2020 will be a year of significant shifts in the U.S. video game marketplace. Overall sales will struggle to reach 2019 levels, and declines should be expected across many gaming segments. However, 2020 will also set the stage for reinvigorated market expansion beginning in 2021, based on the concept of allowing more people to engage with gaming how, where, and when they want.
Consumer spending on subscription services and mobile content should see growth in 2020, while other segments, such as hardware and non-mobile content, could see up to double-digit percentage declines.
Despite potential short-term declines, 2020 should also put the market on the path towards another period of overall expansion. Next generation consoles from Sony and Microsoft are expected to launch in the year; and I expect both to offer a differentiated assortment of content and services that should find wide-ranging appeal across consumer segments. These systems will join a successful Nintendo Switch in offering a variety of console options to U.S. video game players to complement what they play on mobile and PC platforms.
I also expect 2020 to be the year the industry brings ecosystems to the forefront, rather than platforms. Untying content from specific hardware will allow for more people to play more games more often, which should generate wider adoption and overall market gains. While I do not believe this will mean the end of exclusives anytime soon, I do expect that we will begin seeing shifts from platform exclusives to ecosystem exclusives. For example, making what in the past would be a console-only exclusive into a console exclusive that’s also available via a cloud-based service on mobile devices. This type of shift is likely to become a common approach.
Finally, while mobile, console and PC gaming offerings will remain specialized, we will also see more games crossing barriers, bringing more cross-save and cross-play offerings, which will allow players to engage with games on their own terms.
Empowering players to play how they want, where they want, and when they want is the core of gaming’s future growth.
On to the 2020 predictions …
Late cycle dynamics make for a rough console market, at least until new consoles arrive
PlayStation 4 and Xbox One hardware sales experienced strong headwinds throughout 2019. Not only were the platforms approaching the tail end of their cycles, they had also faced a Fortnite hangover (Fortnite drove significant new players to consoles in 2018 with associated gains in hardware, accessories and game card spending). While Switch growth was able to offset some of those declines in 2019, we're likely not to see that trend continue this year. All in-market hardware should see declines throughout 2020. Accessories and new full-game software sales are also expected to decline during this period, at least until new console hardware arrives.
Subscriptions start significantly impacting consumer purchasing behaviors
Many titles that were early participants in subscription programs saw organic full-game sales growth outside of the subscription services themselves, likely (at least partially) because subscribers suggested that friends and family buy the game the subscriber was playing. However, this may be changing; and it may be that subscribers are no longer telling those friends and family to buy an individual game, but rather subscribe to the subscription service itself. It’s possible that we’ll see a significant shift in mix between purchase and subscription players towards subscription for titles appearing on those services, particularly on day one.
Despite year-on-year declines, Nintendo Switch will lead the hardware market
Nintendo Switch carries tremendous momentum into 2020. While I do expect hardware sales to decline in 2020, Nintendo Switch will remain on top in the hardware space, perhaps into 2022.
Immersive gaming VR finally gains momentum
Growth in Oculus Quest, the release of Half-Life: Alyx, and refreshed vigor in the marketing and content plan for PSVR around the launch of PlayStation 5 should at long last bring immersive gaming VR to notable market traction. I expect this segment of gaming to remain quite niche and enthusiast focused. However, given where immersive gaming VR has been over the past few years, the movement I expect to see in 2020 should, at the very least, be encouraging.
Cloud gaming continues to stutter
While I do expect Microsoft's xCloud to begin establishing itself as a valuable addition to the Xbox slate of services, and PlayStation Now to gain more emphasis from Sony in messaging leading to the launch of PlayStation 5, I cannot see other cloud gaming initiatives gaining significant presence in 2020. Too many challenges exist around infrastructure, content and pricing to allow those competing services to make major market strides.