Gaming Industry Dynamics

Gaming as a Technology Driver: Gaming has always been one of the most dynamic businesses in consumer electronics, acting as catalyst and early adopter in the development ofsemiconductors, microprocessors, electronic data storage, display technology, communications, virtual reality, and more. Any visit to the annual Las Vegas Consumer Electronics Show (CES) immediately reveals the preeminence of the gaming sector — it requires an entire exhibition hall of its own.

Historically, the video game industry has always been a technology driver. In the 1970s(before the mobile phone, personal computer, and the Internet) gaming represented a major end-market for a fledgling tech industry and one of the earliest applications of revolutionary invention — reconfigurable logic, aka the microprocessor. Using ROM cartridges, gaming also pioneered one of the earliest forms of electronic content distribution.

As a market however, entertainment and gaming at that time simply wasn’t big enough to economically support the entirety of the tech sector. The financial contraction of game flagship company Atari followed by the video game crash of 1983, a global economic recession, stagflation, massive layoffs, and an energy crisis nearly bankrupted the nascent semiconductor and computer industries.

Yet despite the economic crisis, technological innovation in the 1980’s actually accelerated. In the boom or bust mentality of Silicon Valley, engineering instantly refocused its attentions away from gaming and onto personal computing, the graphical user interface (Xerox PARC, Apple Macintosh, Microsoft Windows), high-capacity optical storage (the Laserdisc and the CD), and the Internet. Meanwhile, the epicenter of game development relocated to Japan led by Nintendo and Sega who vied for ownership of the decimated American gaming market. By 1994, however, integration of 3D graphics and the CD ROM into a new gaming console, the PlayStation , propelled Sony Entertainment into a dominant position in the video game industry. CD ROM game distribution also forced CD media manufacturing capacity increases further accelerating widespread adoption.

By decades end, game consoles also added Internet connectivity. Although the capacity and speed of the Internet itself grew rapidly, the last mile local connection to the home prevented widespread adoption of online gaming and content distribution. With high definition video files exceeding the capacity of the CD, a new physical medium was required. Following extensive delays and bickering over data storage formats, the digital video disk or DVD was finally release. Samsung beginning mass production of DVDs in 1996 followed by Sony launching PlayStation 2, the first gaming console with a built-in DVD player useful for both video content and game distribution.

Meanwhile, cable companies were working feverishly to increase network bandwidth culminating with the industry wide adoption of broadband standard for cable and fiber called DOCSIS [10], an acronym for “data over cable internet specification” able to support multicast video, data, and VoIP concurrently supporting set top boxes and cable modems. By 2006, cable download capacities had surged from 40 Mb/s to 1 Gb/s able supporting both gigabit Ethernet and 802.11 b/g WiFi local area networks. Soon thereafter, the launch of seventh-generation game consoles described as high-bandwidth entertainment centers brought greater focus to connectivity and content access. To compete with notebooks and PCs, these new consoles included HD Blu-ray players, Bluetooth wireless input devices, wireless connectivity via 802.11b/g WiFi, and gigabit Ethernet. Contemporaneously, LED backlit flat-panel LCDs (and eventually HDTVs and AMOLED displays) displaced the CRT “TV-tube” as the dominant display for gamers.

While performance gaming continued to concentrate on regular releases of consoles offering superior graphics speed and gigabit communication data rates, a parallel market opportunity in gaming emerged focused on mobility. Unlike the poor image quality low-cost handheld games of yesteryear, the newest smartphones and tablet integrated high-resolution color LCD and AMOLED touchscreens, high-speed parallel processors, WiFi and 5G connectivity rivaling the performance of home units. After the long wait, the gaming industry finally had what is needed all along — high speed telecommunication networks able to provide digital distribution of games over broadband Internet. Numerous online distribution services emerged including the Sony PlayStation store, Xbox game store, Electronic Arts Origin, GameStop, Amazon.com and more.

Further increases in broadband download data rates made possible by new technologies, including Gigabit Ethernet (802.3, 1000Base) at 1 Gb/s, WiFi (802.11ax) at 2.4 Gb/s, 5G telephony at 1 to 10 Gb/s, and DOCSIS 4.0 cable and fiber at 10 Gb/s not only reduce download times and latency but open entirely new game markets referred to as game streaming. In game streaming, also referred to as cloud gaming or game-as-a-service (GaaS), players access game software on network based servers to translate into gaming commands, with the real time results streamed back to the player. In this manner the gamer avoids the cost of purchasing the game and the cost of purchasing the hardware on which to perform the commands. Players may access the streaming service either through an dedicated application (e.g. GeForce Now, PlayStation Now, Shadow) or via a web browser. Smartphones may be used for game streaming either on Android or on iOS using Safari browser and Xbox Game Pass. In addition to a streaming service, competitive cloud gaming requires a game controller, typically a gamepad or any Bluetooth system compatible controller.

