Where do we go from here? Analysts give 2021 predictions
Our annual panel of industry watchers revisits its pre-pandemic predictions for 2020 and looks to the year ahead
Every year, we turn to a panel of trusted analysts to ask them what they see coming down the road, and ask them to assess their predictions from the previous year.
Considering how unpredictable 2020 wound up being, we debated skipping that part of the exercise this year. But then we re-read their predictions and found a surprising number of them turned out on point regardless. And for the ones that didn't, there were often very understandable mitigating factors.
Thanks as always to our panelists -- Kantan Games' Dr. Serkan Toto, Ampere Analysis' Piers Harding-Rolls, The NPD Group's Mat Piscatella, Interpret VP - North America Jesse Divnich, and Stephanie Llamas, Head of XR at SuperData, a Nielsen company -- for being willing to share their thoughts on the future and good sports about revisiting what they said in the past.
Mat Piscatella, NPD
Last Year's Predictions
Given *looks at everything*, my 2020 predictions tended to work out. I noted that subscriptions and Switch would have big years (they did), while cloud would stutter to gain momentum in its infancy.
Surprisingly, the one prediction that I would notch as a failure was regarding immersive VR gaming, where I claimed that Half-Life: Alyx would bring the segment to notable market traction. While Half-Life: Alyx released to strong critical acclaim and player reviews, the immersive gaming VR market remains a small enthusiast niche. Oh well, can't win 'em all. Still, with the past year being what it was, I am going to give myself two thumbs up. So, I have that going for me, which is nice.
Flexibility will help determine success
This is not much of a quantifiable prediction, but there's little evidence that the coming months will end up being any more predictable than the past year. I am expecting more game delays, continued challenges in production and distribution for gaming hardware and peripherals, potential significant shifts in consumer play behaviors given pandemic conditions within countries or regions, and unpredictable impact from changing economic conditions. The companies that can best navigate these uncertainties will have an advantage. This is no time to become enamored with a particular plan or timeline.
Nintendo Switch stays on top
Despite the launch of the PlayStation 5 and Xbox Series consoles, it will be the Nintendo Switch that ends up selling the most units of console hardware in 2021. I will go a step further and suggest this will be driven by content and promotional efforts rather than the release of a new iterative model.
Call of Duty's model finds followers
With the release of its multiple franchise offerings, including Call of Duty: Warzone, Call of Duty: Mobile and, of course, Call of Duty: Black Ops Cold War, Call of Duty has successfully encouraged player adoption and retention regardless of preferred platform, play type, or even business model. I would argue that Call of Duty's franchise strategy is unparalleled in the marketplace. I expect other franchises to attempt following this model both in 2021 and beyond.
Content and ISPs will determine cloud gaming's future
All of the big cloud players are now in market, and the tech has been proven to work. But adoption has lagged many predictions. A lack of compelling exclusive content on the cloud-exclusive services is one barrier. But that can be accounted for with investment and/or time. What ISPs decide to do with data caps and high customer costs is another matter. In 2021, this challenge will not be solved for, and cloud will continue to struggle to gain momentum, particularly in the US.
Social gaming booms
One of the primary drivers of gaming's rise during 2020 was its ability to bring friends and family together, whether on the couch or online. I think the use of gaming as social bond will be a lasting impact of the pandemic, and 2021 will bring more games designed to enhance and encourage social experiences between family and friends.
Dr. Serkan Toto, Kantan Games
Last Year's Predictions
Switch Pro launch - The most controversial prediction in my now infamous 2020 contribution turned out to be not correct.
More Microsoft games on the Switch - Correct.
Similar launch of PS5 and Xbox Series X - Mostly correct.
Cloud gaming will have its first big moment - Correct, especially regarding xCloud.
Further rise of subscriptions - Mostly correct.
Spectacular game on mobile from Nintendo - Incorrect.
Switch Pro launches
Yes, I know, I know. I predict a beefed-up 4K device is coming during Nintendo's next financial year. And let it be said: "Switch" is just a word.
Nintendo marches on
Everybody expecting the Switch to run out of steam in 2021 is in for a bitter disappointment. The Switch will be the best-selling console this year as well, driven by more first-party games, a hardware refresh (see above), and the device having developed into a lifestyle product for the mass market over the course of 2020.
