Games console market 2017: Nintendo drives market to 18 per cent growth
Growth again after two years of declines
- The global games console market reached $41 billion in 2017 thanks, largely, to Nintendo’s record-breaking comeback with its new Switch console. This is the best console market performance since 2011 and has halted a two year decline starting in 2014. It is still well short of 2008 where the market was worth a substantial $56 billion, but highlights the continued relevance of dedicated games devices to a significant audience of big spending gamers.
- Across TV, handheld and the newly established hybrid consoles, hardware spending in 2017 was up 33 per cent to $14.1 billion following the launch of the Nintendo Switch, Sony PS4 Pro (at the end of 2016) and Microsoft Xbox One X at considerably higher price points to existing console products on the market. This was partially offset by price reductions in the standard editions of both PS4 and Xbox One. Nintendo’s Switch was the major contributor to growth having sold 12.8 million consoles through to consumers during 2017.
- Content spending through all forms of distribution channel represented the biggest segment of the console market and grew 12 per cent to reach $23.6 billion as digital full games sales and paid downloadable content experienced double digit growth year-on-year. We are now approaching a tipping point in consumer behaviour, where the digital share of full game sales has started to accelerate away from the transitional norms. This accelerating picture and the rapid shift to games as a service monetisation models is fuelling growth in content spending.
- Platform subscriptions – Xbox Live Gold and PlayStation Plus - grew 11 per cent to $3 billion. In 2018 this number is forecast to increase significantly once again when Nintendo launches its own subscription service, Nintendo Switch Online.
Sony remains dominant; Nintendo’s market share increases sharply
- Consumer spending in 2017 across Sony devices including PS4, PS3 and PS Vita took 53 per cent share of the total market, down from 57 per cent in 2016. Spending on PS4 consoles alone represented 51 per cent share of the market as Sony delivered successfully on its dual product strategy of PS4 and PS4 Pro and ended the year with an installed base of over 73 million.
- Aside from Sony’s continued dominance, the other major change was from Nintendo, which saw its share of the market jump 9 per cent to 22 per cent as consumers spent freely on Switch hardware and software. In contrast, Microsoft saw its share of a growing market decline from 31 per cent in 2016 to 25 per cent in 2017. At this point we do not expect the launch of the Xbox One X to significantly alter the market share trajectory already established in 2017 through 2018.
Nintendo’s execution of its Switch strategy has been exemplary
- Nintendo has successfully turned around its console business with the launch of the Switch. The hybrid nature of Nintendo’s Switch has allowed it to flex to the buying needs of consumers in different regions, thus making it a globally attractive and relevant product. Nintendo’s content release slate was also exceptional in 2017, acting as the catalyst for rapid adoption of the console. While the Switch’s product positioning has been important, the content has allowed it to be demonstrated at its best.
Nintendo’s share of market expected to eclipse Microsoft’s in 2018
- In 2018, IHS Markit forecasts Nintendo’s console market share to overtake that of Microsoft’s. Spending across hardware, content and services for both Sony and Microsoft is expected to fall in 2018 as the PS4 and Xbox One platforms enter the later stages of their lifecycles. Even so, Sony will remain the market leader in 2018 by some margin.
- Nintendo Switch performance is currently expected to mitigate for a drop in spending across Sony and Microsoft consoles helping the overall market grow by 4 per cent during the year to $42 billion, thus retaining a positive outlook for this important and still relevant segment of the games market.