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Newzoo Trend Report

September 2013

The Global Games Market

Key Facts & Insights On the Global Games Market 2012-2016

Newzoo Authors
Bente de Heij, Data Analyst
Sander Bosman, Manager Research
Thijs Hagoort, CFO
Peter Warman, CEO
2013 Newzoo

www.newzoo.com

Introduction

2012-2016 GLOBAL
COMPOUND ANNUAL
GROWTH RATE

Newzoo recently released the first edition of its annual Global Games
Market Report, including the latest global figures for 2013 and its view
on global growth towards 2016 sliced in multiple ways to ensure the
data is actionable. This report contains high-level data and insights
from this 48-page report that ultimately is a result of 12 months of
modeling using all data and research results available to Newzoo.

Peter Warman
CEO Newzoo,
peter@newzoo.com
+31 (0)20 6635816
linkedin.com/in/warman

Highlights include:
Game revenues will grow at a compound annual growth rate (CAGR)
of 6.7% to $86.1 billion by 2016;
The number of gamers worldwide will rise from 1.21 billion this year
to 1.55 billion;
Mobile gaming will grow at an average annual rate of 19% for
smartphones and 48% for tablets, grossing $13.9bn and $10.0bn in
2016 respectively;
Combined, they will take a 27.8% share of the global market, up
almost ten percent points compared to this year;
Primarily fuelled by a global CAGR of 10.4% for MMO games on PC,
Thijs Hagoort
the computer screen will continue to lead other screens with a
CFO Newzoo,
market share of 35.8% totalling $30.9bn in 2016;
thijs@newzoo.com
Nextgen consoles, free-to-play triple A titles and alternative
+31 (0)20 6635816
linkedin.com/in/thagoort
distribution of games to TV will help to consolidate revenues
through the TV screen at a global growth rate of 3.5%;
The Asia-Pacific region will strengthen its leading position with a
37.9% market share by 2016 as emerging markets drive global
growth

SIZE OF GLOBAL
GAMES MARKET
IN 2016

Peter Warman, CEO at Newzoo: In principle it is not hard to

make high-level projections for the global market in 2016, nor for a
single region or segment a couple of years out. The devil is in the
detail. Breaking down the global games market in a granular way
allowing our clients to slice and dice the data in ways that make the
data actionable is very complicated. Our approach, involving key
growth KPIs, helps in understanding what drives growth per segment
or region, ultimately reflected in dollar figures. This requires deep
knowledge of the industry on a global as well as local level. Also, our
hands-on experience working with global game companies on a
daily basis is of tremendous value in this regard.
Thijs Hagoort , CFO at Newzoo adds: We believe we should be as
clear as possible about the underlying assumptions and I believe the
Global Market Data Model we developed in 2012/13 is unique in
using Key Market Indicators per segment and region (i.e. the number
of players, the percentage of payers and the average spend per
payer) to make bottom-up forecasts.
In terms of data sources, the Newzoo model combines:
Proprietary primary consumer research in 18 countries
involving over 50.000 consumers;
Extensive analysis of financial reporting by public companies
that generated over $50 bn in revenues in 2012;
Analysis of third party research;
Transactional data.

Market estimates and growth rates

A look at the various worldwide figures being published

Global 2011 and 2012 Estimates (U$ Bn)

Global Growth Rates (%)

Note: Compound annual growth rates cover different periods: PwC (2012-16),
IDC (2011-16), Gartner (2011-15), DFC (2012-17), Newzoo (2012-2016).

Global 2011 and 2012 Total Market Size Estimates

The table on the left shows publicly available estimates from several
research firms, illustrating the differences in base line assumptions;
It may appear at first glance that the estimates are all in a rather narrow
band, especially for 2012, but it should be noted that the differences for
2011 are more significant, both in absolute amounts and in the resulting
year-on-year implied historical growth rate;
In general the key difference between Newzoo and other estimates has
been on the valuation of digital game revenues in the years preceding 2013.
The implied 2012 annual growth rate of c. 5% for Newzoo reflects the yearend US$ exchange rate, which is somewhat lower than the underlying
growth rate in constant local currency.
Global Growth Rates Estimates
The table on the left shows the publicly available growth forecast of the
same group of research firms, illustrating large differences in expectations;
As these are compound annual growth rates, the impact of a difference of a
few percentage points per year becomes very material over a period of
three to five years;
Newzoos Global Data Model includes growth forecasts for individual
segments and regions, and in aggregate for the total industry, which are
based on our analysis of key market developments and metrics, in
particular the number of players and percentage of payers per segment
and per region.

Five Key Trends

Driving change and growth in the global games marketplace

1. More Screens

Only five years ago, gamers played mainly on two screens: The TV and the PC. That number has since doubled giving room for more time and
ultimately money spent on gaming. Gamers will still spread their budget across all screens putting pressure on individual game revenues.

2. Free Games

Consumers have gotten used to the idea of trying a game before they decide to spend money. The days of low quality free games have passed as
in-game spending business models have proven successful. Next stop: The TV screen...

3. Business Model Balancing Act

New Business models require continuous balancing between value for the consumer and profit for the developer and/or publisher. Monetization
of the game should keep free gamers happy and provide room for spending by the whales. The launch of a game is just the start...

4. Games are Services

As monetization now takes place within the game at a moment the consumer chooses, publishers and developers are even more incentivized to
keep their gamer engaged as long as possible. Video content and eSports are increasingly becoming part of this strategy. Running games as a
service requires a different organizational structure than selling (boxed) products. Traditional publishers are slowly catching up.

