The games industry changed in the last decade from a market dominated by console and online publishing giants, to an explosion of new and disruptive mobile insurgents. Now the market has gone back to the future, with a stable group of games leaders in the top grossing charts set to dominate for the next few years (although the AR/VR wild card could produce breakout success). To see where the market is headed, let’s dig into the games industry revenue forecast and mobile games revenue forecast from Digi-Capital’s new Games Digest and Games Report Q1 2015.
Games software revenue forecast from $88 billion in 2015 to $110 billion by 2018
Digi-Capital forecasts that games software revenue will grow from $88 billion in 2015 to $110 billion by 2018 at 8% annual growth (see sector split below and games sector/country revenue forecast data here). In a single digit growth market, games leaders with hit IPs, user scale and cashflow are spending more on marketing (Superbowl ads included) and development to drive shareholder value. This dynamic has eaten into games industry margins, and made it more expensive for newcomers to break through (although indie games like Monument Valley will always capture the imagination).
Mobile games will generate more revenue than online games in 2015, as well as more revenue than console software (although not console hardware and software combined – see games hardware revenue forecasts here). Where mobile games will take $3 of every $10 spent by gamers on software in 2015, that figure will go up to $4 out of every $10 by 2018.
Mobile games revenue forecast from $29 billion in 2015 to $45 billion by 2018
Digi-Capital forecasts that mobile games revenue will grow from $29 billion in 2015 to $45 billion by 2018 at 15% annual growth. Asia has dominated mobile games revenue since 2013, compared to both North America and Europe, and Digi-Capital forecasts Asia to take over 50% of all mobile games revenue in 2018 (see regional split below and regional mobile games revenue forecast data here). Stable top grossing mobile games charts look set to remain the norm. This is great for games leaders and their shareholders, but puts the big squeeze on mid-tier players and makes breaking through more challenging for indies.
Android games revenue will be higher than iOS (including China) by 2018
Accepted wisdom and research tells us that iOS makes more money than Google Play, despite Google Play having more downloads. Nobody would argue with that. But what about iOS vs Android at a global level? Include the massive Chinese Android app stores, and Android didn’t just dominate download volumes, it made more money than iOS last year.
China, where Baidu, Apple, Qihoo 360, Tencent, Wandoujia and others compete for the largest download market in the world, has tipped the balance in Android’s favor. Chinese Android app stores put both iOS (with a rapidly growing Chinese business) and Google Play (with limited Chinese presence) in the minority of app downloads globally. See app store download volume shares (all apps, not just games) in the chart below and download volume shares here.
Dominating downloads is great, but downloads can be a vanity metric if they aren’t backed up by corresponding revenue. So while in 2018 iOS should still have the highest mobile games revenue of any one individual app store globally (followed by Google Play and Chinese Android), mobile games revenue from all Android app stores combined could top iOS. In other words, Android could make more money for games developers than iOS by 2018. And that’s a big deal.
Yet iOS remains the easier app store for monetization per download, as it takes over two downloads on Google Play and over eight downloads on Chinese Android app stores to make the same amount of money as one iOS download. Mobile games revenue splits by app store are below and mobile games revenue forecasts by app store type are here.
With games leaders set to continue their dominance in established games sectors, the amazing innovations coming out of AR and VR could give rise to an entirely new set of disruptive insurgents. Let the games begin!
The full analysis is here.
Digi-Capital advises mobile internet, AR/VR, games and digital clients across America, China, Japan, South Korea and Europe