Video Games Market Research & Business Solutions

The console and PC games markets had quite an amazing 2017. A lineup of games that rivals the lineups of some of the best years in industry history, the launch of the Switch along with the continued resurgence of Nintendo, as well as the breakout emergence of the service model all combined to ensure 2017 will have a significant, long-term impact on the industry.

Powered by EEDAR's world-class games database and PlayerPulse consumer tracking, the Deconstructing Mobile & Tablet Gaming 2017 report helps you support strategic business and marketing decisions with confidence. Exhaustive insights into how and where mobile gamers play, combined with their top motivations for spending, make it easy to analyze genre performance and see how the market is responding to genre saturation.

As the video game industry goes digital, the importance of digital storefronts is skyrocketing. For most digital titles, promotional placement volume on digital storefronts is the most effective way to increase revenue. The Digital Storefront Report from EEDAR, an NPD Group company, focuses on the PlayStation 4 and Xbox One digital storefronts, highlighting the factors leading to success on those platforms.

Downloadable content (DLC) and microtransactions deliver the enhanced experiences gamers not only want, but expect. Our PC and Video Games — DLC and Microtransactions Purchasing Report shows you exactly what’s happening with gaming behavior, purchasing, attitudes, and perceptions related to DLC and microtransactions. And we’ve incorporated a focus on non-casual games for both consoles and the PC. This report is the only source for current, in-depth detail about this market.

Core gamers are committed to their video games. They just keep on spending – new content, new consoles — despite the industry’s changes. It’s essential that you understand what they want and how they play. Get a fresh look at core gamers, how they’re adapting to your changing industry, and what they think of the newly-released consoles.

What captures kids’ time and parents’ spending? Understanding why kids do what they do can be a challenge for toy marketers (and parents!). Now there’s a source for new data and insights about how and where parents spend money on children age 14 and younger and how kids spend their time.

Video games, electronics, and apps make up a combined 22 percent of kids’ licensed product dollar sales in the U.S.* – on par with the volume represented by toys, which is the number one licensed industry at most retailers, according to the U.S. Kids License Report from global information company The NPD Group.

According to PC and Video Games – DLC and Microtransaction Purchasing, the latest report from global information company, The NPD Group, among the U.S. population of males and females age 13-54, 28 percent have purchased additional video game content in the past three months, with males and teens being the primary purchasers. Microtransactions are purchased more often than downloadable content (DLC), at 23 percent and 16 percent, respectively.

According to Gamer Segmentation 2016, the latest report from global information company, The NPD Group, the avid omni gamers segment continues to see an upward trend in growth and is close to surpassing the largest segment, free & mobile gamers. The avid omni gamers segment, up three percentage points from 2014, is closing the gap on the largest gamer segment, free & mobile gamers, which exhibited a decrease of two percentage points.

The NPD Group, a global provider of information and advisory services, has signed an agreement to acquire EEDAR, a specialist market research and data analysis firm for the video games industry. Combining the complementary assets and expertise of the two companies will give clients access to a full suite of services covering data, insights, and analytics and facilitate innovation to meet the rapidly changing needs of the industry.

Political ideology aside, consumers share a lot of common ground in their entertainment choices, and they also have some very distinct differences, according to data from global information provider The NPD Group. According to NPD’s BrandLink, the most popular movie genres, music types and video games are favored equally by both Republicans and Democrats.

The NPD Group today announced that it has launched a digital point-of-sale (POS) sourced service, tracking SKU-level sales data on digital games. NPD’s Digital Games Tracking Service is the first service to provide the U.S. gaming industry with publisher-sourced data on digital game sales, aggregated from the participants of a Digital Panel that includes leading publishers in the industry.

According to eSports and Streaming Gameplay, the latest report from global information provider, The NPD Group, 44 percent of current gamers have watched either formal eSports competitions or informal video streaming of gameplay in the past six months.

More than half (52%) of all U.S. Internet homes have at least one TV connected to the Internet, representing an increase of six million homes over the past year, according to The NPD Group Connected Intelligence Connected Home Entertainment Report.

This was my thirteenth E3.  As I walked the show floor this year, on more than one occasion I looked around and wondered how the industry got here and where it is going.

