As most of the industry returns to work from a holiday break, it seems like a natural time to consider all the ways the industry will change shape in the year ahead.
Is streaming going to be the Next Big Thing? Will it realize its potential any faster than the recent parade of Next Big Things like VR, AR, and esports? Is the 2019 the year some of those markets finally realize their potential? Will all the talk about loot boxes translate into action, either on a self-regulatory level or a legislative one?
As has become tradition around here, we went to a panel of expert analysts to ask them what they see coming down the road. Below you'll find predictions from Kantan Games' Dr. Serkan Toto, Wedbush Securities' Michael Pachter, IHS Markit's Piers Harding-Rolls, and The NPD Group's Mat Piscatella, along with a bit of self-review assessing how their predictions from last year turned out.
Dr. Serkan Toto, Kantan Games
Last year I predicted:
- 2018 will be another successful year for Nintendo: Largely correct with Nintendo's year-end run
- Microsoft will continue to struggle and next gen rumors emerge: Correct
- VR and AR won't break through: Correct
- A lot of sequels and remasters will be out: Correct
- Mobile will see further consolidation: Correct
For 2019, I predict:
Switch Pro and Lite - While the 2019 Switch Pro has been already reported to be in development by the Wall Street Journal, I also think Nintendo will offer a "Switch Lite" (or just keep the current version at a lower price) to cover the lower end of the spectrum and offset sinking 3DS sales.
More third-party Switch software - In tandem with hardware revisions and an increasing install base, I am expecting a lot more games from third-party developers in 2019, starting in spring. At least one new game from the mega-franchises owned by EA, Activision or Take-Two will launch on Switch.
No PS5 or new Xbox launch - I predict no next-gen PlayStation or Xbox launches for 2019. However, Sony and Microsoft should officially reveal first details, including an increased focus on cloud and subscription models for their next consoles.
No breakthrough in gaming for crypto, blockchain, VR and AR - Facebook is readying the Oculus Quest for 2019, and several mobile AR games are coming next year, too. Sony will likely reduce the price of and/or introduce a new PSVR. Many start-ups are working on crypto- and blockchain games. However, I predict none of these efforts will even come close to mass market adoption in 2019.
No real competitor for Steam - On the PC front, I am very skeptical about the efforts of Discord, Epic, or Tencent to set up game stores. Steam will likely continue to be the dominant PC game sales platform, and I think their new competitors will not pick up steam in 2019 or anytime after.
More China and Korea power in Japan - As I am based in Tokyo, a prediction for the local gaming market is in order. On mobile (which is 3x bigger than console over here), I see even more game developers from abroad entering the industry, especially from China and Korea. In the light of that and increasing costs overall, I predict a bloodbath in terms of profits for Japanese mobile gaming over 2019.
Michael Pachter, Wedbush Securities
Last year's report card:
- Xbox One X cut to $349 by year-end: F, the price is pretty consistently $399, and though spotty at $349 during Black Friday, it didn't hit my target and likely won't
- No new hardware from any of the big three: A+, unless you count Pokéballs
- Dramatic cut on PSVR: B, I didn't define the word "dramatic", and the cuts have largely been $100
- A new Elder Scrolls game: D-, teased at E3 but not yet announced
- Battle Royale in Call of Duty: A+, nailed it
- Switch sales under 20 million: A+, tracking to 13 million this year
- A mobile Warcraft game: F, although Diablo Immortal was announced
- Continued mobile flops from Nintendo: A+, enough said
- No BIG game announcements from Rockstar: A+, unless you count giving up the trademark on Agent as an announcement
This year's predictions:
We will get major game announcements from Take-Two. I think we'll hear about a new BioShock game and a new title from Rockstar, both for 2020. It would be cheating to say that the company will announce Borderlands, since it will probably happen before this article is published.
Ubisoft's lineup will include four AAA titles. I expect these to include Skull & Bones (already announced), Splinter Cell, Watch Dogs and Rainbow 6.
Activision will make Overwatch and Blackout free-to-play. I think that the 18 Overwatch League owners have been assured by Blizzard that it will expand the audience for Overwatch. The most expedient way to do this is to make the core game free-to-play in order to attract tens of millions of new users, who ostensibly will convert to OWL viewers. I expect this by mid-June (the third anniversary of the launch of the original game. Disgruntled players who bought the core game will likely be compensated by being given free stuff (skins or other cosmetic items). Blackout will go FTP at least a month prior to the launch of next year's Call of Duty, in order to promote the new game.
