The Business of Video Games Comprehensive Market Overview April 2016
Contents Table of Contents CONDITIONS OF PURCHASE... 2 ABOUT THIS REPORT... 3 TABLE OF CONTENTS... 4 INDEX OF TABLES... 7 I. OVERVIEW... 9 A. VIDEO GAME MARKET SIZE... 9 B. SOFTWARE PUBLISHING VALUE CHAIN OVERVIEW... 20 II. HISTORY... 24 A. OVERVIEW... 24 B. ARCADE ERA... 25 C. RISE OF NINTENDO... 28 D. CONSOLE COMPETITION... 31 E. MULTIMEDIA AND PC GAMES PHASE ONE: RISE AND COLLAPSE... 37 F. RISE OF SONY... 41 G. STEADY RISE OF PC ONLINE GAMES... 44 H. GROWTH IN ASIA... 46 I. THE MMOG ERA... 48 J. THE WII CONSUMER AND RISE OF MICROSOFT... 53 K. GROWTH OF SOCIAL AND BROWSER GAMES... 57 L. GROWTH OF MOBILE GAMES... 60 M. NEW CONSOLE SYSTEMS AND DECLINE OF NINTENDO... 67 N. DIGITAL DISTRIBUTION, INDIE DEVELOPERS, VIRTUAL REALITY & ESPORTS... 71 III. GAME INDUSTRY FOOD CHAIN AND BUSINESS MODELS... 74 A. HIGH-END GAME FOOD CHAIN... 75 1. High-End Business Model... 76 2. Developers... 77 3. Publisher... 78 4. Developer/Publisher... 79 5. Straight Developer Publishers... 80 6. Affiliate Label Developers... 80 7. Publisher/Distributors... 82 8. Retailer... 83 9. Online Distribution... 84 10. Console Manufacturers... 84 11. Content Providers... 85 12. PC Titles: Revenue Breakdown... 86 13. Console Titles: Revenue Breakdown... 88 B. GAMES AS A SERVICE/FREEMIUM/F2P BUSINESS MODEL... 90 1. Overview... 90 2. GAS/Freemium Revenue Side Analysis... 91 Published by DFC Intelligence www.dfcint.com 858.834.4340 4
Revenue Model 1: Modest Success Freemium Game /Optional Subscription... 94 Revenue Model 2: Solid Hit Freemium Game /Optional Subscription... 97 Revenue Model 3: Slow Build Big Hit Freemium Game /Optional Subscription... 100 Revenue Model 4: Major Hit Freemium Game/Optional Subscription... 104 Revenue Model 5: Solid Hit Pure Virtual Goods Model... 107 Revenue Model 6: Major Hit Pure Virtual Goods Model... 109 3. Simplified Freemium Revenue Business Models... 112 4. Freemium Cost Side Analysis... 117 Overview... 117 Development Cost... 117 Marketing and User Acquisition Cost... 118 Client Delivery Costs... 120 Payment Methods and Financial Infrastructure Costs... 121 Ongoing Costs... 122 Freemium Cost Model... 123 C. SUBSCRIPTION MODELS/STREAMING GAME SERVICES... 125 IV. GAME INDUSTRY MARKET LEADERS... 128 A. MARKET LEADERS IN GAME HARDWARE AND DISTRIBUTION... 130 Alphabet Inc/Google... 131 Amazon... 131 Apple... 132 Electronic Arts/Activision Blizzard... 133 Facebook... 134 GameFly... 134 GameStop... 135 Gree/DeNA... 136 Microsoft... 136 Nintendo... 138 NVIDIA... 139 Razer... 140 Sony... 141 Samsung... 142 Tencent... 142 Valve... 143 B. MARKET LEADERS IN GAME PUBLISHING AND DEVELOPMENT... 144 1. Leading Diversified Game Companies... 145 Activision Blizzard... 145 Electronic Arts... 146 Tencent... 146 2. Leading Premium Game Publishers... 147 Japanese Publishers: Capcom/Square Enix/Konami/Sega Sammy... 147 Take-Two Interactive... 148 Time Warner... 148 Ubisoft... 149 Valve... 149 ZeniMax Media... 150 3. Leading Mobile Game Companies... 150 EA Mobile/Jamdat... 150 Published by DFC Intelligence www.dfcint.com 858.834.4340 5
Gameloft... 151 Glu Mobile... 151 GungHo... 152 Kabam... 152 King Digital Entertainment... 153 Machine Zone... 153 SoftBank/Supercell... 154 Walt Disney Company... 155 4. Leading PC Game Companies... 156 Big Fish Games/Churchill Downs... 156 Bigpoint... 157 Gameforge... 157 Goodgame Studios... 158 National Geographic Animal Jam... 159 NCSoft... 159 Netease... 160 Netmarble/CJ Games... 160 Nexon... 161 Riot Games... 162 Valve... 162 Wargaming.net... 163 WildTangent... 164 Zynga... 165 V. GAME CONSUMER AND GAME GENRES... 166 A. OVERVIEW... 166 Published by DFC Intelligence www.dfcint.com 858.834.4340 6