The 2018 version of the show reflected an industry in transition towards several potential futures. And yet, few of these potential futures were provided a concrete vision or timeline.

• Future consoles?  They were referred to, almost casually.  New hardware is coming, someday.
• Streaming?  Despite currently available streaming services still striving to find significant mass market adoption, some positioned streaming as the future of gaming, while others described it as a way to expand the audience for immersive gaming. But these additional services and improvements are not ready yet; and few clues were given as to when they would be, or how streaming will overcome challenges around infrastructure, latency and the potential impacts regarding changes to net neutrality.
• Subscriptions?  There are new and expanded services on the way.  But, outside of Microsoft’s commitment to bring its first party games to Xbox Game Pass day 1, the content and timing of these potential services remains unclear.
• Games? We saw games featuring incredible assets and fidelity, but few beyond the first quarter of 2019 had concrete release dates, and even the platforms they’re being created for remained a mystery.

However, on the show floor itself, it’s not the future that was reflected.  Some of the biggest games on the floor were games that can be bought and played today. While I was there, I had hands-on time with Fortnite, For Honor, and Divinity: Original Sin 2, and saw many other games that people can play at home, right now. 

Some titles have additional content coming, while others will be released on new platforms. But odds are high that if one were given a random kiosk on the floor to play, it’d be a game that may already be in the library at home.

The announcement with the most concrete impact of any conference may have been the release of a Fortnite port to Switch. In a world of games as a service, is this not only the present, but the future as well?

Yes, there were new games on the floor, and others that were announced at the conferences, but it seemed to me fewer were playable this year than in the past. Perhaps this is partially due to Microsoft’s presence being missed, with its focus on having “indie” type games on the floor being absent this year. Or maybe it is because the games shown are 2+ years out, possibly for consoles that haven’t been announced.

As the show evolves, other trends are noticeable.  The fan experience seemed expanded and improved but seeing the massive lines for the fans signifies that there is much more that needs to be done. The E3 Coliseum showcase was incredible. Microsoft, Ubisoft, Sony and others broadcast conferences full of amazing games.  The focus on diversity and representation throughout the conferences was encouraging. And highlighting and showing respect to the game makers was on full display.

The games industry, particularly the console space, is looking at an uncertain future.  As always happens during these periods, some ideas will thrive, some will die, and we’ll be left, for the most part, with services, platforms and games consumers are willing to spend money on.

I did not miss the stalwarts of a decade ago: bar charts in the press conferences, “booth babes”, the goofy schwag, and the incessant noise. 

And perhaps I shouldn’t be missing the lack of clarity from the presentations. There are many potential futures for the industry, all of which should lead to continued expansion and growth, providing experiences that can be found in no other medium, delivered by some of the most talented people in the world.

As I look at the road ahead and its multiple forks, it’s becoming evident that the industry is prepared to go down all of them.

Some of these predictions originally appeared on gamesindustry.biz

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.

Now that 2017 full year data for the video game category from The NPD Group is in the books (check out our video for all the detail), it’s time to take a look at the report card.

I made two sets of predictions last year: one in mid-January; and a pre-E3 read from early June.  And now, without further ado …

From my blog post of January 16^th, 2017:

• Early Year Prediction 1: Over 5k games will release on STEAM in 2017.  For every title released on consoles or portable at retail, at least 25 titles will release on STEAM.

• • So, what happened? Over 7,600 games released on STEAM in 2017, while 314 new release titles made it to retail for consoles and portables.  This equates to a ratio of 24.4 STEAM games for every console or portable game released.

• •  Result: The ratio was right, but I underestimated just how many games would come to STEAM.

• Early Year Prediction 2: Users, not Units, will be firmly embedded as the planning currency for console game publishers, so expect more incentives to stick with one console game longer.

• • So, what happened? Games being sold as a service took firm hold of the top sellers list in the 2017 market, with each of the titles in the top 10 offering some form of ongoing service-based support.

• •  Result: Correct. 

• Early Year Prediction 3: Virtual currencies and consumables will be baked into more (most?) console games.