Respawn will launch two titles next year: Titanfall 3 and the new Star Wars game. I expect Titanfall to launch by September.
Nintendo will launch a fully handheld version of the Switch at $199. I expect the device to have the same screen, but with Joy Cons built into the body and no docking station. Since it can't "switch" from handheld to console, it's hard to guess what they will call it, but let's assume Game Boy (kidding).
Elder Scrolls VI is coming in 2019. The flop of Fallout 76 makes a hit more essential for Bethesda, and I expect them to accelerate development of ESVI. (This was my prediction from 2016 and 2017...)
We will see progress on "streaming" services in 2019, with an iTunes like model (pay for a single game at a time) launched first. This could come from Amazon, Apple, Google or Microsoft (not from EA), as each is tinkering with streaming. Ultimately, we may not need to stream anything, since storage and processing power is becoming more ubiquitous, and may be included in a greater number of home devices sold by these companies (Echo, Home, project "Scarlett"), but I think we'll see a major announcement from at least one of them during 2019.
Piers Harding-Rolls, IHS Markit
Last year's predictions:
- Final tally for 2017 will show games market reached over $110 billion in consumer spending - Right. When we completed our actuals for 2017 after this piece was published we'd broken this level significantly ($118bn).
- PS4 and Xbox One global sell-through of 24 million in 2018 - Likely to be wrong. Our current end of year forecast is an adjusted 28 million for these two consoles combined. Microsoft has had a great year and Sony's decline has not been as sharp as expected.
- PS4 sales to have peaked in 2017 and show decline in 2018 - Unconfirmed at present but I think this is going to be right. There have been shortages at the end of the year which makes this more inevitable.
- PS4 to be the best selling console in 2018 - Unconfirmed at present as there is still shopping to be done as of this writing, but it still looks like PS4 will outsell Switch globally this year.
- Switch to launch in mainland China in 2018 - Wrong. The game release freeze has clearly not helped any move into mainland China.
- China games spending breaches $30 billion - Not confirmed yet but expecting to be right. We're forecasting $31 billion in spending in 2018 even with the reduced growth due to the new games release freeze.
- International expansion of major Chinese publishers - Right. We've been tracking how Tencent and NetEase's international mobile games revenue has increased this year.
- AR app growth in 2018 - Partially right. However, Niantic's Harry Potter Wizards Unite title didn't arrive in 2018 and is set for release in 2019.
- Continued loot box controversy in 2018 - Right. Aside from the mainland China situation, regulators in a cross section of territories has been examining loot box use in the context of gambling.
This year's predictions:
More growth to come
When the final tallies are pulled together early next year, IHS Markit is predicting world consumer spending on games to have broken $128 billion in 2018, with mobile games apps and console gaming driving most growth. In 2019, I expect the sector to deliver further growth of 6% propelling it to the $135 billion plus mark. Growth in the mobile games market is slowing, especially in mature markets, but with mainland China expected to return to some sort of normality later in 2019, there is still more to come from this opportunity over the next few years.
Sony, Microsoft, Nintendo in 2019
I expect the console gaming market to grow again in 2019, bolstered by continued growth in paid downloadable content and the strong software performance on Nintendo's Switch. In fact, once we have confirmed the 2018 performance early next year, I expect this year to have been the best console market ever, breaking 2008's previous peak. Quite something for a platform category that has been under question for at least a decade.
Switch will be the best selling console in 2019 as PS4 and Xbox One shift into the late stage phase of their sales lifecycles. We could have several hardware announcements next year: Sony and Microsoft's next-generation reveals, and we may get more details on how Nintendo aims to plug the gap in its portfolio left by the declining 3DS platform. One option is to do nothing and stick with the current Switch strategy. That simplifies the platform strategy but may not be the most commercially efficient. I also think we'll hear more about a next-gen PSVR in 2019.
Next-generation cloud gaming and new market entrants
The industry activity around cloud gaming will rise again in 2019 and while the focus has been on the recent announcements of Microsoft and Google, I expect a number of other players to show their hand during the year. New entrants are likely to come from a cross section of companies: games publishers, consumer electronics companies, telcos, and cloud service providers.
Cloud gaming is coming back into fashion but don't expect new cloud gaming services to make a noticeable commercial impact in the short or even medium term. Current services are a niche market opportunity at less than 2% of overall games content and services spend, and I don't see new services changing this market dynamic quickly.
