What’s behind the gaming industry’s soaring revenues?

Games industry growth

In 1958 the American physicist William Higinbotham created ‘Pong’, the world’s first video game. 63 years on from that ground-breaking release, the gaming industry has become a global behemoth, raking in $162.32 billion in revenues last year.

That figure represents an increase of $70.82 billion from 2015 which raises the question: what is driving the phenomenal growth in global gaming revenues?

To answer this question, let’s take a look at 3 key trends that have defined the gaming industry in recent years and helped to boost its revenues so substantially.

1. MOBILE GAMING

In 1994 German company Hagenuk introduced the world to mobile gaming when they pre-installed the ever popular Tetris on their MT-2000 handset. It wasn’t until 2007 though that the mobile gaming market we know and love today became recognisable.

That was the year that Apple CEO Steve Jobs unveiled the iPhone, a game changing mobile device.

This device revolutionised the gaming market by making graphically sound and eminently playable games available to a mass market. In the 14 years since the release of the iPhone, the mobile gaming industry has gone from strength to strength.

Since 2015 investment in the mobile sector has skyrocketed, resulting in huge revenues and vast playing numbers. Last year alone, an estimated 2.6 billion people played at least one mobile game which helped the sector to generate $77.2 billion in revenues.

That made mobile the biggest sector within the gaming industry, a trend which looks set to continue in the years to come.

Mobile gaming

2. GAMBLING IS GAMING

Traditionally there has been a distinction between gambling and gaming, but in recent years the lines have been blurred somewhat.

Classic casino games like roulette, blackjack and baccarat have been included in the gaming category largely thanks to the way that they are played.

In yesteryear, to play these games, casino lovers would have to travel to their nearest casino and play for real. Now however, players can simply pick up their mobile device and have the pick of the finest online casinos in the country.

America is one of the countries currently powering this growth as changing laws have made online gambling accessible and legal for the majority of Americans.

At the time of writing around a dozen states have the legal framework in place to support online gambling including Michigan and New Jersey, but that number is expected to grow in the coming years with several states debating whether to legalise online gambling activities after seeing the economic benefits it can bring. With more states legalising gambling, we can expect to see the revenues of gambling and in turn gaming, increase.

3. IN-GAME PURCHASES

There used to be a time when you would save up a little money each week to buy your favourite game. As a child or teenager, the cost was quite high but, once you had bought the game you knew that it was yours for good.

Now there isn’t really the same system in place for gaming with much of the best titles out there being free to play. That’s because the previous model didn’t really work for games developers, well not as well as the current model does.

Pre-2010, sales were the only revenue stream for games developers but now they have many more avenues for profit. In-game purchases, like skins, weapon blueprints and aesthetic features are major money makers for gaming companies and are helping to boost industry revenues substantially.

In June, July and August of 2020 free-to-play Battle Royale game Warzone made an estimated $500 million in micro transactions. That’s half of what cult title Modern Warfare 2 – which was released in 2010 – made in total.

 Credit card for microtransactions

WHAT THE FUTURE HOLDS

In 2026 the global gaming industry is predicted to bring in revenues of $295.63 billion which will represent a $133.31 billion increase. The continued growth of the mobile sector, online gambling and micro transactions are all expected to play a part in that growth.

However, the main driver behind that growth according to experts will be the increased presence of cloud gaming. Currently, cloud gaming services like PlayStation Now and Google Stadia are relatively niche services.

In the years to come however, big changes to cloud technology are expected which will put the emphasis on the cloud server to do all the computation work like rendering, processing and video encoding.

These advances to cloud technology will make the streaming services much more accessible for the regular player as they will not need impeccable internet connections to access a stellar library of gaming titles.

This would allow the gaming industry to closely follow the subscription model of streaming services like Amazon Prime Video and Netflix. Which would result in a bigger and more loyal gaming market than ever seen before.

In addition to cloud technology advancements, it is also thought that the improvement in AR and VR technology will help to boost the short-term and long-term aims of the gaming industry.

All in all, the recent and continued growth of the gaming industry is good news for us as consumers, who have more choice than ever before. In 2026 there might even be a new GTA…

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