i3 - September/October 2019 - 50

Business

By Kyle Wandel

starting to change. CTA projects that
consumer spending for gaming software
will increase 11% over 2018 to roughly
$39 billion and is expected to reach $50
billion by 2023, a 43% increase. Software
growth is attributable to increased
spending on in-game purchases, digital
gaming downloads and gaming subscriptions-while physical gaming disc revenues will see double-digit declines for the
extent of CTA's five-year forecast.
While physical media and digital downBY T H E N U M B E RS
loads have made up the majority of industry revenues in recent years (58% in
2018), in-game purchases and subscription revenues will make major contributions over the next few years. In-game
purchases are expected to rise 15% to $12
billion in 2019, as gamers demonstrate
that they are willing to incrementally pay
or several years, the technology industry has been moving for extended game play and enhance their
experience with downloadable content.
towards an increasingly virtual and digital realm as cloud
This year's announcements from tech
storage, cloud computing and online subscription services
giants Apple and Google, entering the
have become more readily available to consumers. The video game game streaming and subscription service
segment offers a particularly interesting example of how busimarket with the debuts of Apple Arcade
nesses are adapting to new technologies. As the gaming industry
and Stadia (respectively), will continue to
disrupt the traditional revenue stream
prepares for a new generation of consoles, it is transforming how
people engage with games, relying more on online gaming services model for gaming software. For 2019, a
26% year-over-year surge in consumer
and less on physical gaming discs.
spending for gaming subscriptions is
expected to position it ahead of physical
gaming software for the first time. This
The trend for video game hardware is
2019 and nearly $3.9 billion in 2020.
trend will continue for many years as
temporarily in decline due to a slump in
However, console revenues look promisgaming subscriptions are expected to
shipments for current generation home
ing pending a successful release of the
reach over $10 billion by 2023.
consoles, such as the PlayStation 4 and the next-gen systems. Revenues are expected
Collectively, in-game purchases and subXbox One S, as consumers patiently await
to bounce back to $4.7 billion in 2021.
scription revenues will make up 54% of
the ninth generation of home console
total video game software revenues in
releases from Sony and Microsoft at the
A New Paradigm
2023, thus turning the table on gaming
end of 2020. Even with strong support for As the gaming industry shifts away from
discs and digital downloads.
the Nintendo Switch as an all-in-one
physical media, the entire revenue model
The gaming industry is typically one of
home/portable console, home console
for the video game software industry is
the first segments
shipments (which excludes shipments of
to adapt to
portable video game hardware) are proConsumer Spending for Gaming Software
advances in techjected to decline 8% from 2018, to roughly
CTA projects that consumer spending for gaming software
nology. As con14.8 million total units shipping in 2019.
will increase 11% over 2018 to roughly $39 billion and is
sumers continue
Paired with the continual double-digit
50
expected to reach $50 billion by 2023, a 43% increase.
$50 billion
to embrace techdeclines in portable console sales (mainly
40
nologies such as
due to the rise in tablet and smartphone
cloud computing
gaming), total video game hardware
$39 billion
30
and subscription
shipments are positioned to decline 9%
streaming services,
in 2019 and 11% in 2020. Collectively,
2018
2019e
2020p
2021p
2022p
2023p
so will the gaming
gaming consoles will account for over
industry.
$4.2 billion in shipment revenues in
Years

The Gaming Industry
Takes Flight into the Cloud

Amount in Billions

SEPTEMBER/OCTOBER 2019

i3_0919_BUSINESS_ByTheNumbers.indd 50

I T I S I N N O VAT I O N

9/9/19 12:59 PM

i3 - September/October 2019

Table of Contents for the Digital Edition of i3 - September/October 2019