Given gaming’s unique role as an early adopter, the time has come for the next leap in game tech — the blockchain, Web 3 application decentralization, tokenization, and the metaverse.

Market Gaming Trends: The reported worldwide gaming market for 2021 was approximately $180 billion USD up 1.4% from 2020. Today’s gaming market is segmented into three categories comprising (i) game consoles, (2) personal computers, and (iii) mobile devices. Of these, the mobile market (dominated by smartphones) represents $93.2 billion USD or 52%, followed by gaming consoles at $50.4 billion USD or 28%. At $36.7 billion USD, gaming on PCs makes up the remaining 20%.

While game market researchers agree historically, there is no consensus on projected market growth rates. Estimates vary widely [18][19] with cumulative average growth rates (CAGR) ranging from a pessimistic 1.4% near term to an explosive 13.2% over five years, with estimated markets of $314 billion in 2027 to as high as $546 billion in 2028.. How can market growth forecasting be so difficult to gauge? Frankly, there is a lot going on in the world right now. Factors impacting the market include macro and microeconomics as well as evolving population demographics. Events and trends affecting the gaming market include the following dynamics:

• One major macroeconomic factor affecting personal spending globally was the COVID-19 pandemic, which with busines shutdowns, bankruptcies, and shelter-in-place orders reduced disposable cash and overall personal spending. While purchases of luxury items declined, spending on staples and necessities increased. Required for at-home learning and for contactless delivery during home quarantines, Internet connectivity became a living necessity.
• Overall, the market for smartphone gaming demonstrated robust growth of 7.3% YoY while PC gaming remained flat and console sales declined (see figure). In other words, negative growth factors in the overall gaming market represent an adjustment in market segmentation within the sector, largely driven by macroeconomic conditions unrelated to gaming, not a slowing of growth. In particular, delays of new game consoles and slower PC sales are at least in part due to supply chain shortages stemming from the pandemic.
• According to one survey, 4.95 billion people used the Internet in October 2021, constituting 62.5% of the world’s population. Nearly a quarter billion new Internet users were added in the 2021, with 91% of cell phone subscribers using their phone as a means for Internet access.
• A growing number of Internet users now subscribe to online content, including 3 billion Internet users who reportedly watched streaming or downloaded video at least once per month. Paid video streaming subscriptions globally hit 1 billion viewers, up 26% YoY
• In 2021, consumers purchased 1.4 billion new smartphones and 341 million personal computers (including desktops, notebooks and workstations).
• The number of gamers worldwide exceeded 3.2 billion in 2021, roughly 65% of all Internet users (40% of the earth’s population) with 55% of gamers in Asia-Pacific.
• As a distraction from personal isolation of social distancing and lockdowns caused by the pandemic, engagement in the digital and virtual world increased dramatically. Reports suggest online gaming in India increased in duration by 53% to 7 to 8 hours per week
• Online gaming is estimated at 1 billion players worldwide , with China, South Korea, and Japan having the largest social gaming communities, and with Africa showing the highest new player adoption rate.
• Game streaming and cloud gaming grew to 24 million paying users in 2021 comprising a $1.6 billion USD market . Major game servers include NVIDIA GeForce Now, Sony PlayStation Now, Google Stadia, Amazon Luna, and game dedicated vendors such as Shadow, Vortex, and more. Many video streaming services such as Netflix are also considering moving into game streaming services
• As post WWII baby boomers retire declining as a percentage of the consumer market, the gaming market for millennials and especially gen X, Y, and Z players continues to expand Unlike the boomers connecting to the Internet through PCs and cable services, younger consumers demand mobility. Gaming is therefore expected to continue to migrate to smartphones and tablets.
• In 2021, online social community gaming such as MOBA (multiplayer online battle arena) and MMORPG (massively multiplayer online role-playing games) expanded their reach, hitting share-of-markets (SOMs) of 68% and 74% respectively.
• Aside from game streaming, the gaming industry also includes 1.2 billion gaming video content (GVC) streaming subscribers for Twitch and others.

To be continued :-) subscribe!