PS5 pulls ahead
Personally, I like the new Xbox but believe Sony's PS5 will be significantly ahead at the end of 2021 in terms of both hardware and software sales globally. In Japan (where I am based), Sony is very likely to miss the PS4's first-year sales numbers because of Nintendo's continuing dominance in both companies' home market.
More M&A to come
2020 was a big year for mergers and acquisitions in gaming despite the coronavirus situation, and consolidation will likely continue in 2021. There is room for at least one billion-dollar mega deal and several that are in the US$100-500 million band, with Take-Two, Sony, and Microsoft as the most likely buyers in my view.
Game stock price retreat
Driven by the pandemic, next-generation console launches and the stock market moving upwards overall, game stocks worldwide have been bubbling up to unprecedented highs in 2020. While I am sure that part of the new audience and increased engagement can be retained over the next years, gaming will eventually take a hit and share prices will see a correction in the first half of 2021.
App stores see structural changes
Monopoly, walled garden, high-tax marketplace: the accusations by many mobile game developers against how Apple in particular manages their App Store are harsh, and their voices are starting to get heard. I believe that Apple reducing app store fees for smaller studios is just a first reaction. Both Google and Apple are likely to be forced to make additional structural changes to their app stores in one way or the other in 2021.
Stephanie Llamas, Superdata
Last Year's Predictions
More popular gaming IP - Yes, but we should plan to see more growth in 2021. The Walking Dead, Medal of Honor, and more Star Wars are just some of the AAA-caliber IP we've seen this year. But there's room for a lot more.
Apple will come out with AR glasses (just kidding, no they won't) - And they didn't despite many acquisitions and job posts. I've long anticipated a 2022/2023 launch, and continue to do so.
Oculus Quest will sell 1.8M devices and slash its prices - Almost! We predict the Quest and Quest 2 actually sold a combined 1.6M this year -- no pricing slashes needed...
Social XR is on the "Horizon" - [Facebook's social VR platform] Horizon is still in invite-only beta, however social applications like VR Chat and Rec Room are hugely popular. Multi-player capabilities have also grown in the space, showing there is an appetite for social interaction in virtual spaces.
Mobile AR will not be an entryway for direct consumer monetization but will transform advertising and retail - Yes, but not as much as I'd hoped. It's still in the experimentation stage.
2020 is not the year of mass VR adoption - Right, although it did make big strides with the massive success of the Oculus Quest 2.
Location-based VR will continue to be a key driver for adoption - Obviously, COVID threw a wrench in that…
Standards for the minimum qualities will be based on the Quest 2
We predict the Quest 2 will sell 3M+ headsets in the coming year as Facebook has refined its supply chain, and will continue to meet demand where they could not before. We saw a COVID-fueled boost in usage this year, with 71% of US VR headset owners spending more time on their devices than in the past due to the social consequences of the virus. This coupled with the huge popularity of Facebook's standalone device means that more content creators, including AAAs, are considering VR as part of their strategy. And more content will be a key driver to higher adoption.
Quest 2's popularity, and Facebook's retirement of tethered devices, has shown the industry's appetite for standalones. Therefore, content creators will be looking to the growing audiences that standalones offer as the baseline for their specs, especially as tethered devices move toward enterprise applications and PlayStation won't come out with a new headset until at least 2022.
VR-as-a-service will begin to transform the monetization landscape
VR's novelty and nascency meant that users were often using the technology in sprints, and the content that was out there had little replayability. Flash forward to 2020 and we are seeing the likes of FitVR, Beat Saber and Rec Room building in monetizable additional content into their experiences, and consumers are biting. This shows the potential for real gains on the part of creators who traditionally had to rely on the premium model where you sell a game once and you never monetize that user again. Those games hit a revenue ceiling. VR content is breaking through that ceiling and we are bound to see more of this trend in 2021 as VR monetization likens itself more and more to the highly lucrative service-based model.
We will start to see AR glasses experiment in the space, but they won't be ready for mass consumption
As we all eagerly await Apple's AR glasses, other companies like Samsung and Facebook have been teasing audiences with their new devices, without word of when they will be released or for how much. 2022 remains the year I predict we'll see real “affordable” AR headsets (affordable is obviously relative since they will still cost hundreds of dollars, but not thousands), but 2021 will be when we see some more elementary versions released. I liken these to be more like Echo Frames or Snap Spectacles than your phone on your face. But consumers will want more than that to justify the cost, so it will still take time for AR wearables to go mainstream.