• • So, what happened? One of the things 2017 will be remembered most for in the industry is the rise to prominence of the “loot box”.  While virtual currencies and consumables go well beyond loot boxes, the impact of these mechanics in some of the biggest games of the year cannot be denied.

• •  Result: Correct. 

• Early Year Prediction 4: Gold editions will become more prevalent, lifting average selling prices at launch well above $60.

• • So, what happened? Bundling additional content with the base game became a more widespread practice in 2017, with many games holding average prices at higher levels for longer periods of time than has been seen in past years.  Of the games in the top 10 for all of 2017, more than half offered these types of editions, a ratio I expect may rise higher in the future.

• •  Result: Correct.

• Early Year Prediction 5: The Nintendo Switch will experience hardware shortages, alter the console landscape.

• • So, what happened? Hardware shortages were a challenge for Nintendo Switch for a majority of the year as it continued its record setting sales pace.  And in terms of altering the console landscape, well, I think we’ve yet to realize the full impact Nintendo Switch will eventually have on gaming.  Prior to launch, I was one of the more bullish analysts out there on Switch, and it blew away even my lofty sales expectations.

• •  Result: Correct.

But these weren’t my only predictions from 2017. 

I made a more specific set of Holiday predictions just prior to E3, in a blog post from June 1^st, 2017:

• Holiday Quarter Prediction 1: 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.

• •  Result: Correct.

• Holiday Quarter Prediction 2: At least 4 titles will achieve $100 million or more in Q4 packaged consumer sales.

• •  Result: Correct.

• Holiday Quarter Prediction 3: 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.

• •  Result: Incorrect, but I was close.

• Holiday Quarter Prediction 4: 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.

• •  Result: Incorrect, but close again.  The top 5 selling games of Q4 were Call of Duty: WWII, Star Wars: Battlefront II, Super Mario Odyssey, NBA 2K18 and Assassin’s Creed: Origins.

• Holiday Quarter Prediction 5: 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.

• •  Result: Correct.  At least close enough.  314 packaged titles released in 2017.  I was off by 2 percent.

• Holiday Quarter Prediction 6: 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.

• •  Result: Once more, very close but just off.  The time aligned (over the first 50 months in market for each console) installed base of PS4 and Xbox One exceeds that of the PlayStation 2 and Xbox by 4 percent, and is 18 percent ahead of the PlayStation 3 and Xbox 360.

• Holiday Quarter Prediction 7: Sales of portable hardware and software will be down by at least 40 percent versus Q4 2016.

• •  Result: Incorrect, the decline in portable hardware and software sales was less than predicted, thanks mainly to strong performance from Pokémon Ultra Sun, Pokémon Ultra Moon, and the new Nintendo 2DS hardware releases.

• Holiday Quarter Prediction 8: At least 90 percent of Q4 packaged software sales will come from the PlayStation 4, Xbox One and Switch.

• •  Result: Off by 1 percent at 89 percent, so I’ll call this close enough to be correct.

The holiday quarter performed much as I expected.  The exception being Portable, which performed better than I had expected due to the launch of Pokémon Ultra Sun and Pokémon Ultra Moon and the performance of the $79.99 Nintendo 2DS hardware.

Overall, it was a fantastic holiday quarter, and quite a remarkable year, for the video game industry.

And hey, as far as report cards go, I’ve certainly had worse.

The NPD Group reported U.S. sales of video game products in the month of September grew 39% when compared to a year ago, reaching $1.2B in the month.

Performance of console software was the most impressive in the month, as dollar sales grew 52.1% compared to September 2016 reaching $726m, thanks in large part to the releases of Destiny 2 from Activision Blizzard and Take 2’s NBA 2K18.

This growth in console software dollar sales is, in fact, the highest in tracked history for the month of September.

So how has the console software industry transitioned from 2013 proclamations that “Mobile Kills the Console” to highest recorded growth?

