The console and PC games markets had an amazing 2017. A lineup of games that rivals the best years in the history of video games, the launch of the Switch along with the continued resurgence of Nintendo, as well as the breakout emergence of the service model has ensured that 2017 will have a significant long-term impact on the industry.
The coming year will be more evolutionary than revolutionary, as the industry continues to shift from a product model to a live service one.
In terms of general trends:
- Growth in subscription services – Exponential revenue growth in this area is something I expect to see in 2018. I expect EA Access to make its way to the PlayStation 4, the launch of Nintendo’s online service to be warmly received, services like Xbox Game Pass to expand and be promoted heavily, and the launch of new subscription services throughout the year. Combined with other existing services like PlayStation+ and Xbox Gold, subscription services may be a significant growth area in the year.
- Switch to lead the console market – Nintendo Switch exceeded the expectations of many in both quality and quantity of released content, as well as sales in 2017. I expect this momentum to carry over into 2018, and Switch to both sell the most hardware units as well as generate the most software revenues at retail over the coming year. Pokémon RPG for Switch is the true wild card. If Pokémon RPG for Switch releases in 2018, we could start seeing multiple Switch consoles per household, raising the potential ceiling on traditional console benchmarks. Even without, however, Switch is poised to take market leadership as both PlayStation 4 and Xbox One enter their sixth year in the market.
- Immersive gaming VR will continue to struggle – The barriers to entry for mass market consumers to enter the high-end, immersive gaming VR space continues to be excessively high. From play pattern to price point to having necessary physical space available, immersive gaming VR will likely fail to experience a breakthrough in 2018. Prices for hardware will continue to fall, but sales lifts will fail to follow. Game sales will continue to lag, and goalposts for success will continue to shift. Currently, VR has an exciting presence in mobile, and a bright future in many other use cases. Perhaps one day it will find success in immersive gaming; 2018, however, will not be that year.
- Switch gold rush leads to discovery challenges – Nintendo Switch has been a fantastic success story of 2017, but with that success comes new challenges. One is the games storefront. Games are coming to Nintendo Switch at a furious pace that will only increase over time. Nintendo will be challenged to make discovering those games easier for consumers, and to ensure quality content doesn’t get buried in the avalanche of releases. While it’s a long way from facing the same scale of challenges STEAM is in this regard, the Switch must be able to connect consumers to the eShop content they’d enjoy buying and playing.
- At least 30 versions of Battle Royale games, or the addition of Battle Royale modes in existing games, will reach the Console market – The success of PlayerUnknown’s Battlegrounds and Fortnite in the emerging Battle Royale subsegment of the Shooter genre will inspire the addition of similar modes across existing games and the release of new games focusing on this playstyle. E3 will be swimming in a pool of Battle Royale games. Let’s hope we don’t drown in them.
- At least 16.8m units of console hardware will be sold in 2018 – The second year of Nintendo Switch, combined with extended strength of PlayStation 4, Xbox One and Nintendo 3DS will drive the market to its highest hardware unit sales total since 2012.
- Packaged software consumer dollar sales in the US will grow by a double-digit percentage, reach highest levels since 2013 – Itshould also put to rest, at least for a moment, the talk of “digital killing physical.” Sales of packaged Nintendo Switch software will drive this growth.
- Packaged software release count will grow at least 5 percent, to 330 titles – It will mark the third consecutive year of packaged software release count growth.
Finally, I expect 2018 to be a bridge year for PlayStation 4 and Xbox One as a lead in to 2019 new console announcements for launch in 2020.
There are many reasons to be bullish for the U.S. video game market in 2018. Nintendo Switch is on track for a big second year in market, while sales of PlayStation 4 and Xbox One continue to be strong. And while Nintendo 3DS is entering the latter part of its lifecycle, it will continue to be a vibrant platform in the year.
2018 will show that there’s never been a better time to be playing video games. The market will, once again, prove itself not to be a zero-sum game. New titles, and maybe even completely new genres, will emerge; and games will continue to delight those that play them anywhere they’d like to.
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