5. Global Market Place

The games market is now, a truly global playground. Online connectivity in general and mobile devices specifically allow companies to localize and
launch games anywhere on the planet. To secure growth, emerging markets should be a part of any game companys strategy.

Global Population vs Gamers

Only 15% of the global population generates 74% of global game revenues

Future global growth

within the industry will
be primarily driven by
emerging markets.
This is illustrated by
the image on the right,
showing that 14.9% of
the worlds population
currently accounts for
an astounding 73.6%
of all gaming
revenues.
This population/
revenue gap will
shrink over the
coming years as the
online population and
economies continue
to grow within
emerging markets,
leading to an increase
in active and paying
gamers.

Key data points per region for the top 100 countries: Population, Online population, Gamers, Money (2013E)

2013 Newzoo

Welcome to Holland
Why choose Holland as a gateway to Europe?
Holland has a strong and organized gaming sector, supported by an active government
policy. The world-class Dutch education and research institutes deliver a workforce that
is innovative, creative, and highly multilingual. Also, Holland hosts one of the best
communication infrastructures in the world (both wired and wireless). On top of that,
Holland has a strategic location in the internet exchange network for reaching both the
European and North-American markets.
Holland is an attractive destination for foreign investors for a variety of reasons:

Attractive tax climate

Presence of major international gaming companies
Some of the worlds best known studios are Dutch
Advanced gaming education, research institutes and a strong creative industry
Excellent ICT infrastructure: the most wired country in the world
Skilled talent pool and a very attractive location for employees
Strategic and central location in Europe
Innovative software environment

Come & find out why companies like Electronic Arts, Nintendo, DeNA, Perfect World,
Kixeye, Ubisoft, Microsoft and many others have already invested in Holland.

Global Games Market 2012 - 2016

Underneath a healthy growth rate of 6.7%, major differences in growth potential are found

Global game revenues

will grow at a
compound annual
growth rate (CAGR) of
6.7% to $86.1 billion by
2016. The number of
gamers worldwide will
rise from 1.21 billion
this year to 1.55 billion.
Fastest growing
segments are clearly
smartphones and
tablets that are
expected to take 27.8%
of the global games
market in 2016.
The full report also
plots projections
towards 2016 using
different ways of
segmenting the market.

Global Games Market Per Region | 2013E

The Asia-Pacific region expands it leading position taking the largest share of the global market
Regional growth in game spending is
highest in Latin America and the
Asia-Pacific region: 11%. This growth
will push the Asia-Pacific market to
$25.1 billion this year, making it the
biggest games market in the world.
Despite the relatively large year-onyear increase, Latin America will
remain a small market with revenues
of $3.0 billion. The North American
market will total $22.8 billion (+2% yo-y) followed by EMEA with $19.5
billion (+4% y-o-y) .
The full report contains a
comparable outlook towards 2016.

Global Games Market Per Segment | 2013E

Consoles remain dominant but global growth comes from other segments
Consoles remain to be the biggest revenue
generating platform or market segment,
with $30.6 billion (-1% y-o-y) equal to 43%
of global games revenues. This includes all
DLC spend and business-to-consumer
second-hand trade. Traditional PC onsoles
will remain the highest revenue gaming
(downloads and boxed) contracts to $6.0
billion (-7% y-o-y), but this is offset by 14%
year-on-year growth for MMO games,
totaling $14.9 billion. Game revenues
generated by tablet and smartphones will
gross 18% of the global games market,
surpassing $12bn, which is roughly double
the amount spent on games for handheld
consoles.
The full report contains a comparable
outlook towards 2016.

Screen Segmentation Model

Traditional segmentation does not suffice to understand market change and growth
All types of games are moving
towards the cloud, relying on ingame sales for revenues and
becoming increasingly accessible
via multiple screens. Traditional
market segmentation is based on
definitions and terms that are increasingly difficult to maintain. In
addition, the overlap between the
traditional segments is constantly
growing and becoming increasingly
difficult to distinguish.
In 2012, Newzoo launched an
alternative way of segmenting the
games market The Screen Segmentation Model. The starting
point for the model is the
consumer and the four typical
screens that they can use, with
each its own characteristics and
appeal, depending on various
factors such as time, place and
budget.
The full report also plots data for
twelve key countries on this model.
www.newzoo.com

Global Revenue Per Screen | 2013E

The PC continues to gross most money on a global scale, specifically fueled by MMO games growth
When plotting the 2013 revenue estimates in
the Screen Segmentation model, the largest
screen is the Computer Screen this
encompasses boxed or downloaded PC games,
casual, social and MMO games generating
39% of all revenues compared to 36% for the TV
or Enter- tainment Screen. The Personal Screen
or mobile phone, will show global growth of
22% y-o-y and accounts for 12% of global
games market revenues. Within the category of
Floating Screens, the shift from handheld
consoles to tablets is illustrated by the
anticipated 78% growth for tablets and 21%
decline in spending on handheld console
games. Over time, global revenues are expected
to grow towards a more equal divide across the
four screens.
The full report contains a comparable outlook
towards 2016.
2013 Newzoo

www.newzoo.com

2013 Global Games Market Report

The essential 48-page reference report for anyone with an interest in the global games market
Includes projections 2012-2016

Featuring
twelve key
countries with
additional
insights

Data per
region,
country,
segment and
screen

48 pages of
global data &
insights

Order it online at www.globalgamesmarket.com for 1,490 ($1,950)

Key global
trends

Contact us
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Tablet & smartphone

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Newzoo
Wybe Schutte
wybe@newzoo.com
+31 20 6635816

www.newzoo.com

www.newzoo.com