobile games for quite some time now.
Ads will also help PC and console developers and publishers make up for expenses associated with developing content. Mixed advertising solutions will help them show immersive ads that are organically integrated into gameplay.
- Promising New Markets
The video game markets in Africa and the Middle East will show even more dynamic growth. But the Asia-Pacific region will still be the leader in terms of revenue and number of players. It’s important to note that, in addition to its large number of gamers, many countries in this region have exceptionally high LTV indicators, which affects the overall profitability of games and the attractiveness of the market.
Another actively developing segment is VR games. Experts predict that the annual number of installs will almost double (to 46 million) by the end of 2024. The VR game market’s revenue will also increase from $1.8 billion to $3.2 billion. The increase in this segment’s popularity is largely linked to the decreasing price of VR headsets, which in turn attracts even more gamers.
We should note that VR technology is used not only in video games, but also in health care, education, machine-building, and other fields. Innovations in motion-tracking, tactile feedback, and immersive audio are happening all the time. In addition to developing game content and enhancing the user experience, VR technology also brings metaverses into our lives.
Metaverses became a reality in 2022, and they’ve already become venues for the largest events in the video game industry. One vivid example is ChinaJoy 2022, which was held on the MetaCJ platform.
Metaverses were a major trend last year. But, according to experts, following the weakening of pandemic-related restrictions and the end of lockdowns, interest in metaverses is gradually cooling. However, metaverses are still attracting a lot of companies as a new advertising channel with gamification elements. Where a user used to only be able to look at an image of a product, they can now partially interact with it by, for example, trying on virtual sneakers or accessories. Nike, Louis Vuitton, and other popular brands have already developed strategies for promoting their products in metaverses.
As the metaverse concept grows, the demand for games that take place in metaverses will grow along with it. More games featuring continuous gameplay and cross-platform compatibility will be released. Since players are looking for ways to connect to each other in virtual spaces, social interaction and collaboration will play an important role. But we still don’t know exactly what metaverses will look like or how they will be arranged. There are lots of concepts out there from various companies with an extremely wide range of functions.
Another key tendency in the video game market will be the growth of the cloud gaming segment. Revenue from this market was $2.4 billion in 2022, and, according to Newzoo, it’s expected to reach $8.2 billion by 2025. Cloud gaming services are currently used by over 30 million people, and that’s far from the limit.
Cloud gaming has a number of substantial advantages, the most important being that it makes games accessible to gamers with low-spec computers. This means that game developers won’t be tethered to the hardware-based limitations of specific devices, which will give them more freedom to create innovative gaming experiences.
In addition, cloud gaming will have a major impact on the game industry’s business model, increasing the market’s focus on monetization via subscriptions and in-game transactions.