Market Insight

Worldwide spend on content and services for games consoles hits record high in 2018

May 07, 2019

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Highlights

·       In terms of content and services, 2018's console market surpassed even 2008, which held the previous record for peak spend

·       The surging Switch, plus the strong late-cycle performance from PS4 and Xbox One mean that 2019 is expected to grow further still

·       Of all segments that compose the console market, only packaged games saw an annual decline in spend in 2018

Our Analysis

IHS Markit figures reveal the console market to be in robust health, with its content and services segment having grown from $27 billion in 2017 to nearly $32 billion in 2018. Indeed, the total console market (spend on hardware, plus content and services) totals $47 billion for 2018, up from $42 billion in 2017, which itself is at its highest point since 2011.

Of all the hardware, content and service spend segments contributing to this total, it was only packaged content that dipped year-on-year, dropping just 3 percent, but exhibiting long-term devaluation.

As ever, the console market remains ripe for disruption, having to prove itself with each new generation. But for as long as it can continue to offer compelling content woven around progressive services and appealing hardware, it has a place in the games landscape.

Hardware

After a launch year frustrated by supply constraints, Nintendo was able to set about ensuring the competitive success of Switch in 2018. The prospect of a new SKU from Nintendo, either in the form of a fresh iteration on Switch or a newer handheld proposition, is expected to stave off decline for 2019, resulting in a flat or even slightly increased comparable for total console market value.

On a global basis, combined sales of games consoles reached volumes not achieved since 2009, with Microsoft’s Xbox One maintaining global market share due to a low single-digit increase in unit sales in the United States. Sony’s PS4 maintained market leadership in terms of unit sales, but Nintendo’s Switch, now in full supply, started to eat away at that share, albeit not to the extent that some may have been expecting.

Content

Console content experienced its strongest year for nearly a decade. Full-game downloads and paid downloadable content (expansions, virtual currency, passes etc) continued to grow, with the concept of running games as a service having become a fully-fledged proposition for this generation of consoles. Major publishers such as Take Two and Ubisoft are successfully running their biggest franchises as live-ops concerns, plus the transformative performance of the battle-royale sub-genre has placed huge winds behind freemium on console.

Meanwhile, traditional first-party offerings remained persuasive and hit plenty of high notes in 2018 across all major consoles, with titles such as “God of War,” “Super Smash Bros. Ultimate,” and “Forza Horizon 4” offering clear examples of how AAA developers are still able to meet the immense expectations set by a marketplace that’s so crowded by content.

Services

Nintendo’s paid platform-service layer, Nintendo Switch Online, has entered the fray but captured just 1 percent of this segment of the console market in 2018. Room for growth is sizeable and depends on Nintendo’s priorities in the next few years. However, it’s worth noting that with regards to other forms of digital commerce, Nintendo has started to pull its weight: When it comes to the volume of discounted games available to buy for Switch, the company has begun competing directly with PS4 and Xbox One across the first quarter of 2019.


 

Geography
USA
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