• Appealing hardware - Consumers have purchased the new consoles at levels approaching all-time highs.  On a time-aligned basis, the PS4 and Xbox One combine to currently feature an installed base that’s 25 percent higher than that of the PS3 and Xbox 360; and they are on pace to finish the year ahead of the time-aligned combined installed base of the PS2 and original Xbox. The Nintendo Switch, launched earlier this year, has been supply constrained since launch, with demand far exceeding available supply.  Can the Nintendo Switch reach the sales levels achieved by the Nintendo Wii in the U.S. over its first 12 months?  Difficult to say, but it’s very possible.
• A wide range of appealing content – A far wider variety of games is available today than at any other point in history.  We’re also seeing a wide range of price points and business models to go along with a larger assortment of genre, gameplay, and art styles featured in these games.
• The rise of digital distribution – The data is clear - digital distribution is a market growth driver that’s making the overall available market bigger.  Not only because of the wider variety of titles that digital distribution makes possible, but also because of consumer convenience, accessibility, and flexibility in pricing and promotional programs.  Digital distribution has also fueled expansion of available business models supporting titles that strive to achieve deeper and more sustained player engagement, the driver of extended sales success at a title level.

For more insights from the month, please take a look at my YouTube video of September market highlights here.

U.S. Video Game Market Holiday Predictions (UPDATE)

Looking ahead to Q4 results, I expect continued growth, even if not at the same lofty levels seen in the September results.

In June, I published my predictions for holiday 2017.  Nothing in the data we’ve seen since has pushed me off any of these expectations:

• 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.

The only change I might make now is adding Assassin’s Creed: Origins to potentially replace Destiny 2 as the #5 game of Q4, only because the September launch of Destiny 2 was so massive that the timing of sales may have been pulled forward.

In any case, I expect double-digit percentage dollar sales growth to be a common theme in both hardware and console software reporting through the rest of 2017.

The 2017 U.S. Video Game Market Looking Much as I Expected in January (UPDATE)

At the beginning of the year, I posted my 2017 outlook.  Checking in on progress through the end of Q3, the market is shaping up almost exactly as I’d anticipated:

• Over 5,000 games will release on STEAM in 2017.  For every title released on consoles or portables at retail, at least 25 titles will release on STEAM.
• Users, not Units, will be firmly embedded as the planning currency for console game publishers, so expect more incentives to stick with one console game longer.
• Virtual currencies and consumables will be baked into more (most?) console games.
• Gold editions will become more prevalent, lifting average selling prices at launch well above $60.
• The Nintendo Switch will experience hardware shortages, alter the console landscape.

I underestimated how many titles would come to STEAM in the year.  As of this writing, nearly 6,000 games had reached STEAM in 2017, and we may be well on our way towards seeing 7,500 or more in the year.  Steam Direct has certainly had an impact in making it an easy process to place titles on the STEAM marketplace.

Engagement, virtual currencies, consumables (loot boxes), and gold editions have all been very hot topics going into the holiday, with almost all the biggest titles pursuing extended engagement using a multitude of these mechanics.

Nintendo Switch has exceeded the lofty expectations I had for it entering the year.  It’s not only altered the console landscape, it features what could be the strongest year one software lineup of any console in history.  With the coming launch of Pokémon RPG and extended support of indie and major third-party development, Nintendo Switch could rewrite the record book for console installed base and adoption by the end of its lifecycle.  Will Pokémon RPG drive multi-console unit ownership per household?  Will the hardware be iterated on, as Nintendo has managed previous consoles and portable devices?  How many more 90+ rated games will we see on the platform?  The answers to these questions will ultimately determine the ceiling, but so far there is much reason for optimism.

It’s been quite some time since the console market in the U.S. has been in such a strong position for potential continued growth.  Driven by innovations in both hardware and content, and pushed forward by high levels of consumer engagement, the console space has reasserted itself.  The short to mid-term outlook of the space remains exceptionally bright for those that can adjust to the ever-changing landscape.

PlayerUnknown’s Battlegrounds is the most popular and best-selling entertainment property you may have never heard of.

It may also be one of the most important games releasing in the console space this holiday period.

You shouldn’t feel too bad about not knowing a lot about PlayerUnknown’s Battlegrounds.  After all, it only launched in March as an Early Access game on Valve’s PC digital distribution platform STEAM.

It’s a game that is bucking all AAA market trends.  There are no cutscenes, no celebrity voice actors, no in game advertisements, no high production value graphics, no quick time events, no achievements or trophies, there isn’t even any music.

