Newzoo Trend Report September 2013 Sponsored by The Global Games Market Key Facts & Insights On the Global Games Market 2012-2016 2013 Newzoo Newzoo Authors Bente de Heij, Data Analyst Sander Bosman, Manager Research Thijs Hagoort, CFO Peter Warman, CEO www.newzoo.com
Introduction 2012-2016 GLOBAL COMPOUND ANNUAL GROWTH RATE SIZE OF GLOBAL GAMES MARKET IN 2016 Newzoo recently released the first edition of its annual Global Games Market Report, including the latest global figures for 2013 and its view on global growth towards 2016 sliced in multiple ways to ensure the data is actionable. This report contains high-level data and insights from this 48-page report that ultimately is a result of 12 months of modeling using all data and research results available to Newzoo. Highlights include: Game revenues will grow at a compound annual growth rate (CAGR) of 6.7% to $86.1 billion by 2016; The number of gamers worldwide will rise from 1.21 billion this year to 1.55 billion; Mobile gaming will grow at an average annual rate of 19% for smartphones and 48% for tablets, grossing $13.9bn and $10.0bn in 2016 respectively; Combined, they will take a 27.8% share of the global market, up almost ten percent points compared to this year; Primarily fuelled by a global CAGR of 10.4% for MMO games on PC, the computer screen will continue to lead other screens with a market share of 35.8% totalling $30.9bn in 2016; Nextgen consoles, free-to-play triple A titles and alternative distribution of games to TV will help to consolidate revenues through the TV screen at a global growth rate of 3.5%; The Asia-Pacific region will strengthen its leading position with a 37.9% market share by 2016 as emerging markets drive global growth Peter Warman CEO Newzoo, peter@newzoo.com +31 (0)20 6635816 linkedin.com/in/warman Thijs Hagoort CFO Newzoo, thijs@newzoo.com +31 (0)20 6635816 linkedin.com/in/thagoort Peter Warman, CEO at Newzoo: In principle it is not hard to make high-level projections for the global market in 2016, nor for a single region or segment a couple of years out. The devil is in the detail. Breaking down the global games market in a granular way allowing our clients to slice and dice the data in ways that make the data actionable is very complicated. Our approach, involving key growth KPIs, helps in understanding what drives growth per segment or region, ultimately reflected in dollar figures. This requires deep knowledge of the industry on a global as well as local level. Also, our hands-on experience working with global game companies on a daily basis is of tremendous value in this regard. Thijs Hagoort, CFO at Newzoo adds: We believe we should be as clear as possible about the underlying assumptions and I believe the Global Market Data Model we developed in 2012/13 is unique in using Key Market Indicators per segment and region (i.e. the number of players, the percentage of payers and the average spend per payer) to make bottom-up forecasts. In terms of data sources, the Newzoo model combines: Proprietary primary consumer research in 18 countries involving over 50.000 consumers; Extensive analysis of financial reporting by public companies that generated over $50 bn in revenues in 2012; Analysis of third party research; Transactional data.
Market estimates and growth rates A look at the various worldwide figures being published Global 2011 and 2012 Estimates (U$ Bn) Global Growth Rates (%) Global 2011 and 2012 Total Market Size Estimates The table on the left shows publicly available estimates from several research firms, illustrating the differences in base line assumptions; It may appear at first glance that the estimates are all in a rather narrow band, especially for 2012, but it should be noted that the differences for 2011 are more significant, both in absolute amounts and in the resulting year-on-year implied historical growth rate; In general the key difference between Newzoo and other estimates has been on the valuation of digital game revenues in the years preceding 2013. The implied 2012 annual growth rate of c. 5% for Newzoo reflects the yearend US$ exchange rate, which is somewhat lower than the underlying growth rate in constant local currency. Global Growth Rates Estimates The table on the left shows the publicly available growth forecast of the same group of research firms, illustrating large differences in expectations; As these are compound annual growth rates, the impact of a difference of a few percentage points per year becomes very material over a period of three to five years; Newzoo s Global Data Model includes growth forecasts for individual segments and regions, and in aggregate for the total industry, which are based on our analysis of key market developments and metrics, in particular the number of players and percentage of payers per segment and per region. Note: Compound annual growth rates cover different periods: PwC (2012-16), IDC (2011-16), Gartner (2011-15), DFC (2012-17), Newzoo (2012-2016).
Five Key Trends Driving change and growth in the global games marketplace 1. More Screens Only five years ago, gamers played mainly on two screens: The TV and the PC. That number has since doubled giving room for more time and ultimately money spent on gaming. Gamers will still spread their budget across all screens putting pressure on individual game revenues. 2. Free Games Consumers have gotten used to the idea of trying a game before they decide to spend money. The days of low quality free games have passed as in-game spending business models have proven successful. Next stop: The TV screen... 3. Business Model Balancing Act New Business models require continuous balancing between value for the consumer and profit for the developer and/or publisher. Monetization of the game should keep free gamers happy and provide room for spending by the whales. The launch of a game is just the start... 4. Games are Services As monetization now takes place within the game at a moment the consumer chooses, publishers and developers are even more incentivized to keep their gamer engaged as long as possible. Video content and esports are increasingly becoming part of this strategy. Running games as a service requires a different organizational structure than selling (boxed) products. Traditional publishers are slowly catching up. 5. Global Market Place The games market is now, a truly global playground. Online connectivity in general and mobile devices specifically allow companies to localize and launch games anywhere on the planet. To secure growth, emerging markets should be a part of any game company s strategy.
