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The video games industry is expected to reach global annual revenues of over $300 billion and a worldwide audience of 3.8 billion active players by 2030.
That’s according to a new report by Midia Research, which forecasts the industry’s growth for the rest of the decade and the factors that will drive it.
But the report’s authors, Karol Severin and Perry Gresham, warn that the growth pace of the global games industry has “arguably peaked.”
“The grand finale of its growth heyday was artificially fuelled by the COVID bounce in 2020 (26.3% growth) and 2021 (9.8%), followed by a 5% decline in 2022,” they wrote.
“While global revenue will return to growth in 2023, it will remain under the rate of inflation. Furthermore, against the inflationary backdrop, the games industry will not see more than low- to mid-single digit percentage growth for the remainder of the decade.”
The authors added: “The games industry needs a new growth driver if it is to thrive once again. The saving grace could come in the form of in-game spending (especially the cosmetic part thereof).
“As consumers spend increasingly larger portions of their lives in digital environments, their need to define their image, personality, and identity in digital grows too. Unlike paying for a game, paying for image and identity definition can be largely uncapped, providing larger potential upside to developers and publishers who can find their ‘fandom hook’.”
GamesIndustry.biz has scoured the full report, and here’s an overview of how Midia believes the industry will reach those landmark figures by 2030.
Table of contents
2023 in numbers
Midia forecasts that following a slight decline in 2022, the industry will return to “modest growth” of 4.4% this year with global revenues expected to reach $223.1 billion.
However, the authors note this is “against the backdrop of 6.5% global inflation” which the International Monetary Fund expects to report this year.
The number of active players in 2023 is expected to rise to 2.88 billion, up from 2.73 billion in 2022.
Midia also explored the impact of subscriptions, with 180.6 million games subscriptions expected to be active by the end of 2023, up from 171.3 million last year, and generating $11.7 billion. These subscriptions will only account for 5.2% of global games revenue, with the majority of spending (67.2%) coming from in-game purchases.
In-game spending is on track to reach $125.7 billion in 2023, of which $72.5 billion will come from cosmetic purchases. This now takes a larger market share than what Midia refers to as “progress-based in-game spending, which it forecasts will generate $53.2 billion this year.
Looking at the three types of platforms, mobile is unsurprisingly the largest source of revenue at $105.2 billion. By comparison, console and PC are expected to generate $45.3 billion and $36.4 billion respectively.
“Against the inflationary backdrop, the games industry will not see more than low- to mid-single digit percentage growth for the remainder of the decade”
Karol Severin and Perry Gresham, Midia Research
Console hardware will reach a “delayed peak” for the current generation of devices at $20.2 billion, while virtual and extended reality hardware remains relatively niche at $4.3 billion.
Games advertising is expected to generate $21.8 billion in 2023.
2030 in numbers
As mentioned, Midia forecasts games revenues to pass $300 billion by the end of the decade, reaching $301.2 billion. This growth is expected to be driven by the growth of the player population (more on that in a bit), as well as increased in-game spending and advertising, plus an uptick in the VR space.
The number of active game subscriptions is expected to grow to 318.5 million by 2030 (more on this later as well), although its share of global games revenues will only grow to 7.5%. Revenue from this model is expected to grow to $22.7 billion.
Nonetheless, Severin and Gresham believe subscriptions will “significantly affect the trajectory of global games revenue for the next decade.”
In-game spending is expected to increase to $176.9 billion by 2030, accounting for just over 70% of all games software revenue. Cosmetics will still be the main driver at $105.5 billion, while progress-based purchases are forecast to rise to $71.4 billion.
The growth of cosmetic in-game spending is expected to be driven by growing penetration among older players (as younger players who are accustomed to such purchase grow up), a modest growth in the time spent playing games, and rising average revenue per user.
Platform wise, mobile is expected to see revenues grow 32.4% to $139.3 billion by 2030. Consoles will grow 35.1% to $61.2 billion, while PC will increase 39.3% to $40.7 billion.
While Midia did not offer exact numbers for console hardware revenues in 2030, it does predict this will decline from 2023 to 2027, before growing from 2028 onwards during the next generation of consoles.
