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Jan 29, 2019

Mat’s 2019 US Video Game Market Predictions

Mat Piscatella, Industry Analyst ;

Video Games

@MatPiscatella

Note: Some of these predictions originally appeared on gamesindustry.biz.

The U.S. Video Game industry experienced significant growth in 2018, as sales increased 18% to over $43 billion.  Some of the drivers of this growth included the cultural phenomenon that is Fortnite, continued gains in mobile spending, cyclical peaks of both PlayStation 4 and Xbox One, and a strong second year for Nintendo Switch, among others.

The market also experienced strong growth in subscription spending due to offerings such as Xbox Game Pass and the debut of Nintendo Switch Online. Finally, we had a sneak peek into the potential future as streaming services began to step forward, joining Sony’s PlayStation Now.

This year will be more challenging, and I do not expect to see the growth rate of a year ago repeated.  We should see cyclical declines in both PlayStation 4 and Xbox One that Switch gains will not be able to offset. The market will also have a tough time to replicate the growth that Fortnite helped drive, particularly in the year’s first half. Finally, it will be very difficult for the market games slate in 2019 to show significant growth against what may have been the strongest software slate in a decade a year ago.

With that, here are my predictions for what should be an intriguing year in the U.S. Video Games market:

  • Spending on digital content to account for 90 percent of total gaming content spending - According to The NPD Group's Games Market Dynamics report, by the end of Q3 2018, 86 percent of gaming content was sold digitally across console, portable, PC, and mobile. Digital growth should force more share to shift, although I do expect physical software sales will continue to not be significantly cannibalized by this digital growth.
  • In console hardware, Switch grows, leads market - I have Switch achieving more than 35 share of hardware unit sales in the U.S. in 2019, with a new Pokémon RPG and the continued strength of Nintendo's evergreen franchises driving the performance.
  • Subscription spending continues to rapidly grow - More services, more consumer choice, as well as deeper and broader offerings will allow subscription spending growth to accelerate throughout the year, potentially exceeding the over 40 percent growth in subscription spending that the market experienced in 2018.
  • 2018 success will lead to tough comps in console software & hardware - 2018 was a remarkable year for the breadth and depth of titles released from some of the most successful franchises and studios in gaming. Content drives the business, and many months in 2019 will have challenging comparable periods, especially as we move towards a potential next generation of PlayStation and Xbox offerings.  Declines in software spending in some months should be expected, and I do expect total annual hardware unit sales to fall in the low to mid-single digit percentages.
  • More focus on facilitating social hangouts in games - One of the more significant drivers of success in the biggest games in recent years has been the facilitation of making it easy for friends to play together. This trend should continue, particularly as game sales become more aggregated amongst the market’s biggest games.  Titles that emphasize not only great gameplay, but also making it easy and appealing for getting together with friends should return higher engagement and sales.
  • Streaming offerings outpace consumer adoption - There are significant incentives for companies to offer streaming gaming solutions, particularly on margins, and there will be no shortage of new consumer offerings over the course of 2019. However, given current infrastructure and ingrained consumer practices, adoption of such services will come slowly. I expect streaming services to make a lot of noise in 2019, but with little consumer payoff, at least in the short term.

While achieving a similar level of growth the market experienced in 2018 is highly unlikely, it is reasonable to assume that the 2019 market will be relatively flat, or a few percentage points thereabouts.  We should also expect the announcement of the next generation console successors from Sony and Microsoft in 2019, likely launching in 2020, although nothing here is certain.  In any case, 2019 should be a dynamic and exciting year in the video game space, as game makers continue to expand gaming’s reach across all ages and interests with compelling, exciting content.


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