Content windowing to expand
New storefronts, platforms and distribution channels means a demand for more exclusive content to engage users. I think we'll start to see content windowing expand in 2019 and to increase further in the coming years. This will mean a more fragmented and disorientating marketplace for gamers during the next few years.
Chinese publishers to continue growing international presence
We've already seen how Tencent and NetEase have grown their international mobile games business so far in 2018, and I expect this trend to continue in 2019. In mainland China with already released titles being reviewed by publishers to check their suitability for younger gamers, and a backlog of new releases seeking approval its going to take a few months for the market to return to normal. This will fuel a continued focus on international markets from Chinese publishers, meaning increased competition for Western, South Korean and Japanese publishers.
Major acquisitions on the cards
International expansion, new distribution and go-to-market models, and the need for content exclusivity will drive M&A activity in 2019. It's quite possible that there will be some major acquisitions by new market entrants, which will alter the dynamic of the games market and shake up the status quo.
Regulatory developments will linger on
I pretty sure I'm not alone in thinking we haven't heard the end of discussions about loot boxes, connections between gaming and gambling, and the potential regulatory response. While mainland China is where there has been a robust response against child use of games, many other countries have yet to decide on a response. With in-game spending by far the most lucrative form of game content monetisation I'd like to see the industry self-regulate to ensure gamer safeguarding and protect these revenue streams rather than see its hand forced by government intervention.
New PC game storefronts won't significantly grow the market
PC game storefront moves by Discord and Epic Games will put pressure on Valve to respond with further revenue share improvements in 2019 although I see these new stores as mostly cannibalistic to the market rather than a growth engine. I also don't believe Steam's dominance will be toppled. The biggest changes will impact the commercial conditions for developers and publishers using these distribution channels which is positive for the industry as a whole.
Outside bets for 2019
- Google or Amazon acquire a major games publisher
- Facebook throws its hat into the cloud gaming ring
- Magic Leap to raise more funding to add to its $2.3 billion
Mat Piscatella, The NPD Group
Last year's predictions
- Exponential growth in subscription services - Subscription services overperformed my expectations in the year as several new services including Nintendo Switch Online joined Xbox Game Pass, EA Access and others. Subscriptions continue to show significant short and long-term growth potential.
- Switch to lead the console market - At the time of this writing, the year is still a bit too close to call, but the possibility certainly exists that this ends up correct. All three major console manufacturers have had fantastic years.
- Switch gold rush leads to discovery challenges - The pace of games coming to Switch has accelerated over the course of the year. And despite Nintendo's continued efforts to improve the eShop, discovery of games has indeed been a challenge.
- Immersive gaming VR will continue to struggle - It certainly has. PSVR is the leading immersive gaming VR platform, but even it has not crossed over into the mass market.
- 2018 a bridge year for PlayStation and Xbox, leading to 2019 next generation announcements - Continues on track, and I do expect next generation announcements for both PlayStation and Xbox in 2019.
This year's predictions:
Spending on digital content to account for 90% of total content spending - According to The NPD Group's Games Market Dynamics report, by the end of Q3 86% of gaming content was sold digitally across Console, Portable, PC and Mobile. Digital growth should force more share to shift, although I do expect physical will continue to not be cannibalized by this digital growth.
In console hardware, Switch grows, leads market - I have Switch achieving more than 35 share of hardware unit sales in the US in 2019, with Pokémon and continued strength of Nintendo's evergreen franchises driving the performance.
Subscription spending continues to rapidly grow - More services, more consumer choice, as well as deeper and broader offerings will allow subscription spending growth to accelerate throughout the year.
2018 success will lead to tough comps in console software - 2018 was a remarkable year for the breadth and depth of titles released from some of the most successful franchises and studios in gaming. Content drives the business, and many months in 2019 will have challenging comparable periods, especially as we move towards a potential next generation of PlayStation and Xbox offerings.
More focus on facilitating social hangouts in games - One of the more significant drivers of success in the biggest games in recent years has been the facilitation of making it easy for friends to play together. This trend should continue, particularly as game sales get more top heavy. Titles that emphasize not only great gameplay, but also making it easy and appealing for getting together with friends should return higher sales and engagement.
Streaming offerings outpace consumer adoption - There are significant incentives for companies to offer streaming gaming solutions, particularly on margins, and there will be no shortage of new consumer offerings over the course of 2019. However, given current infrastructure and ingrained consumer practices, adoption of such services will come slowly. I expect streaming services to make a lot of noise in 2019, but with little consumer payoff, at least in the short term.