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Exploring the resilient surge in the video games market: a closer look at the dynamic forces fuelling industry expansion.
The video games market has been experiencing a dynamic landscape in recent years driven by noteworthy trends and developments taking place across the tech industry. Notably, the growth of the mobile gaming market takes precedence over other digital platforms, as it has spearheaded recent industrial growth due to a series of advancements.
Today we’re looking at the appeal of mobile gaming as a whole, and why its development has incentivised a larger revenue share in the market as opposed to alternatives, questioning how effective traditional gaming structures are in attracting consumers.
The projection of the gaming market has been unprecedented, yet it can be attributed to its expansion through accessibility, extensive hardware and software development.
According to Statista, the mobile games market is projected to grow by 10.6% in 2024 with an estimated revenue of US$98.74 billion worldwide. These digital games are created for mobile platforms, such as everyday smartphones, wearable technologies and tablets. However, these software packages require intensive processing units and specifications, so it brings into question how its revenue growth has risen as much as it has.
1. Smartphone Penetration
A significant motivator for the market’s expansion is the extended use of smartphones, and its level of dependency in everyday life. Therefore, the smartphone market’s capability to become an essential good over the last two decades for both personal and work uses has complemented the gaming industry’s growth through a new avenue of mobile gaming. Every year, consumers set aside disposable income to purchase cell phones, which incentivise these production companies to develop better technologies for their products.
As a result of this, there is an array of mobile hardware available and accessible to a wide range of income groups, with the deployment of the most cutting-edge technologies on the market. This consistent rise in research and development has enabled gaming houses to take advantage of mobile technology, giving rise to an abundant amount of quality digital games to be produced.
According to American think tank, the Pew Research Center, the proportion of Americans owning a smartphone reached 85% in 2021, which is a massive growth from a decade earlier in 2011 of 35%. Ultimately, these developments and accessibility options has expanded the market, where an everyday consumer can be considered a gamer, in comparison to the monetary restrictions in the past of purchasing consoles as the only avenue to exclusively access games. There is no doubt that the growth of smartphone penetration has driven the attraction of the mobile gaming market.
A second contribution to the market’s expansion coincides with the shift in everyday lifestyle, which has seen individuals become more on-the-go due to work and school routines requiring more commutes than ever before. This shift had been amplified over the coronavirus crisis in 2020, which concentrated many industries to focus on digital and internal services.
Stated otherwise, the crisis played into the gaming industry’s hand, which saw record numbers of people playing games as they were left to their own devices whilst being stuck in their homes. Because of this, smartphone penetration has created immense demand for mobile gaming, as these devices have become multipurpose, with extensive usage for playing games and an avenue to spend one’s leisure time.
2. Studio Diversification
This universal traction to own smartphones has interested developers beyond the field of mobile gaming, where some of the gaming industry’s biggest studios have slowly integrated development of titles onto these mobile platforms. Key studios penetrating this market include Activision Blizzard, Electronic Arts, Microsoft Corporation, CyberAgent, and GungHo Online Entertainment.
Having considered smartphone penetration and changing lifestyles, these companies have understood the potential for new customers by expanding their discoverability through IOS and Android platforms. To illustrate, Apple reports that there are over a billion active iPhones which is an extortionate amount compared to next-generation consoles sold in 2023, accumulating to roughly 36 million units across PlayStation 5, Xbox Series X/S and the Nintendo Switch.
An illustrative example can be found with Electronic Arts, a company that publishes game for console, PC, and mobile, who acquired Glu Mobile in 2021. This M&A deal has expanded the firm’s mobile portfolio, which benefits the company as it enables new mobile experiences for users.
3. The Freemium System
Finally, the prioritisation of the mobile gaming market in the industry can be attributed to its basis in its business model, where gaming apps have been able to maximise profits by taking advantage of the freemium system, which attributes access to the base game to be free of charge, with the benefit of allowing in-game purchases that allow users to improve their experiences through visual changes or upgrades.
This business strategy has become a game changer in the gaming industry as a whole, as flagship AAA titles which used to have a recommended retail price (RRP) of $60 have to compete with new titles that have no upfront cost with the user. This model lowers the barrier to entry on a considerable level, and allows games to showcase their value to an expanded audience.
This initial gateway opens up the desire to enhance their gaming experiences through in-game purchases, which adds a layer of service between the user and developer by constantly requiring new content, monetisation techniques and in-game items to make the game feel consistently fresh and relevant.
It’s only a matter of time before we see the mobile gaming market continue to expand or stagnate its growth, as the opportunities within the technology industry also coincides with its own challenges, like competition from other forms of entertainment.
In the case of smartphones, streaming services like Netflix are competing against traditional gaming firms by complementing their subscriptions with their own catalogue of mobile games, a free addition to the current subscription for entertainment.
Additionally, the accessibility and range of media compete not only through monetary means but also through time and attention, which could pose challenges with conventional gaming platforms to grow as services need to distinguish and attract people from the wide range of options online.