Games advertising is expected to grow 46.3% to $31.9 billion.
While inflation is expected to limit the growth pace of the industry, Severin and Gresham noted that video games have always shown resilience during times of economic hardship. Many consumers also perceive subscriptions as a money saving exercise, so increasing the prices of standalone games will likely have little uptake on the growth of sales and engagement.
Growing the player population
Severin and Gresham describe the number of players as “the single most important driver” for growth in the games industry between 2023 and 2030.
The authors attributed the expected growth in this area to three key factors, the first being the rising global population, which Midia predicts will increase from 8.1 billion today to 8.9 billion by the end of the decade.
“While consumers will welcome subscriptions with open arms, the impact on the overall games industry will be bittersweet, depending on the type of games company”
Karol Severin and Perry Gresham, Midia Research
Alongside that growing population, Midia expects the increasing penetration of internet and smartphones in emerging markets will have a direct impact on the number of players. The report predicts particularly significant improvement of access to the internet and smartphones across Africa and Southern and Southeast Asia.
Finally, as the generations who grew up with video games grow older, the number of players amongst older consumer segments is expected to increase. This trend is already underway, according to Midia, with the number of US consumers over 55 who play on consoles rising from 5% in 2019 to 9% in 2022.
It’s warned, however, that while audience growth will boost games revenues overall, the average revenue per user is expected to decline slightly between 2022 and 2030.
The rise of subscriptions
Despite the prediction that subscriptions will only account for 7.5% of global games revenues in 2030, Midia believes this model will be the “single most important catalyst behind the changing commercial dynamics of the games industry” over the next seven years.
“While consumers will welcome subscriptions with open arms, the impact on the overall games industry will be bittersweet, depending on the type of games company in question,” Severin and Gresham observed.
“Although traditional premium game publishers and developers may increasingly suffer from the effects of subscriptions, those that embrace the in-game spending and advertising business models may actually benefit.”
Midia predicts that the rise of subscriptions will “dilute the need to purchase an individual games title,” especially at higher price points. But the report added that more consumers having access to libraries of games means that more titles are likely to get played. Additionally, the lifecycle of a game on such a service may well benefit, as it’s easier to push updates and “reignite engagement.”
The report continued: “If music and video are to partially serve as cautionary tales of what happens (at least temporarily) to the value of an individual media asset when the ‘all access’ streaming tap is turned on, the attractivity of this proposition in gamers’ eyes will be even stronger (and, because of the monetary impact on the games industry, bigger).
“While in music a $10.99 subscription would be against the backdrop of a $10-$20 CD, or a $20-$30 DVD in film, a AAA game can cost anywhere between $50-$100 today. A subscription costing less than $20, which gives access to hundreds of games, therefore presents an unprecedented entertainment value proposition.”
Severin and Gresham added that developers are likely to become increasingly dependent on subscriptions if they want their titles to be discovered and played, which will decrease studio’s negotiating power with the operators of these services.
And while traditional publishers are expected to continue playing an important role in terms of funding, subscriptions are likely to absorb some of their power in terms of marketing, user testing and distribution. As subscriptions hinder the growth of individual games purchases, this will also impact the amount of funding publishers are able to provide for developers.
“If you turn on the ‘all access’ tap at an affordable price, consumers get addicted and their need to pay high price points for individual assets declines significantly”
Karol Severin, Midia Research
When you combine the rise of subscriptions with the ongoing growth of free-to-play, Midia expects the traditional unit sales model to encounter “significant headwinds.”
“The shift towards F2P games that are monetised by either ads or in-game purchases is making the games industry increasingly commercially dependent on time spent in games,” Severin and Gresham explained. “Time spent is a metric that is increasingly harder to come by, as consumers’ available entertainment time is largely tapped out – unless they start eating into activities like sleep and work.
“Time spent is now largely a zero-sum game. To grow it, games companies need to capture time away from competitors rather than pursue freely available time like they once could.”
Recommendations
Midia’s report concludes with advice for developers and distributors (the latter referring to marketplaces such as Steam, but also subscription services such as Xbox Game Pass).