Global Population vs Gamers Only 15% of the global population generates 74% of global game revenues Future global growth within the industry will be primarily driven by emerging markets. This is illustrated by the image on the right, showing that 14.9% of the world s population currently accounts for an astounding 73.6% of all gaming revenues. Key data points per region for the top 100 countries: Population, Online population, Gamers, Money (2013 E ) 2013 Newzoo This population/ revenue gap will shrink over the coming years as the online population and economies continue to grow within emerging markets, leading to an increase in active and paying gamers.
Welcome to Holland Why choose Holland as a gateway to Europe? Holland has a strong and organized gaming sector, supported by an active government policy. The world-class Dutch education and research institutes deliver a workforce that is innovative, creative, and highly multilingual. Also, Holland hosts one of the best communication infrastructures in the world (both wired and wireless). On top of that, Holland has a strategic location in the internet exchange network for reaching both the European and North-American markets. Holland is an attractive destination for foreign investors for a variety of reasons: Attractive tax climate Presence of major international gaming companies Some of the world s best known studios are Dutch Advanced gaming education, research institutes and a strong creative industry Excellent ICT infrastructure: the most wired country in the world Skilled talent pool and a very attractive location for employees Strategic and central location in Europe Innovative software environment Come & find out why companies like Electronic Arts, Nintendo, DeNA, Perfect World, Kixeye, Ubisoft, Microsoft and many others have already invested in Holland.
Global Games Market 2012-2016 Underneath a healthy growth rate of 6.7%, major differences in growth potential are found Global game revenues will grow at a compound annual growth rate (CAGR) of 6.7% to $86.1 billion by 2016. The number of gamers worldwide will rise from 1.21 billion this year to 1.55 billion. Fastest growing segments are clearly smartphones and tablets that are expected to take 27.8% of the global games market in 2016. The full report also plots projections towards 2016 using different ways of segmenting the market.
Global Games Market Per Region 2013E The Asia-Pacific region expands it leading position taking the largest share of the global market Regional growth in game spending is highest in Latin America and the Asia-Pacific region: 11%. This growth will push the Asia-Pacific market to $25.1 billion this year, making it the biggest games market in the world. Despite the relatively large year-onyear increase, Latin America will remain a small market with revenues of $3.0 billion. The North American market will total $22.8 billion (+2% y- o-y) followed by EMEA with $19.5 billion (+4% y-o-y). The full report contains a comparable outlook towards 2016.
Global Games Market Per Segment 2013E Consoles remain dominant but global growth comes from other segments Consoles remain to be the biggest revenue generating platform or market segment, with $30.6 billion (-1% y-o-y) equal to 43% of global games revenues. This includes all DLC spend and business-to-consumer second-hand trade. Traditional PC onsoles will remain the highest revenue gaming (downloads and boxed) contracts to $6.0 billion (-7% y-o-y), but this is offset by 14% year-on-year growth for MMO games, totaling $14.9 billion. Game revenues generated by tablet and smartphones will gross 18% of the global games market, surpassing $12bn, which is roughly double the amount spent on games for handheld consoles. The full report contains a comparable outlook towards 2016.
Screen Segmentation Model Traditional segmentation does not suffice to understand market change and growth All types of games are moving towards the cloud, relying on ingame sales for revenues and becoming increasingly accessible via multiple screens. Traditional market segmentation is based on definitions and terms that are increasingly difficult to maintain. In addition, the overlap between the traditional segments is constantly growing and becoming increasingly difficult to distinguish. In 2012, Newzoo launched an alternative way of segmenting the games market The Screen Segmentation Model. The starting point for the model is the consumer and the four typical screens that they can use, with each its own characteristics and appeal, depending on various factors such as time, place and budget. The full report also plots data for twelve key countries on this model. www.newzoo.com
Global Revenue Per Screen 2013E The PC continues to gross most money on a global scale, specifically fueled by MMO games growth When plotting the 2013 revenue estimates in the Screen Segmentation model, the largest screen is the Computer Screen this encompasses boxed or downloaded PC games, casual, social and MMO games generating 39% of all revenues compared to 36% for the TV or Enter- tainment Screen. The Personal Screen or mobile phone, will show global growth of 22% y-o-y and accounts for 12% of global games market revenues. Within the category of Floating Screens, the shift from handheld consoles to tablets is illustrated by the anticipated 78% growth for tablets and 21% decline in spending on handheld console games. Over time, global revenues are expected to grow towards a more equal divide across the four screens. The full report contains a comparable outlook towards 2016. 2013 Newzoo www.newzoo.com
2013 Global Games Market Report The essential 48-page reference report for anyone with an interest in the global games market Includes projections 2012-2016 Data per region, country, segment and screen Featuring twelve key countries with additional insights 48 pages of global data & insights Key global trends Order it online at www.globalgamesmarket.com for 1,490 ($1,950)
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