Index of Tables Table 1 Global Video Game Software Revenue: Physical versus Digital 2010-2020... 10 Table 2 Global Game Software Revenue by Major Platform Type: 2010-2020... 10 Table 3 Video Game Console Hardware Unit Sales by Generation: 2009-2020... 11 Table 4 Global Console Video Game Software Physical vs. Digital: 2009-2020... 13 Table 5 Worldwide PC Game Revenue by Source: 2014-2018... 15 Table 6 Worldwide PC Game Revenue by Region: 2014-2018... 16 Table 7 Worldwide Console Physical Game Revenue by Region: 2010-2019... 17 Table 8 Worldwide Smartphone and Tablet Revenue by Region: 2010-2019... 18 Table 9 Worldwide Mobile and PC Gamers by Region... 19 Table 10 PC Game Digital Distributors... 22 Table 11 Console Game Digital Distributors... 22 Table 12 Mobile Game Digital Distributors... 23 Table 13 Key Game Industry Sub-Segments... 74 Table 14 Traditional Publishing Revenue Split... 86 Table 15 Traditional Console Publishing Revenue Splits... 88 Table 16 Modest Success Scenario for a Freemium Game with Optional Subscription... 94 Table 17 Five Year Cumulative Revenue for Modest Success Scenario for a Freemium Game with Optional Subscription... 95 Table 18 Solid Hit Scenario for a Freemium Game with an Optional Subscription... 97 Table 19 Five Year Cumulative Revenue for Solid Hit Scenario for a Freemium Game with Optional Subscription... 98 Table 20 Slow Build Big-Hit Scenario for a Freemium Game with an Optional Subscription... 100 Table 21 Five Year Cumulative Revenue for Slow Build Big Hit Scenario Freemium Game with Optional Subscription... 102 Table 22 Major Hit Scenario for a Freemium Game with an Optional Subscription... 104 Table 23 Five Year Cumulative Revenue for Major Hit Scenario Freemium Game with Optional Subscription... 105 Table 24 Solid Hit Scenario for a Freemium Game with a Pure Virtual Goods Model... 107 Table 25 Five Year Cumulative Revenue for Solid Hit Scenario Freemium Game with Pure Virtual Goods Model... 108 Table 26 Major Hit Scenario for a Freemium Game with a Pure Virtual Goods Model... 109 Table 27 Five Year Cumulative Revenue for Major Hit Scenario Freemium with Pure Virtual Goods Model... 110 Table 28 Basic Revenue Model at 2% Conversion Rate... 113 Table 29 Basic Revenue Model at 5% Conversion Rate... 114 Table 30 Basic Revenue Model at 10% Conversion Rate... 115 Table 31 Basic Revenue Model at 15% Conversion Rate... 116 Table 32 Freemium Game Marketing Funnel... 119 Table 33 Standard Transaction Fee Comparison between U.S. and Korea... 122 Table 34 Client-Based Freemium Customer Acquisition Cost Model... 124 Table 35 Client-Based Freemium First-Year Profit/Loss Analysis... 124 Table 36 Examples of Online Game Subscription Services Circa 2005... 126 Table 37 Examples of Game Streaming and Subscription Services 2016... 127 Table 38 DFC Intelligence Top 10 Market Leaders in the Video Game Industry: 2016... 128 Table 39 DFC Intelligence Video Game Market Leader Ranking Metrics... 129 Table 40 Global Game Industry Software Market Leaders by Segment... 144 Table 41 Worldwide Video Game Consumers by Region... 167 Published by DFC Intelligence www.dfcint.com 858.834.4340 7
Table 42 Global Video Game Consumers by Region... 168 Table 43 DFC Intelligence Game Type Classification Categories... 169 Table 44 Example of Leading Cross Category Games... 170 Table 45 Top Games by Category... 171 Published by DFC Intelligence www.dfcint.com 858.834.4340 8