We’re back with the top 10 trends shaping video games and the games market in 2023 and beyond.
This year is already proving to be a wild (or at least unpredictable) ride for the market. We’re now seeing the first impacts of 2022, with companies like Ubisoft canceling sizable quantities of games and Google and NVIDIA expressing concerns about the fraught deal between Microsoft and Activision.
So, will 2023 be just as eventful as last year? We expect the answer to be a resounding yes.
In our newest article series, we’re exploring the top 10 trends we believe will have the biggest impact on the market in 2023. Our analysts offer key insights into the most riveting developments and make several big predictions on everything ranging from surprising M&A activity to generative AI and gaming in cars.
Last week, we talked about AA and AAA publishers moving to service-based models, the Microsoft-Activision deal, and hybrid monetization strategies for PC and console publishers. Here are four more trends shaping the market this year.
The appetite for mergers and acquisitions (M&A) will continue to slow down in 2023
After two record-breaking years, the games market started to slow down in 2022. This trend has cooled the appetite for investment and M&A in the industry.
Before you point to the Microsoft-Activision deal, we define it as an outlier. It’s unprecedented in size and scope, so including it in our recap of 2022 deals would give a lopsided view of what really went on last year.
For most of 2022, the combined deal size was down year-on-year. Given the economic situation and how it’s affecting the appetite for new investments, we expect that M&A activity in the games industry will slow down for a prolonged period.
Capital will get more and more expensive, while opportunity costs will go up, hindering any major (or even minor) acquisitions. On top of this, the current regulatory climate will keep disincentivizing acquisitions with high enough profiles for regulators to perk up their ears and take action.
Lars Wingefors, the CEO of Embracer Group, said in the company’s most recent report that macroeconomic conditions “require current and future investments, both organic and inorganic, to have higher minimum hurdle with a safety margin to justify the capital allocation.”
Longer-term, ongoing economic headwinds might open up new avenues for M&A activity while independent developers and publishers look for safety nets in consolidation. At the same time, stock prices may drop to the point where more hostile acquisition attempts become feasible.
The global semiconductor supply chain will bounce back, boosting console availability
Thanks to global supply chain challenges, tons of people have endured long waits to get their hands on current-generation consoles. One of the major supply chain issues affecting the gaming market was the drastically limited supply of semiconductors. Looking ahead to 2023, it would appear that many of the issues plaguing the supply chain have been resolved.
Sony confirmed that December 2022 was the best month for PS5 sales, and Jim Ryan, Sony Interactive Entertainment’s president and CEO, announced during CES 2023 that it finding PS5s in retail stores would be much easier this year.
More than two years since current-generation consoles hit the market, supply is finally catching up to demand. In hindsight, the timing here works out well for platform holders. Content has been sparse in the past two years, with delay after delay across many studios.
This year, in contrast, is becoming a solid year for console releases, which suggests that consumers will find it easier to justify purchasing a console. We expect a great year ahead for the console gaming market.
The supply chain crisis also impacted the availability of integral PC components, though many of the issues hampering the PC market have been resolved or are careening toward a resolution. Thanks to these cheery resolutions and the lower demand for high-end GPUs from the crypto market, an abundance of PC components will enter the market this year.
However, PC gaming won’t see a giant leap forward in graphic fidelity, meaning one fewer push for players to upgrade. With more components on the market, prices will dip and discounts will expand, which will lead more players to buy PCs but not necessarily go for huge upgrades.
In the post-ATT era, user acquisition for mobile games will become harder for (hyper) casual games
Hybrid monetization has morphed into a go-to strategy for mid-core and core mobile game companies. Mobile gamers will see more (rewarded) advertisements, in-app purchases, and subscriptions pop up across many titles, especially ones that have already built up an audience.
This strategy has the potential to be so successful that it may push a whole host of mobile publishers to follow Supercell in removing loot boxes altogether.
While hybrid monetization is a lucrative strategy for many publishers, the folks behind casual and hypercasual games may not reap the same rewards.
Casual and hypercasual games are already facing fierce competition from short video platforms like TikTok and YouTube Shorts. The hypercasual genre, in particular, once benefitted from the mobile app economy’s advertising opportunities, but targeted user acquisition is getting more complex budgets are diminishing.
Hypercasual games must transform or fall by the wayside thanks to new monetization strategies. In most cases, simply adding in-app purchases or a subscription model won’t suffice. These games aren’t designed to engage players for long stretches of time, so these strategies aren’t sustainable or scalable. Many casual and hypercasual games are adopting elements from core mobile titles.
For instance, some developers are adding meta elements to the simple gameplay loop, like the highly-successful survivor.io by Habby. Voodoo, the world’s largest mobile publisher by downloads, recently announced a publishing arm focused on helping smaller, upcoming studios to implement hybrid monetization strategies more.
Good news, Netflix! Cloud gaming service providers will invest more in Platforms as a Service (PaaS)
The B2B cloud gaming market segment is promising a solid performance in 2023. This segment, which offers white-labeled cloud gaming services to platforms, game publishers, media companies, and other clients, will account for a larger share of the cloud gaming market, especially in those more mature.
Cloud gaming service providers will expand their white-labeled offerings and invest more in PaaS, empowering more platforms and publishers to offer the cloud as an alternative distribution method.
A chunk of the market for cloud gaming will pivot from a consumer-facing solution to a back-end technology. This shift will be where Google’s Stadia technology gets to shine.
One of the main benefactors of this development will be Netflix. Over the past couple of years, Netflix has taken its first steps into the world of gaming, serving up games to subscribers on top of its other media offering. However, the gaming experience has its limitations, with users required to download games rather than being able to launch them directly in the Netflix app.
This step is quite a barrier for subscribers, primarily as they are used to a more seamless streaming experience.
Soon, app store ecosystems will have to allow third-party products, enabling Netflix (among other similar platforms) to take more significant steps toward a workable gaming strategy. Cloud gaming will play a key role moving forward. In fact, the more app store ecosystems open their doors to third-party companies, the more cloud gaming services will seamlessly move into mobile.
As the year speeds along, Netflix may start publishing free-to-play games available to people who don’t have a subscription. After ten years of continuous growth, Netflix has seen its subscriber population wane, and cloud gaming solutions could become a salve for these faltering numbers.
Netflix may use more accessible free-to-play games to grow its gaming division and draw in new subscribers with perks and rewards (does this remind you of the battle pass system?).
That’s it for the next 4 top trends to watch out for in 2023. Stay tuned for the final part of our top 10 most exciting trends in the world of video games, including our predictions from last year.