VR gatherings will bring higher profile concerts and events onto the platform
Travis Scott's Fortnite concert earlier this year drew 12 million viewers. Obviously, VR doesn't have the install base for that kind of viewership, but it does show an itch for online events that VR could scratch as adoption grows. VR concert applications are beginning to see this appetite for live shows grow first-hand: The Wave raised $30M in funding in June of this year while MelodyVR has had 10 times as many concerts through the pandemic compared to the same timeframe a year ago. The likes of John Legend and Chance the Rapper have turned to the technology to give concerts during COVID, and sports are getting on board, too: ONE Championship has partnered with Oculus to show matches in VR, while Sky Worlds has started showing Premier League matches in VR as well. We'll see a lot more of this, and a lot more high-profile names, in the coming year.
WebAR will bring AR experiences to more mobile users
The main thing holding people back from using mobile AR is when they have to download a dedicated app for one experience. Brands like Coca-Cola and Patrón have been innovators in the space, but have required their customers to take that extra step. The most successful mobile AR experiences are those that you “stumble upon” while using apps for other purposes (e.g., social apps, retail apps and Pokémon GO). WebAR promises to remove that friction, making AR as easy as scanning a QR phone and jumping to a website. No downloads required.
Location-based XR won't hit pre-COVID predictions, but it will start coming back
COVID has ravaged the location-based entertainment (LBE) space, causing companies like Spaces to completely pivot, and The Void to be in danger of shuttering their doors forever. LBE has always been a key driver for future VR adoption, so it's a real bummer that we can't get people into headsets for on-site experiences. However, it's definitely not dead, and once COVID gets more under control, I anticipate we'll see an opportunity for LBE to slowly begin to re-emerge. Outside of the US we are already seeing interesting use cases: Super Nintendo World, part of Universal Studios Japan, will be opening on February 4 with a new AR Super Mario rollercoaster. The LBE XR market was set to reach close to $700M worldwide this year before COVID. Now, we don't forecast it reaching that until after 2023 while it takes time to pick back up following the massive consequences of the pandemic.
Jesse Divnich, Interpret
Last Year's Predictions
VR Still Struggles - As anticipated, Half-Life: Alyx made a big splash, but in a small pool. VR was one of the few gaming markets that did not receive a significant bounce from the increase in gaming engagement due to COVID-19 and the stay-at-home orders.
Fortnite Dropoff - The prediction was right, but for unforeseen reasons. While COVID-19 drove engagement across nearly every game, any Fortnite bump was significantly offset by the removal of the Fortnite app across Apple's and Google's mobile storefronts. If Epic, Apple, and Google can get along in 2021, maybe Fortnite can re-emerge, but I do think many Fortnite mobile players have moved on.
Apex Legends Gains Share - Apex Legends had a record year and showed significant growth in 2020. Respawn was consistent with high quality updates throughout the year, which propelled the studio's record growth. We are, however, getting a sense that playership is waning. The newest map / update was a little underwhelming, but I would not count Respawn out for 2021.
Streamer Private Education on Conduct - This one is difficult to call. We have seen some scandals surrounding controversial influencers in 2020, and while just one is too many in my book, I do believe the industry is improving. Twitch and most major streaming services have notably made stricter changes to their terms of service for their streamers - a step in the right direction. I still would like to see more private programs dedicated to education and preparing streamers for the real world, instead of enforcing vague and stricter language in their terms of service. Nevertheless, I am proud of the influencer / streaming community in 2020 and believe we are beginning to see some maturation of the streaming ecosystem.
Habits are hard to break
As the world returns to some level of normalcy, we anticipate that gaming engagement will decline from its 2020 peak, but we do not anticipate a full regression. Because the pandemic has persisted for 10 months (and counting), new habits were formed, which will be hard to break. We expect gaming engagement levels to fall somewhere between pre-pandemic levels and the peak. This retraction will not be equally distributed across all segments, as our data indicates that that "new adopters," those who picked up gaming during the pandemic for the first time, are going to exhibit the greatest dips in engagement. We anticipate up to 40% of new adopters to slowly stop gaming, which will impact the mobile market the most, but we expect less retraction among existing gamers.