PlayerUnknown’s Battlegrounds is play in one of its purest forms.  One hundred players parachute onto an island, one player wins by eliminating all other players in the style of the 2000 film Battle Royale.  There are no respawns, no super powers and no levelling.  Players make their own stories, either alone or with squads of friends.  And the winner gets the most sought-after congratulations in gaming, a simple screen that says only “Winner Winner Chicken Dinner.”

It’s a game that, looking at the rest of the market, probably shouldn’t be this successful.

Since PlayerUnknown’s Battlegrounds March launch, however, it’s done what many would say was previously impossible.  Over the weekend, PlayerUnknown’s Battlegrounds took over the top spot in peak concurrent worldwide players on STEAM, displacing Valve’s own DOTA 2.

Oh, it’s also been a sales juggernaut.

In the five months since PlayerUnknown’s Battlegrounds launched, it has achieved eight million units in global sales on PC.

By August 17^th, it had reached seven million.

By July 25^th, six million.

By July 21^st, five million.

I’m guessing you can see a pattern here.

Bluehole, the publisher of PlayerUnknown’s Battlegrounds on STEAM, has certainly enjoyed the remarkable rise of the game on PC.  It is a sales and player engagement darling.  On Twitch, PlayerUnknown’s Battlegrounds is now carrying view counts more than three times that of longtime leader League of Legends.

And for the market leaders in the console space, the impact of PlayerUnknown’s Battlegrounds is just getting started.

PlayerUnknown’s Battlegrounds is Microsoft’s exclusive crown jewel in what will be a highly competitive holiday 2017 sales period.  The company, which is releasing the Xbox One X on November 7^th, has faced criticisms for a somewhat sparse exclusive content slate in recent months.  Microsoft will be publishing the Xbox One version of PlayerUnknown’s Battlegrounds, which will be exclusive to the platform in the console space throughout the holiday window at least, although it’s uncertain just how long the exclusivity window will last.

And with just this one game, Microsoft could very well not only potentially have the best-selling exclusive product of the holiday quarter, but one that could drive significant sales of Xbox One hardware as well.

The only hang up?  PlayerUnknown’s Battlegrounds release date has yet to be confirmed. 

Early results for Xbox One X hardware pre-orders are reportedly positive.  Microsoft is claiming the highest initial pre-orders in Xbox history, although specifics around what that pre-order level is are fleeting.

While Sony’s PlayStation 4 has led the US market during the generation that began in 2013, the launch of the iterative Xbox One X console along with PlayerUnknown’s Battlegrounds console exclusivity on the Xbox One platform could have competition heating up.  If the game launches this holiday, of course.

How console players react to PlayerUnknown’s Battlegrounds market-defying structure and play style will go a long way towards determining just how hot that competition will get.  Earlier this year I’d predicted six hundred thousand Xbox One X units to sell to US consumers in 2017.  If PlayerUnknown’s Battlegrounds launches on Xbox One this holiday, and if the game can find a receptive market of gamers in the console space, Microsoft may be seeing its own version of “Winner Winner Chicken Dinner.”

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 21^st 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!

What a week.

One would normally expect the release of a new console platform to dominate gaming news in the days leading up to its launch. This is 2017, however, and it has seemingly become normal to have the sands shift underfoot on a more frequent basis.

Two market moving initiatives were announced this week, one potential game of the year has been released with another on the way Friday and, lest we forget, the Nintendo Switch just happens to be launching as well.

• Twitch as video game sales engine – Amazon’s purchase of Twitch in 2014 was a bold move with a billion-dollar price tag. Since that time, viewership has grown to 9.7 million daily active users with 106 minutes watched per person per day. The next step for Twitch, selling video games and downloadable content, will potentially allow each of the 2 million Twitch streamers per month (or at least the 17k most popular streamers termed Twitch Partners) to become commissioned salespeople for the games industry. Twitch’s vice president of commerce Matt McCloskey calls this “the idea of social commerce” and it presents both significant opportunity, and change, for the games marketplace.
  
