Game on: The booming growth of online gaming
Published 8:30 pm Tuesday, December 12, 2023
Game on: The booming growth of online gaming
Dismissed as a “passing fad” in its nascent days, video games have since exploded in the market, particularly during the pandemic. The global games market is expected to reach $187.7 billion in revenue for 2023, according to a report by video game insights company Newzoo.
Over the past few decades, the video game industry has found new and successful ways of making money, much of it from mobile games and competitive online gaming. About 4 in 10 people globally play video games in one way or another, DFC Intelligence reports. The number will only like grow as companies like Microsoft and Amazon invest heavily in infrastructures for online and cloud gaming.
Even now, there’s an undeniable shift from playing single or multiplayer games sans internet connection to playing online with multiple players across countries. Esports has become an industry unto itself valued at about $1.38 billion in 2022, and mobile games have reached markets around the globe. Whether on a phone, computer, or console, playing video games online is fairly inevitable.
Gamesville examined industry reports from Newzoo, Statista, GlobalData, and news articles to see how online gaming has grown and become an inextricable part of video gaming.
While phone games like Snake are still fun to this day, mobile games have grown increasingly complex and profitable. In fact, Newzoo estimates that mobile games make up 49% of the video game market at $92.6 billion, making it the largest segment in the industry. By the 2010s and early 2020s, games including Angry Birds, Temple Run, Candy Crush, and Clash of Clans became sensations, even for those who don’t regularly play video games.
With smartphones—particularly devices with Apple’s iOS and Google’s Android operating systems—becoming commonplace in the past decade, mobile gaming is more accessible worldwide now than ever. At their core, mobile games are still relatively simple. For example, Temple Run is a game with very few controls, only requiring players to make their character jump, duck, and turn left or right to dodge obstacles. However, it’s the addicting and never-ending nature of these games that makes them profitable.
Using the “freemium” model, companies attract consumers to their game application by making it free and then encouraging players to spend money within the game itself. Players may engage in “microtransactions” for in-game items to improve their performance, but many mobile games like Temple Run will have players pay in order to continue playing the game in the long term. These microtransactions alone will generate up to $89.7 billion on mobile alone in 2023, making up for an astonishing 97% of revenue for the global mobile gaming market.
What started as a hobby has turned into an entire competitive landscape online. “Esports” is the term used for professional video gaming competitions, and some online games now have a similar reach and appeal to traditional athletic sports. By 2023, major world governments—most notably the United States, China, and South Korea—have recognized esports to some degree.
Many players have started to train for esports players like any other athlete, while outlets like ESPN have covered esports extensively. Revenue from esports comes from sources not limited to merchandising, sponsorships, and tournament winnings; these alone have turned esports into a $1.38 billion industry in 2022.
Today, the biggest esports games in terms of viewership include League of Legends and Valorant from Riot Games, Counter-Strike and Dota from Valve, and Call of Duty from Activision Blizzard. Many of these games have their own professional league, including the Overwatch League and Fortnite World Cup. Esports perhaps has the biggest presence in Asian-Pacific territories due to the prominence of PC gaming in countries like South Korea.
“Games as a service” models
As the development costs of major video game titles have increased going into the 2020s, game publishers have explored new methods to keep profits up—most requiring an internet connection. The phrase “games as a service,” or “live service game” for short, has been used by game companies and consumers to refer to games that continue to offer new monetized content after their release. Asian gaming markets have blazed a trail in this space, and these live service models can vary but have been influenced by mobile game trends such as the freemium model mentioned above.
Some online multiplayer games such as World of Warcraft and Final Fantasy XIV are dependent on monthly subscriptions from players; many popular online games of today are free-to-play but will encourage players to spend money by offering cosmetics and other luxuries. For example, the online shooter game Fortnite from Epic Games is free to download and play, but the game offers “seasons” of new content, and players will have to pay for a “battle pass” in order to earn in-game cosmetic rewards like character skins and emotes within a limited time.
Destiny 2 from Bungie is free-to-play, but most activities similarly require the purchase of a “season pass.” The game also relies on story to help keep the money flowing in. If gamers want to keep up with developments in the game’s world via purchased downloadable content, which interweaves storylines with new features and missions.
The Chinese-developed Genshin Impact uses a “gacha” model, where players will spend money to receive a random benefit, akin to gambling. Controversially, the first Overwatch and Star Wars Battlefront II made use of loot boxes, random rewards similar to the gacha model, leading to legislation in different parts of the world to address them. While many of these game models only require in-game currency from players, spending real money is the fastest and easiest way to earn enough game currency to achieve a player’s wants.
There are online games like World of Warcraft that require their own monthly subscriptions, but the late 2010s put broader gaming subscription services to the forefront. Currently, the biggest and most prolific service is Microsoft’s Game Pass for its Xbox One and Windows platforms. For a monthly fee that starts at $9.99 for PC and $10.99 for Xbox (after a 2023 price hike), subscribers will have access to roughly 400 video games from a rotating catalog, similar to the film and television offerings of Netflix.
Publishers have introduced their own similar services, such as EA Play (starting at $4.99 a month) and Ubisoft+ (starting at $14.99 a month). Apple Arcade service for macOS, iOS, and tvOS devices costs $4.99 a month, and Microsoft’s main video gaming competitor Sony has a complex tiered Playstation Plus Essential plan that starts at $9.99 per month (with a price hike for its annual subscription starting in September 2023).
The future of gaming—cloud gaming, VR, and more
Microsoft and Sony are also competing for cloud gaming space. Cloud gaming allows users to directly stream gameplay to their own screens and control the game with their own devices, bypassing the need to download and install games.
While this isn’t currently the norm due to data caps and the accessibility of internet services worldwide, large companies are moving forward with their attempts to offer cloud gaming options to consumers. Google made an attempt to enter the space with Stadia before shutting down the service in January 2023, while Amazon made its entry into cloud gaming with Amazon Luna.
Virtual reality gaming started to become more accessible to consumers in the past decade, with the leading companies in the space including Meta, Valve, and Sony. While VR gaming isn’t as profitable and accessible due to the high costs of VR hardware, VR games are projected to reach $3.2 billion in revenue by 2024.
The video gaming industry has grown into a behemoth, thanks to various streams of revenue and advances in technology. But with the success of the games market and the rising cost of games development, the pressure is on large game studios to maintain their long-term game services and regularly add new content. This has developers and consumers debating the sustainability of current gaming economic models, especially as game prices increase for consumers.
But with new problems always come new solutions, especially in the dynamic video game industry. What innovations the fast-changing and ever-growing gaming industry will come up with next remains to be seen.
Story editing by Carren Jao. Copy editing by Tim Bruns.