Many of the world’s consumers have turned to video games as an accessible entertainment source during a year dominated by Coronavirus lockdown restrictions, leading to a massive expansion in the number of titles downloaded, played and purchased, by those including an increasing number of first-time gamers.
The trend is driving an upsurge in revenue for games developers and platform providers. The latest quarterly update for Newzoo’s Global Games Market Report suggests that the market will expand almost 20% year on year to be worth US$175bn in 2020, over US$15.6bn (or 9%) higher than the forecast the company first made at the start of the pandemic.
The Asia Pacific region will account for a colossal 48% of that 2020 total, up almost 18% year on year to US$84.3bn estimates Newzoo. North America comes a distant second at US$44.7bn (up 21%) and Europe third at US$32.9bn (up 20%). The remainder of global gaming revenue is split between Latin America (US$6.8bn) and the Middle East and Africa regions (US$6.2bn) again up 25% and 30% respectively. Two countries alone – the US and China – account for almost half of consumer spending on games.
While the Coronavirus pandemic may not have fundamentally changed the games market or transformed player behaviour, it has accelerated trends which were already apparent, reported Newzoo. In other words, video games have provided a vital source of entertainment, escapism and social interaction for billions of people worldwide forced to spend more time at home due to lockdown restrictions.
Mobile gaming is the single largest market segment
Newzoo tracks the entire games market – including digital video games played on PCs, consoles, tablets and smartphones, and board games. But it noted that the fastest source of revenue growth came from smartphone games, up 29% year on year in 2020 to account for US$74.9bn, almost 43%, of the total. In contrast total PC game sales expanded only 6.2% between 2019 and 2020, while console games grew at a healthier 21%.
The low barriers to market entry for developers interested in building and distributing their titles mean mobile is the fastest, most convenient route to monetisation for developers. An increasing smartphone penetration, especially in emerging economies of the world, has also helped the cause.
Mobile titles are much cheaper to buy than PC or console variants, within the younger players’ budgets. Free to play pricing models that allow players to sample a mobile game before deciding to pay for them (often funded through advertising) drives further adoption.
Mobile game downloads soar during lockdown
Further evidence comes from statistics published by mobile AppStore marketing intelligence firm -Sensor Tower in September. The company found that downloads of mobile games saw far greater annual growth rates in the second quarter of 2020 than any other type of mobile app, including over the top (OTT) entertainment services, communication and collaboration, and productivity tools.
The same was true for the third quarter according to Sensor Tower’s Q3 2020 Store Intelligence Data Digest. Despite game downloads from Apple’s App Store decreasing 4.2% on the same period in 2019, a 36.4% surge in equivalent game downloads from Google Play contributed to a massive overall expansion, dwarfing all other types of apps. US spending on mobile games reached a record US$6bn in Q220, up 55% year on year, and followed up with another US$5.8bn in Q320 (primarily due to the country’s higher proportion of App Store game downloads compared to other geographies).
Such was the rate of expansion and subsequent monetisation, Sensor Tower calculates that for the first time since it began collating data, there were five mobile games which exceeded US$1bn of revenue in 2020. Those included two Tencent titles – PUBG Mobile and Honor of Kings – which brought in US$2.6bn (up a massive 64% on 2019) and US$2.5bn respectively (up 43%). The actual figures are likely to be much higher because Sensor Tower was unable to record revenue from third-party Android stores in China or other regions.
Ninatic Lab’s adaptation of Pokemon Go for the smartphone was a distant third in terms of turnover, but still grew its revenue 32% year on year to US$1.2bn in 2020, while Coin Master and Roblox also exceeded US$1bn for the first time. Despite that, it was Among Us, first released in June 2018, which topped the global download charts in the third quarter, illustrating the speed with which games developers can quickly find big audiences for new titles via mobile channels.
Telcos well placed to help subscribers fund mobile game purchases
The upwards trend for mobile gaming is likely to be given a further boost with the widespread implementation of fifth-generation (5G) networks offering more data capacity, lower latency and more reliable signal coverage in 2021 and beyond. Many broadband service providers are set to deliver fixed wireless access (FWA) services in regions of the world where wired broadband links are either unavailable or expensive to install. That will bring smartphone gaming within reach of a much larger segment of the consumer population in some countries, particularly in regions like South East Asia and Latin America.
Recently launched and updated cloud gaming platforms this year – including Sony’s PlayStation Now, Microsoft’s xCloud, Nvidia’s GeForce Now and Google’s Stadia – have also attracted additional regular, subscribers and encouraged existing mobile gamers to spend more time and money playing new titles. ABI Research’s latest 5G Media and Entertainment application analysis report estimates that the extra reach and enhanced performance of 5G networks will drive almost US$1.9bn of new revenue to cloud gaming alone by 2024. And Newzoo is now forecasting that all gaming sales will continue to grow over the next three years to generate US$218bn by 2023.
Telcos and mobile network operators (MNOs), providing both smartphones and data subscriptions are in a prime position to help gamers get access to the games they want to play on their mobile devices. And they also have an opportunity to take a greater role in the billing process by making sure players can quickly and easily fund their purchases – whether for the titles themselves, cloud gaming subscriptions or downloadable game content (DLC) transactions.
While many adults play mobile games, a large proportion is under 18. Many do not have access to credit or debit cards which they can use to pay for game content or even own bank accounts in some cases. That means games developers can reach a large, previously untapped audience for their wares by working with telcos and operators to set up direct carrier billing (DCB) payment mechanisms that allow gamers to add purchases onto their monthly mobile phone bills.
Research firm Omdia has forecast that online gaming will grow to be one of the key drivers of DCB revenue over the next four years. Games developers can partner experienced payment service providers like DOCOMO Digital to quickly set up the required partnerships and billing integrations which will maximise their sales and grow their customer base for the long term.
 Global Game Revenues Up an Extra $15 Billion This Year as Engagement Skyrockets, Newzoo, 4th November 2020
 Five mobile games topped $1b in revenue this year – Sensor Tower, gamesindustry.biz, 16th December 2020
 5G Will Transform the Media Landscape and Enable Over US$69 Billion in Revenues to Cloud Gaming and Cloud Video by 2024, ABI Research, 20th May 2020