  I believe the magnitude and potential of this initiative is difficult to overstate. The integration of selling tools into the Twitch streaming service, coupled with incentivized streamers, provides significant incremental selling opportunities. I believe this has the potential to be the most significant change to the games marketplace since the creation of the digital marketplaces themselves. While complete details are yet to be announced, this could be the signal of a significant marketplace shift that changes how content is discovered and sold.
• Microsoft’s Xbox Game Pass as gaming’s version of Netflix – The service, launching later this spring, promises unlimited access to over 100 Xbox One and backward compatible Xbox 360 games for a $9.99 per month cost. Currently in testing with Xbox Insider Program members, the service will also allow subscribers to purchase games featured in the service at a discount.
  
  This is not the first subscription program on console. EA Access launched in August of 2014 and now has 43 games in the “Vault” which subscribers can access and play at no additional cost. In addition, subscribers have been allowed early exclusive trials of such games as Battlefield 1, and receive discounts across EA products on the Xbox One store.
  
  The Xbox Game Pass is not only an interesting proposition for consumers. Publishers can incrementally monetize back catalogs, measure interest and engagement in dormant franchises (potentially allowing for new development investment), and support new releases by allowing players to revisit favorite games in that series prior to the new titles in the franchise launching.
  
  Sales data suggest that EA Access has had a net positive impact to sales and engagement of EA products on Xbox One. I fully expect the same to be the case with the Xbox Game Pass for participating publishers and titles. I also expect gamer backlogs to swell considerably. Combined, these factors are potentially great news for all involved.
• Horizon: Zero Dawn and The Legend of Zelda: Breath of the Wild as early GOTY contenders – Getting one potential game of the year in a month is fantastic, getting two in one week is almost unfair.
  
  Horizon: Zero Dawn, currently rated 88 on opencritic.com, is Guerrilla Games’ latest, an action RPG published by Sony Interactive Entertainment exclusively for the PlayStation 4. Nintendo’s major title launch in support of the Nintendo Switch (and coming to the Wii U) is The Legend of Zelda: Breath of the Wild. While at the time of writing a review embargo is still in place leading to the games’ Friday release, previews have the title widely praised for its scale and depth.
  
  Review scores are a factor in determining sales potential, although many others play into how a title might ultimately sell. In any case, having two high-profile, critically acclaimed games releasing in the same week is a tremendous positive for gamers and the console segment.
• Launch of the Nintendo Switch – Finally, this week will see the launch of the Nintendo Switch. I am cautiously optimistic on the platform. The potential of the device is significant, while technical and library challenges are noted by many reviewers.

The Wall Street Journal’s Takashi Mochizuki reported that Nintendo’s worldwide shipment target for launch month was 2 million units. If this report remains the case, the US market could receive an estimated 0.6-0.9 million units of the device in March. While I believe there are certainly enough fans of The Legend of Zelda franchise to snap up these launch units, it will be more interesting to see how sales trend over the summer months leading up to the launch of Super Mario Odyssey this holiday.

There are few weeks in memory that have had as many events take place with as much potential impact to the games industry as this.

Twitch’s selling of games and content, Microsoft’s Xbox Game Pass, the launch of two potential game of the year candidates from Sony and Nintendo and the launch of the latest Nintendo console?

What a week indeed.

Games as a Service (GaaS) is a term gaining significant traction within the video game marketplace, for good reason.

These types of games, which frequently include digital add-on components such as downloadable content, virtual currencies, micro-transactions, consumables, cosmetic items and, of course, season passes bundling these items, have dominated the sales charts in recent months.

Titles like Grand Theft Auto V, Overwatch, Tom Clancy’s The Division, FIFA 17, and Destiny are among the games that feature a model of consistent digital updates and additions that work towards keeping players returning to the games.  This has resulted in longer selling tails, higher engagement rates, and significantly more digital content spending than more traditional games.

Perhaps there’s no better example of the possibilities presented by the GaaS model than Tom Clancy’s Rainbow Six Siege.

Despite a slow start when launched in December 2015, Tom Clancy’s Rainbow Six Siege has accomplished what most game makers and publishers only dream of: steady growth in its player base, even more than a year after launch, and continued growth in its revenues driven by add-on content.  In its most recent earnings call, Ubisoft announced that Tom Clancy’s Rainbow Six Siege achieved 15 million registered players, with record daily active users, more than a year after launch.