VR continues to struggle
I have been voicing my concerns about the VR marketplace for the past two years. Sadly, I see no evidence to change my mind for the third year in a row. VR will continue to struggle with its penetration into the gaming market. We are leaving 2020 wondering where VR is headed, and we believe by the end of 2021, we will still be wondering the same. If an exclusive Half-Life title does not move the needle, nothing will.
Vtuber a rising opportunity
V-what? A client introduced me recently to the Vtuber market. You can Google it - I'll wait. It is mostly targeted at and used by anime fans, but I anticipate Vtubers to break out in late 2021 and begin to expand into game streaming. How Vtubers will manifest their talents in the broader gaming and game streaming market is not yet clear, but I believe we will see at least one company by the end of 2021 that creates, streams, or somehow facilitates the Vtubing process to be worth at least $100 million. I also believe we will see a major contract signed by a streaming service for exclusiveness of a North American or European Vtuber, much like we have seen with game streamers. The market for creating avatars that look like you or fantasy avatars (2D or 3D) will be a huge market the gaming market should pay attention to, immediately.
Piers Harding-Rolls, Ampere Analysis
Last Year's Predictions
Switch will be the best-selling console in 2020 and sales to be the best since launch: Right
Unlikely there will be a Switch Pro in 2020: Right
PS5 and Xbox Series X launch pricing to be similar and more than $399: Right
PS5 to outsell Xbox Series X in 2020: Obviously not the end of the year [as this is being written] but this will be right
PS5 and Xbox Series X to sell more than previous gen at launch: So far this is right
Facebook to enter the cloud gaming market (from 2019 predictions): Late, but right
Amazon cloud gaming service to be revealed: Right
Project xCloud, GeForce Now, Tencent and NetEase cloud gaming services to have full commercial launches in 2020: Partly right. Microsoft and Nvidia have rolled out full integration into commercial products. NetEase cloud gaming service is monetised but still in beta. Tencent's various cloud gaming projects have not yet been fully commercialised.
PlayStation Now to remain the biggest cloud gaming content subscription service: With the inclusion of streaming within Xbox Game Pass Ultimate in select markets for free this is now wrong, although download usage of games in Xbox Game Pass Ultimate will far outweigh streaming usage at this point.
Hypercasual mobile game publishers to evolve their content and monetisation strategies: Right
Half-Life: Alyx will provide a noticeable bump to the PC-based VR market: Right, usage of PC-based headsets on Steam spiked significantly on launch of title.
Oculus Quest to be the best-selling consumer VR headset: Partly right. The Quest was superseded by the Quest 2 more rapidly than expected. Quest devices have shipped more units combined than PlayStation VR.
Apple Arcade to reach 12 million subs by the end of 2020: Wrong. It's not the end of the year but this forecast ended up being too aggressive even with around a billion active iPhones.
Increase in industry regulation: Right, although moving quite slowly. The Netherlands has started enforcing its loot box ban, while its looking increasingly likely that the UK will legislate in relevance to loot boxes.
Console: I expect Nintendo's Switch family of devices to be the best-selling consoles again in 2021 following a very strong 2020. Last year I was unconvinced there would be a new flagship model Switch in 2020, but it makes more commercial sense to release an updated version in 2021. I currently have an updated version of the Switch in my forecasts for 2021.
Overall, 2021 is going to be a big year for the console sector, with Switch devices expected to sell in large numbers (currently expecting ~24 million) and next-gen consoles fresh to the market (combined sales forecast to hit ~25 million), segment growth will be substantial even against the backdrop of a pandemic-induced recession. I expect production of Xbox One S and PS4 Pro to cease in 2021. PS5 will outsell the combined total of Xbox Series X|S on a global basis. I'm expecting PS5 shipments of around 8.5 million by the end of March 2021.
Previously I suggested a next-gen PSVR could arrive in 2021 but I'm now expecting it in 2022 at the earliest.
Cloud gaming: With cloud gaming services and technology revealed by Amazon and Facebook, and existing services and tests from Google, Microsoft, Sony, Nvidia, Tencent, and NetEase, many of the major global consumer-facing technology companies already have products strategies for cloud gaming. This makes any global-level new service reveals in 2021 less likely. However, I expect telco-based services to proliferate further in 2021 adding complexity to the competitive landscape and evolving a more substantial local versus global service environment.
I expect Amazon's Luna service to be expanded to Western Europe in 2021, while Xbox Game Pass Ultimate will come to iOS devices and, likely, be integrated into Facebook Gaming.
