Global games market to surpass $200 Billion by 2023, despite decline

The gaming industry continues to skyrocket upwards with no signs of slowing down, as the COVID-19 pandemic added more fuel to its roaring fire.

This statement was echoed by Amsterdam-based games and esports data company Newzoo’s new report outlining the state of the global games market.  Last week, we published our latest games market estimates for subscribers to our Global Games Market Report. We forecast during 2021, the market will generate revenues of $175.8 billion, a small year-on-year decline of -1.1 percent. By the end of the year, there will be 2.9 billion players worldwide.

This is the first time in Newzoo’s history that we forecast the games market to decline, however, our research indicates that it is no cause for concern for the games market’s long-term prospects.

To contextualize the games market in 2021, it is important to mention that 2020 was a unique growth year. COVID-19-related lockdown measures spurred enormous interest in gaming across all regions and platforms.

The Q4 release of the PlayStation 5 and Xbox Series S|X sealed a year of record-breaking growth. We now estimate the games market generated $177.8 billion in 2020, up +23.1 percent year on year, the highest growth for the market since Newzoo began tracking revenues in 2012.

COVID-19’s impact on society and AAA global gaming market

While the impact of the COVID-19 outbreak on engagement and spending in 2020 was positive, there is also a downside to the pandemic’s impact on the games market. The lockdowns in the first half of 2020 affected nearly everyone’s way of working, and gaming studios were no exception.

Furthermore, global supply chains continue to be disrupted by the pandemic.

We now forecast the PC games market to decline -2.8 percent year on year to $35.9 billion in 2021. Of that, $33.3 billion will be spent on downloaded/boxed games, and $2.6 billion will be spent on browser games.

For console, we now forecast the market to decline -8.9 percent to $49.2 billion, as the after-effects of COVID-19 will shape the console market this year.

Delays in game releases affect development and publishing across the market, but the heavier impact is on games with high production values and large teams working together, typically the AAA market for console and—to a lesser extent—PC gaming.

The lineup of games for next-generation consoles has been impacted by the pandemic and will continue to be disrupted for the rest of the year, with many releases already pushed to the second half of this year or even 2022.

The negative impact also affects hardware, as global shortages of chips mean a supply shortage for many consumer electronics, key among which are next-generation consoles and components required for high-end PC gaming.

Like the delays in game releases, we expect the shortage of hardware and components to negatively affect consumer spending on games on PC and console.

Additionally, we now have a clearer idea of what the world will look like once the pandemic is under control, and we have adjusted our global games market forecast accordingly. While we expect a lot of the increased engagement will stick, there will be a short-term return to the levels of engagement and spending of pre-2020 as people enjoy increased freedom and spend their disposable income on non-gaming social activities.

Apple’s IDFA removal looms over the mobile games market

We now forecast mobile gaming to generate $90.7 billion in 2021, growing +4.4 percent year on year. This is more than half of the global games market, as the segment is less affected by the effects of COVID-19 than PC and console gaming.

For mobile games, the relatively lower complexity of development means that the segment is not as impacted by game delays resulting from changing working conditions.

However, Apple’s removal of the IDFA (Identifier for Advertisers) is looming over the market, which will disrupt how many mobile game companies measure the success of their marketing campaigns.

The brunt of the impact of this change will fall on the part of the mobile games market monetized through advertisement (which is not in Newzoo’s scope, as we look at revenues generated through consumer spending) and games that are heavily reliant on precise user targeting.

We also expect an impact on user acquisition and marketing performance measurements that successful mobile publishers rely on to perfect their strategy, but this will be overshadowed on a global scale by other underlying growth drivers.

For example, a significant part of mobile games’ revenue growth comes from China, where Tencent and NetEase’s ecosystems are strong without IDFA. This reliance on first-party player data is just one-way mobile developers and publishers can work around the removal of IDFA. 

We are confident that mobile developers will be able to adjust to the new regulation and resume a path to growth fairly quickly, which is why we retain a positive outlook for mobile gaming in 2021 and the years beyond.

Outlook of the global games market

The games market will continue to grow in the following years, exceeding $200 billion at the end of 2023. By then, we forecast the games market to grow with a +7.2 percent CAGR between 2019 and 2023 to $204.6 billion.

To illustrate that 2021 is a mere speedbump in the continued growth of the games market, we revisited the global games market revenue forecast we published in April 2020, when the effect of COVID-19 on the games market was just becoming clear.

While our outlook then was steady growth toward 2023, the impact of COVID-19 on the games market meant that a lot of that growth was frontloaded in 2020. This year will be a corrective year; even with a slight decline, our forecast for 2021 is still above what it was 12 months ago.

Looking ahead, we forecast the games market in 2023 to generate $204.6 billion, almost $4 billion above our forecast 12 months ago.

Mobile gaming will be the fastest-growing segment over the coming years, though console gaming will carry that title for 2022 when the release schedule is overloaded due to delays and more people being able to purchase the new consoles.

This article has been written by Amsterdam-based games and esports data company Newzoo, outlining the state of the global games market during 2021, and beyond.