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Jun 1, 2017

Video Game Industry Predictions for Holiday 2017 and What to Watch at E3

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2017 has been a fantastic year to be a video game fan. 

The Nintendo Switch has experienced a strong launch, supported by The Legend of Zelda: Breath of the Wild and Mario Kart 8 Deluxe.  Highly reviewed games like Persona 5, Resident Evil 7: biohazard, Horizon: Zero Dawn, What Remains of Edith Finch and NieR: Automata have given consumers broad choice in genre and gameplay.  And the Games as a Service model is being embraced by consumers, with games like Tom Clancy’s Ghost Recon: Wildlands, For Honor, Grand Theft Auto V and NBA 2K17 experiencing prolonged sales and sustained consumer engagement.

In January I published my 2017 predictions for the video game industry.   Here I’ll take a pre-E3 pass at what the holiday quarter may bring for U.S. packaged video games:

  • Call of Duty: World War II will be the quarter’s best-selling game, with sales growing more than 25 percent versus last year’s Call of Duty: Infinite Warfare.
  • At least 4 titles will achieve $100 million or more in Q4 packaged consumer sales.
  • The top 5 selling games this Q4 will combine to generate at least 20 percent more packaged consumer revenues than the top 5 one year ago.
  • This year’s top 5 selling games of Q4 will be Call of Duty: WWII, Star Wars Battlefront II, NBA 2K18, Super Mario Odyssey and Destiny 2. 
  • By the end of Q4, approximately 320 packaged titles will reach retail shelves, up from 271 a year ago, and up from the 21st century low of 230 games in 2015. 
  • At year’s end, the time-aligned installed base of the PlayStation 4 and Xbox One will exceed that of the PlayStation 2 and Xbox by 5 percent, and will be ahead of the PlayStation 3 and Xbox 360 by at least 25 percent.
  • Sales of portable hardware and software will be down by at least 40 percent versus Q4 2016.
  • At least 90 percent of Q4 packaged software sales will come from the PlayStation 4, Xbox One and Switch.

Of course, E3 is just a month away, and some surprises are certainly in store. 

The full reveal of Microsoft’s Project Scorpio will be my primary focus as pricing, software support and additional services are expected to be clarified during the E3 period.  I am bullish on the potential of Scorpio, but absolutely want to know more detail around what the consumer offering will be.  I want to believe, but there are currently more unknowns than knowns. 

The Nintendo Switch has had an amazing start.  Are we looking at the new way people want to experience games, with similar experiences on the TV and on the go?  Seeing what content is coming after Super Mario Odyssey will provide much needed guidance for what the future may hold.  In addition, in a market environment where Games as a Service are becoming more ubiquitous, and where revenues from subscription services are on the cusp of achieving exponential annual growth, what will Nintendo’s online offering for the Switch be?

Sony’s PlayStation 4 has achieved success that few predicted prior to its launch.  Sony has been able to sell enough hardware to create an installed base where titles of all types and sizes can succeed.  Persona 5 is just the latest in a series of Sony platform exclusives that have performed better than historical benchmarks.  Sony’s strength in the current generation has been delivering exclusive content and appealing hardware bundles.  I expect more of the same at E3, but am open to more surprises from a company currently firing on all cylinders.

Finally, sales performance of virtual reality gaming has been somewhat disappointing thus far.  Significant investment continues, as do the promises of VR eventually becoming the primary way people play games.  I don’t buy it, at least not yet.  I see more barriers to entry than entry points, and I think this E3 is put up or shut up time for this generation of VR gaming systems.  I hope I’m wrong, but I don’t expect VR to deliver mass market returns in the near future.

2017 has been an amazing year so far, full of significant industry changes and evolutions.  I’m not sure we’ve had a more surprising year since the Wii took the world by storm a decade ago.  What other surprises are in store?

Bring on E3!


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