Cloud gaming's deeper integration into streaming platforms will be one of the key service evolutions in 2021. 2021 is also shaping up to be Google Stadia's make-or-break year using its current cloud gaming product strategy. Following aggressive promotional activity in the second half of 2020, the support of better content and third-party channels in the form of Ubisoft+, and the roll-out of new features, it suggests the company will be looking for substantial growth in 2021. If this doesn't materialise, I think there needs to be a re-evaluation of the product strategy by the end of the year.
Cloud gaming will not provide a substantial disruption to the traditional console and PC high-end gaming markets anytime soon, although availability of Xbox Game Pass Ultimate via streaming boxes and sticks will start to offer those with the required internet an alternative access point to big-screen gaming beyond the Xbox console.
Subscription services: EA and Ubisoft continue to pursue platform/service partner distribution strategies to reach more users. As such, I wouldn't be surprised if EA Play finds its way to Amazon Luna or Google Stadia in 2021. Other major publishers may follow the lead of these companies. I'm forecasting Xbox Game Pass to break 20 million subscribers by the end of 2021 and for it to become a $2 billion-a-year business. PlayStation Now will reach 4 million subs by the end of the year.
Mobile: There will be no let up to the adaption of console and PC-based IP into the mobile space. Major titles currently in production include Diablo Immortal, Apex Legends Mobile, Tomb Raider, Path of Exile Mobile, The Witcher: Monster Slayer, NieR Re[in]carnation and Pokémon Unite. Some of these will hit the market in 2021 alongside newly launched major releases such as League of Legends: Wild Rift.
Mobile esports will continue to grow its profile across the esports scene, fueled by mobile-first countries including Southeast Asia, India and Brazil. This in turn will drive more views to YouTube due to its coverage of these markets. YouTube is best placed to eat into Twitch's games streaming (non-China) market share lead as a result. I also expect Twitch's non-gaming content diversification to continue and it to shift more progressively into a mainstream platform.
While mobile gaming spending will continue to grow, Apple's soon-to-be-introduced IDFA policy changes will have an immediate impact on the use of advertising for both user acquisition and monetisation. It is likely that a substantial chunk of iOS users will not opt-in to ad-related tracking in apps making ad networks across games and apps less targetable and therefore less viable or valuable. I think it is likely that Google will follow suit. The hypercasual market is particularly exposed to advertising monetisation, so this is likely to hasten the adoption of new content and monetisation models by hypercasual games companies.
Continued M&A activity and industry consolidation: The pandemic has helped fuel higher valuations of dev studios and publishers that own their own IP. This factor has come into play against a backdrop of increasing industry demand for original content due to the proliferation of companies, storefronts, and services active in the market. Chinese publishers such as NetEase and Tencent have been very M&A active in 2020 driven by an increase in domestic competition from the likes of ByteDance and Alibaba, a drive to expand into international markets and to plug gaps in their games platform expertise. I expect there to be increased global competition from these publishers in 2021 across all platforms including console.
Sector regulation and anti-monopoly investigations: The Epic Games case against Apple is the most high-profile of a collection of private and state-based actions that are taking place examining everything from loot box usage to digital storefront revenue share. These actions will continue to increase.
In Apple's case, it has already taken some sting out of the lawsuit with its rev share concession, and the availability of cloud gaming services via Safari, and at this stage I don't expect the court to force Apple to open its devices to third-party storefronts or third-party payment methods. There is some momentum behind the introduction of storefront revenue share tiers depending on the developer size and success of the apps involved, and I predict that other storefronts will follow this lead.
Politicisation of industry regulation and protectionism has also increased in 2020 especially around international use of Chinese apps and games. It's a little hard to judge how these policies might change in 2021, but there is a chance that, with a new administration entering the White House, policies may become less targeted against Chinese services. How that will change the view of other countries such as India remains to be seen.
The pandemic's lasting impact: I expect those newly exposed to gaming, lapsed gamers that returned to the market in 2020 and those that increasingly use online games as social platforms to have a lasting impact on the sector into 2021 and beyond. It is inevitable that once the vaccines are rolled out to more people and life returns to some sort of normality that gamers will look to pursue more out-of-home activities, but I still expect there to be a positive longtail of impact from pandemic usage. Another area of ongoing change will be the increased consumption of digital content and a more rapid decline of physical media sales.