Intuitively, one may assume that this is bad news for traditional retail.  That assumption would, however, be incorrect.

At retail, nine of the top 10 selling packaged video games in 2016 featured a GaaS model, with over a quarter of all retail revenues from those nine games coming from premium-priced versions of those packaged games.  These premium versions frequently included digital items such as downloadable content, and virtual currencies or cosmetics, among other digital items.

These premium versions of the games offering this additional content were most often priced well above the standard $59.99 MSRP.  Sales of these versions were also embraced by consumers, as significant sales growth was seen on these premium-priced versions of GaaS games when compared to last year.

So, what can retail do to ensure its getting its fair share of the emerging GaaS market, and thus capitalizing on digital?

Carrying more copies of these higher priced SKUs in a retail assortment mix is one, as a dollar spent on digital products at retail is purely incremental to normal, baseline retail demand.  Second, offering exclusive versions of these premium versions of GaaS games could offer some differentiation between retailers.  Finally, and perhaps the most dramatic path, a retailer could consider carrying these premium versions of GaaS games exclusively, refusing to carry the lower-priced SKUs that do not offer digital content components.

Consumers have quickly adopted the GaaS model, with such titles showing a significant portion of sales coming directly from digital add-on content.  Retail can take advantage of the GaaS model, and thereby capitalize on digital, by ensuring that premium versions of GaaS model games become and remain a merchandising priority.

A dramatic change has been happening at gaming retail since the beginning of the decade. 

Retail game sections have shrunk, packaged game sales have declined, more games have been released exclusively through digital marketplaces, and it’s rare to see an optimistic forecast for future packaged game sales.

Over the same period, shrinking retail shelves have been taken over by the latest AAA shooter and action games almost exclusively.  Other genres, such as platformers, action RPGs and adventure games can go missing entirely, often because major publishers are no longer making packaged games to serve these audiences.

The good news is that video game retail has the opportunity and ability to increase on-shelf title diversity in both pricing and genres available to consumers.  By embracing physical versions of games that would at one point have been considered digital exclusives, retail can offer more reasons for a consumer to browse its shelves, to discover games she would have otherwise missed, and to make retail video game sections once again a destination for excitement and discovery.

Release Count may be a meaningful driver of retail video game sales

The drivers of the change in packaged video game sales might seem obvious at first glance.  Growth in digital and mobile channels is often singled out as the primary reason for the change in packaged video game sales.   

However, the data suggests that the number of titles releasing at retail is as meaningful a reason as any (perhaps even the most meaningful) for the change in retail sales.  The change in retail release count also happens to be the most quantifiable, and has what may be the highest correlation to the change in retail sales of any quantifiable metric over the period.

There are fewer publishers, and on average those remaining publishers are bringing fewer games to retail than they were at the start of the decade.

This has resulted in a dramatic reduction in release count; one that just so happens to correlate quite well to packaged retail sales.

In addition, the decline in release count has resulted in more homogeneity in the kinds of games on shelf, and in price points.  Most retail shelves consist primarily of AAA action and shooter games originally priced at $59.99.  Only rarely will a platformer, strategy or family game reach the shelf.  This, in turn, has made browsing and discovery far less compelling for consumers.

Release count grew in 2016, with new publishers bringing smaller titles, that would formerly be digital exclusives, directly to retail

The good news is that the decline in packaged release count stopped in 2016.  The market actually experienced an uptick (which was detailed by James Batchelor at gamesindustry.biz) thanks to the expansion of this concept.

GameStop has proactively taken the steps to enter physical publishing of smaller scale digital games with GameTrust.  Its first title, Insomniac’s Song of the Deep, launched in July, was supported with significant presence and promotion at retail and in consumer marketing.  GameTrust also has partnerships in place with developers of digital games such as Tequila Works, Ready at Dawn and Frozenbyte.

505 Games  has been quite active in this space, bringing to retail physical versions of such digital hits as Rocket League, Terraria and, announced today, Stardew Valley.

Soedesco Publishing brought former digital exclusives such as Ziggurat, Giana Sisters: Twisted Dreams, and Among the Sleep to retail in 2016, while Limited Run Games has sold physical versions of digital games such as Oddworld: New N’ Tasty, and Octodad directly to consumers, without entering retail - at least not yet. 

