Missed the GamesBeat Summit excitement? Don’t worry! Tune in now to catch all of the live and virtual sessions here. Total video games and esports revenue in the U.S. was $54.1 billion in 2022 and is forecast to reach $72.0 billion by $27 billion, according to a report by PwC. That represents a 5.9% compound […]
Total video games and esports revenue in the U.S. was $54.1 billion in 2022 and is forecast to reach $72.0 billion by $27 billion, according to a report by PwC.
That represents a 5.9% compound annual growth rate (CAGR) from 2022 to 2027. Year-on-year growth in 2022 was 2.4%, representing the lowest growth rate the video games and esports market in the U.S. has experienced in five years.
Those numbers by themselves aren’t surprising, but I gained some interesting insight in an interview with CJ Bangah, a market research leader who worked on the PwC Global Entertainment & Media Outlook. It’s worth noting that traditional games are only 26.7% of total U.S. game and esports revenues now, and there are different drivers pushing gaming forward than there used to be. But first, let’s look at details.The details
A post-COVID-19 pandemic market correction likely played a role in this, because consumers returning to regular working life had less free time and disposable income to spend on video games. The growth rate is expected to increase to 5.1% in 2023, and oscillate between 6.6% and 5.6% for the remainder of the forecast period, said Bangah.
The composition of the video games market in the U.S. typifies that of a modern Western nation, with a rapidly growing social and casual gaming sector and a robust traditional gaming sector that exhibits slower overall growth as it transitions away from physical media to digital sales and microtransactions, PwC said.
Previously the largest video games market in the world, the U.S. was overtaken in 2021 by China’s rapidly
growing appetite for games. Nonetheless, the U.S. will remain one of the most significant presences in the
global video games market, with U.S.-based companies like Apple, Google and Microsoft holding substantial influence over the future trajectory of video gaming.The drivers
I asked Bangah about whether Hollywood was lifting the games industry with blockbusters like the Super Mario Bros. Movie and shows like The Last of Us on HBO. She said, “I don’t know that we see Hollywood lifting the games industry. I think we see the games industry growing increasingly mature, and starting to have a lot more in common with the other parts of the entertainment and media ecosystem than it did in the past.”
She added, “Take esports as an example. In the esports breakdown, you have streaming rights, you have sponsorships, you have live experience, and ticket sales. That looks a lot more like traditional sports, right? If you look at the video game advertising revenue forecasts that we have, this is absolutely starting to skew towards advertising representing more from a monetization perspective for the sector than it ever has before.”
And she said, “And, we’re forecasting advertising like doubling and growth in the forecast period, in terms of revenues. The Hollywood influence there, or the bigger, more traditional market players paying more attention to video gaming, is coming from (multiple) drivers.”
Hollywood is looking to video games to find growth. And consumers are going deep into video game experiences of all kinds — something she calls omnichannel consumer experiences.
“If I can interact with the game, and a theme park experience, and I can watch the television show or the movie, and I can listen to the podcast, and I can play the game,” Bangah said. “And I connect with an online community and I can watch the esports, it’s just rounding out a more complete view of a customer entertainment experience that really puts the player at the center and puts the customer experience at the center.”
Another driver for gaming growth is packaging and bundling.
“We’re very much seeing particularly for the OTT (over-the-top streaming) providers, the need to have a more complete test for how they drive relevance and warrant the subscription that fuels so much of their business. And video games have been a really attractive acquisition target for some of the big streaming providers for that reason,” she said. “They can then build that more comprehensive content catalog and bring more relevant offerings to consumer suppliers.”
Gamers are getting access to much deeper content. The companies are providing much more content to satisfy the demands of that gaming community.
“From a corporate perspective, the companies have additional ways to monetize the consumer. I can make money on the gaming subscription, I can make money on video game ads. I can make money creating live experiences for them to interact with. I can make money doing a rev share with a major studio or Hollywood company. I can make money selling them hoodies, sweatshirts, hats, stress balls, you name it. From a console player experience or from a consumer experience,” she said.
Bangah added, “They can interact with characters they love through more [minutes of] their day, through form factors. Video games are one of the best use cases that we have for entertainment that truly transcends other categories. They provide an immersive experience that takes consumers into new worlds and allows them to deeply, deeply explore things.”
And she said, “I think all we’re seeing is a continued maturity that’s going down that trajectory of something that humans like to interact with things that we love, and we love video games, and so interacting with the concept of all of that through more form factors is an attractive value proposition.”
In other words, there is no limit to video game fandom.
“A few years ago, we recommended the rest of the entertainment and media ecosystem do a better job at connecting with their fans, right? So we were looking at what you see in video games and having conversations with some of the traditional media companies. And we pointed to it as fans will become the greatest advocate you could ever ask for,” Bangah said. “It allows you [as a company] to then spend more of your money as a video game publisher, creating a great player experience investing in world building.”
Instead of game companies having to attract people to their platforms, fans can do a lot of the heavy lifting for you, she said.
“And it completely changes the dynamics of what you’re able to do, and how compelling you’re able to make your offerings over time,” Bangah said. “Because you don’t have to use capital for acquisition. You can use capital to protect and grow those relationships with your fans, and they’ll help you drive the expansion to their friends, their family, so on and so forth.”Social and casual gaming
Social and casual gaming contributes the largest amount of revenue to the US’ video games market. In 2022, social and casual gaming revenue in the U.S. was $37.1 billion, representing 68.6% of total video games and esports revenue. Year-on-year growth in social and casual gaming was 3.6% in 2022, falling from 9.3% in 2021. The growth rate is forecast to increase to a high of 8.3% in 2024 and remain above 7.0% thereafter.
In the next five years, social and casual gaming will increase its revenue share to 73.