Developers are advised:
- To join subscriptions sooner rather than later, if this is what they are considering, before their negotiating power and the funds offered diminish too much. However, Severin and Gresham said there will be exceptions for niche premium titles that have “loyal, resilient and high-spending users bases,” as these are likely to be attractive to investors or potential buyers.
- That premium games will become increasingly niche, although they will still account for $42.2 billion of global games revenues in 2030. But with subscription services expected to become more dominant, it will be harder to reach large audiences with games that have a high price point. The biggest growth opportunity in premium games will be “niche, high-premium and hard to replicate titles, such as simulators.”
- To “double down on identity with in-game items and experiences,” as cosmetic in-game spending is expected to see the most growth for the next decade.
- To embrace advertising and product placement within PC and console games as an additional way to improve their margins in the face of growing subscriptions and falling premium sales.
- That time spent in-game will be more important than games that can be finished. Severin and Gresham said games are “turning from one-off entertainment experiences or media assets towards entertainment platforms themselves,” and that learning more about your players’ needs and behaviours – and enabling these in-game – will be crucial.
Finally, for distributors, Midia’s key takeaways are:
- That subscription services will become the most powerful digital distributors, and “the ultimate Trojan Horse to building strong end-to-end relationships with both gamers and developers.” Traditional distributors that do not compete in this space will begin to struggle to get their games in front of players.
- Algorithmic recommendations will become increasingly important, not only for publishers and developers but also for distributors to ensure players are getting the most out of their subscriptions. Severin and Gresham warned that games distributors should “note a cautionary tale from the video subscription services and do what they can to protect gamers from having to spend too much time deciding what to play.”
- Working directly with developers will be key. Since subscription distributors will increasingly own the relationship with players, it will fall on them to provide many of the services that have traditionally been provided by publishers, such as funding, marketing, QA, testing and benchmarking.
Final thoughts
Speaking to GamesIndustry.biz, the report’s co-author Karol Severin said that the slowdown of the industry’s growth pace has been inevitable, and should be something that companies adapt to rather than try to counter.
“I think we have to come to terms with the fact that this is now a mature industry,” he told us. “The larger any industry grows in absolute terms, the slower it is likely to continue growing in relative terms. Rather than this being something to battle or overcome, I think it’s more about companies realising this and focussing on the key levers to capture as large parts of the growth ahead as possible.”
Severin reiterated that the industry is in need of new growth drivers, especially now that time spent and consumers’ willingness to spend money are increasingly the most important factors.
“The games industry needs a new growth driver if it is to thrive once again”
Karol Severin and Perry Gresham, Midia Research
“It’s not necessarily about convincing consumers to play for longer or spend more money on existing games propositions,” he warned. “Rather it is about embracing consumers’ digital entertainment lives as a whole and embracing the fact that games are becoming consumption platforms.
“It is key to understand and embrace that gamers organically spend time and money on things like music, video, sports, social media no matter how much they like any one game. Bringing some of these products, experiences and features in-game will be [key to] driving growth for the remainder of decade. Games now have an opportunity to be a part of not just the games market, but the consumer image and digital life market.”
While games increasingly have to compete with music, video and other forms of entertainment for consumers’ time, there are lessons companies can learn from these industries.
“Music and video now both already have mature streaming markets, whereas it’s only beginning to truly take off in games,” Severin explained. “So while there are of course many differences between those industries, we can certainly take some learnings on the top level.
“In music for example, when streaming commoditized access to songs and put a downward pressure on unit sales (e.g. CDs), the music industry’s growth stalled. It took years to get back to growth in absolute terms.
“In video, it’s a similar story, in that the overall industry declined after streaming services decreased the need to buy high price point Pay-TV subscriptions or DVDs. In the US alone, Pay-TV (which have much higher price points than streaming services) declined significantly, let alone the effect this had on things like DVD sales.
“Similar dynamics are about to transpire in games. If you turn on the ‘all access’ tap at an affordable price, consumers get addicted and their need to pay high price points for individual assets declines significantly.”
You can find the full report at Midia’s website.
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