While bringing digital games to retail isn’t a new thing (both the Sony PlayStation 3 and Microsoft’s Xbox 360 received disc versions of digital game compilations while developers like Telltale have been bringing its games to market in packaged form for some time), the importance such titles could have in today’s market is.

It would be unreasonable to believe that any one digital title could offset the revenue generated at retail by a AAA game it may substitute on shelf for.  These smaller, formerly digital exclusives generally retail from $14.99-$19.99, while a AAA product retails for $59.99. 

However, what these smaller titles can do is generate additional sales of the games themselves while at the same time driving traffic to the video game aisle, leading to incremental sales of other games while reengaging consumers that have gaming interests beyond the latest AAA big budget shooter.

Bringing the joy of discovery back to the video game aisle

What better way to encourage discovery, generate incremental game sales, and improve the shopping experience than provide retail consumers with more titles, more genres and more price points, to make shopping for video games at retail more engaging and fun?

The risk is, if the expansion of smaller digital games into the retail space doesn’t happen, and with AAA packaged release counts falling so low, at what point will consumers simply choose to look towards digital marketplaces first, not only for these smaller games but also for the big AAA blockbusters?  At what annual AAA physical release count does retail lose its appeal as a shopping destination for video games?

Bringing smaller digital games to retail would benefit developers, retailers and consumers.  It’s time for the model to be more fully embraced so everyone can benefit.

Consumers of console and PC video games have never faced a more overwhelming level of choices.  There are more games, and more opportunities to spend, than ever before.  Iterative console hardware, digital distribution and subscriptions, free-to-play monetization models in full-price games gaining in prevalence, and multiple SKUs with competing offers across digital and retail have already impacted the market (and have been confusing consumers) for some time.

This overwhelming amount of choice will only grow in 2017.  Console and PC gaming consumers will have even more options, across more platforms and with a larger range of price points, than ever before.  Here are a few things I’m predicting will happen in 2017:

Over 5k games will release on STEAM in 2017.  For every title released on consoles or portables at retail, at least 25 titles will release on STEAM.

This is, of course, a double-edged sword.  It will bring far more variety to the PC platform, and allow for developers of all sizes to get games into distribution.  On the other hand, this expanding flood of releases will make discoverability an even more daunting challenge for both developers and consumers.

Users, not Units, will be firmly embedded as the planning currency for console game publishers, so expect more incentives to stick with one console game longer.

Topline planning at publishers used to be simple: units and average price for sales of a console game at retail or digitally.  Now, the shift towards ARPU-based planning for console games is accelerating.  Publishers looking to retain and grow the player base for a game, while offering that base more opportunity to spend, is what consumers should expect.

Virtual currencies and consumables will be baked into more (most?) console games.

Adopting free-to-play monetization in full-price console titles will become more prevalent.  Accelerators, cosmetics, loot crates and boosts purchased with real world money will become a normal and expected component of most major console releases.

Gold editions will become more prevalent, lifting average selling prices at launch well above $60.

Game base retail prices have held at $60 largely because consumers have purchased enough DLC and MTX over the past few years to make the model hold.  Now, given the success of titles offering gold editions (versions of the game that include bonus content like season passes, virtual currencies or exclusive content) effectively raising the average retail price well over $60 at and around launch, expect most major console titles to offer this type of offering in a SKU mix.  I also expect more exclusive content to be included in these higher-priced versions.

The Nintendo Switch will experience hardware shortages, alter the console landscape.

Nintendo has very quietly been experiencing a sales resurgence.  3DS hardware and software sales have been on an extended year-on-year growth run in the U.S. market, while Pokémon Sun and Pokémon Moon were the best-selling launch Pokémon combo in history.  Super Mario Run has also achieved market success in mobile, allowing gamers to reengage with the brand.  Finally, the NES Classic has been sold out at retail since launch and was one of the quarter’s hottest gifting items.  Given this success, Nintendo is poised to re-establish itself as a market leader in the console space, and strongly compete in the retail market.  “Never count Nintendo out” is the oldest mantra in the video game industry.  I suspect it will be revived.