Global gaming industry, APAC winning the race?

• Rising global gaming industry as games become a favourite pass time
• Mobile surpassing PC games globally
• APAC is getting ahead in the gaming market with a large population  

The global gaming industry is entering a new phase with consumers spending in excess of $121 bn in 2017 on gaming from $70 bn in 2012. A double-digit growth with a CAGR of 11.51% in the past five years evinced innovative business models, this was ushered by a digital age and gave new means of entertainment and engagement to consumers. According to Newzoo (a leading provider of global games statistics), 2.3 bn gamers are expected to spend $137.9 bn across the globe on games in 2018, this is anticipated to reach $180.1 bn by 2021 and is likely to maintain a double-digit growth of 11% CAGR in the 10-year period (2012-2021e). Games are now becoming an integral part of preferred leisure activity, especially for the millennial generation and people are spending more time to play games. According to the Limelight Network report (2018), people who play video games spend on an average of 6 hours per week, which increased to more than 7 hours per week for millennials. Gamers consecutively play for ~1 hour and 20 minutes across the globe.

New generation games are now taking entertainment to a completely different level, where a consumer is not only a gamer who plays but also his or her passion gets reignited by viewing other players and through the creation of unique content on demand and/or live streaming. A rise of e-sports (a form of video game where multiplayer compete and others can watch online) has taken the act of viewing game video content to a professional level. Hence, with additional involvement in terms of time and generation of even more eyes balls than sports, gaming is now gaining popularity among digital media and broadcast companies world over. 

There is a continuous growth for mobile games. The launch of iPhone, a decade ago triggered an evolution by bringing in a whole new user experience, screen technology, hardware and software in the gaming industry. There has also been a rise in the mobile internet usage, increase in smartphone penetration, growth in the number of gaming apps and convenient digital payment options have mainly supported the proliferation of mobile games. Interestingly, at the same time, both PCs and console games lost their share in the global gaming revenue. While PC games are expected to grow at a mere 3.1% CAGR during 2012-21, console games are projected to grow even lower at 2.3% CAGR during the same period. One of the reasons for this is the declining pay to play PC game’s average price in recent years. Moreover, browsing PC games are also putting downward pressure on PC games revenue growth as gamers are continuously shifting to mobile games. Furthermore, increasing smartphone penetration globally is a major challenge for PC and console games. According to Newzoo, out of all console gamers, 87% also play games on PCs as this make it much easier to upgrade and share the content online. But an abundant availability of gaming apps (plenty of these are free to play and allow a player to compete with others and share content) and low entry barriers have provided an advantage to mobile games over console and PC games.  

Mobile gaming (both the smartphone and tablet gaming) has become the largest segment in global gaming from a small revenue share (2012) with a current revenue of $70.3 bn and has surpassed half of the gaming industry’s revenue globally. The ubiquity of mobile phones with more advanced features, processors and large display laid a path for a rapid growth of mobile games. The mobile gaming industry will continue to outpace overall games industry with an expected market size of $106 bn, accounting for 59% of the market share in the global games industry by 2021.

APAC (Asia-Pacific) with more smartphone users and gamers is the major contributor to this growth. Further, increasing paying capacity and ease of digital payment has also boosted mobile games revenue in the APAC.

The smartphone user count is expected to reach 3.6 bn by 2020 with APAC accounting for ~2 bn users. In 2018, APAC will have more than half of global smartphone users with China alone having more than 25% (775 million) of global smartphone users’ population. The nations like India, Japan and Indonesia are propelling the growth in the APAC along with China. Additionally, APAC is also ahead in terms of online and gamers population globally, inhabiting more than half of gamers population in the world. Although America witnessed a decline in gaming population in 2017, APAC grew to ~1.15 bn gamers.

Hence, APAC countries are likely to generate $71.4 bn of revenue with a large base of gamers (more than half of global gaming revenue) in 2018, this will be led by emerging markets such as Southeast Asia and India together with China, Japan and South Korea. In addition, more than 60% of the APAC’s revenue is projected to be generated through mobile games. 

China will continue to be at the top spot in the gaming market not only in terms of players but with respect to gaming revenue. Although an exponential growth of smartphone users, especially in Southeast Asia will be a major driver, a growing spending on mobile games in established markets such as Japan and South Korea will push global gaming market further ahead. According to Newzoo, gamers in Japan spend 1.5 more amount of money on games than North America and 2.5 times higher than Western Europe. 

Thus, in conclusion, it can be stated that evolution of new business models, for instance, Free2Play and Freemium where games are free and these entities mostly generate revenue through in-game purchases contrary to Pay-to-Play model, will disrupt the existing framework of the gaming industry. An extensive reach and a massive number of players for Free2Play decisively outstripped Pay-to-Play’s revenue. Addedly, high fidelity games with advanced 3D graphics and high vertex counts including AI (artificial intelligence) controlled characters are providing gamers with console like experience on a mobile. According to Priori Data (a data provider for global mobile app market), out of the top 200 Android and iOS games, 45 were high fidelity games in 2017, which are increasing day by day. At the same time, new technologies like virtual reality (VR) headsets, augmented reality (AR), wearable devices are going to change the current shape of the gaming pattern. Further, most games of the present generation allow multi-user platforms to provide highly competitive modes and run on Game-as-Service instead of Game-as-Product. APAC will be a primary driver for the growth in the overall gaming market due to its large population and increasing willingness to pay for games. Tencent and Sony hold number 1 and 2 positions internationally in the gaming market, these firms are from APAC and both have registered a revenue growth (2017) of 50% and 35% YOY respectively, this was much greater than any other company in the world. Chinese powerhouse Tencent, which is holding ~15% of the total gaming market and the US-based Activision Blizzard, both lead large-scale consolidation and these are heavily investing on gaming related areas by projecting as entertainment companies rather gaming companies. Technological advancement in both the hardware and software and M&A endeavours will further accelerate the growth in the global gaming.