Hardware, software, peripherals: If it has to do with staying at home…
By Adam H. Williams, Senior Associate at E911-LBS, LBSglobe.com, for WOLF STREET:
Typically, revenue growth the year before a new console generation arrives is slow. But 2020 is the year of the Pandemic, with people losing their jobs or working from home and in many areas not being able to go to indoor venues and events, video games have exploded. Microsoft and Sony have now announced the details of next-gen consoles, and we are set for a banner year of an all-time sales high, despite the slow-down in the global economy. COVID has created a situation where virtual technologies advanced, international markets were shaken, and gaming just gets bigger and bigger.
Strong Industry Performance
When we looked at gaming in 2019, the US-China Trade War was the big upset, and companies were hedging by moving some production out of China. 2020 was going to be a slow year. And then with the Pandemic, all that went out the window. According to analytics company NDP Group, second-quarter US Video Game sales jumped 30% year-over-year to $11.6 billion, the highest in history:
It was not just software that sold. Startlingly, despite next-gen systems coming out in just a few months, hardware sales across Nintendo Switch, PlayStation 4 and Xbox One exploded by 57% year-over-year to $848 million. And sales of video game accessories – gamepads, headsets, steering wheels, and other peripherals – soared by 50% to $584 million.
Retailers both online and physical, even struggling GameStop [GME], saw a significant surge in business while other forms of entertainment, such as movie ticket sales, collapsed. The used market also remained strong, as did smaller independent games via digital stores.
Nintendo’s Switch was a big winner and set a new record in August, with sales more than doubling from a year ago, likely driven by Animal Crossing’s success. In terms of peripherals, flight sticks were in hot demand, after the launch of Microsoft Flight Simulator 2020.
The global console games market for the entire year is expected to grow by 41%, from $41 billion in 2019 to about $58 billion in 2020, according to Research and Markets, cited by Yahoo Finance.
Growth in console games has also been driven by an increase of “gamers” worldwide: In 2017, there were an estimated 2.21 billion gamers; in 2021, 2.73 billion people fall under that bracket, with at least 63% of the people in the US being gamers.
9th Generation Console Systems on the Way.
The big news is the announcement of both Sony’s PlayStation 5 and Microsoft’s Xbox Series X, both priced at $499, but both also offering stripped-down digital-only versions. The reception has been positive, though many are skeptical about digital-only. We can expect robust sales into the holiday season of the consoles.
In terms of hardware specs, PS5 and Xbox X are relatively comparable, with PS5 offering a bit higher performance, according to IGN.
In terms of market strategy, PlayStation seems to be winning, with PS4 the dominant 8th generation console. Sony is focusing more on hardware, while Microsoft’s strategy on software ecosystem – with the integration of PC and Xbox platforms with Gamepass – is highlighted by the surprise announcement of Microsoft’s acquisition of Bethesda/ZeniMax for $7.5 billion.
Nintendo’s Switch remains very popular. Both Microsoft and Sony have stated their continued support for 8th generation platforms, and backward compatibility will be a well-received feature.
Game prices will increase to $70 from the current $60 and potentially higher in international markets. This may create a drag in a tighter market as gamers feel economic pressure. The US market is maturing and quality is a big issue. Many gamers are tired of the incomplete “Game as a Service” model to release an unfinished product – proven by several recent high visibility flops.
China still strong but clouds on the horizon.
Despite heavy restrictions, the China Market has been growing strongly. Still, trouble like the ongoing conflict between Epic Games and Apple around Fortnite (China’s Tencent owns 40% of Epic) and issues similar to those around TikTok have shadowed the market. BGR reports: “The Committee on Foreign Investment in the US (CFIUS) has sent letters to Epic, Riot, and Blizzard, asking them about security protocols involving the personal data of American customers”. This may be a sign that after TikTok, Chinese gaming interests may be the next target (see: Trade War Effect).
Still, the internal Chinese market seems strong. According to a report released at the 2020 China Digital Entertainment Congress in Shanghai, cited by China.org.cn, China’s gaming industry revenues rose 22% year-over-year so far, to 139.5 billion yuan ($20.5 billion). Cloud gaming and esports up were by 79% and 54% respectively, propelled by limited hardware access and cultural phenomenon.
Virtual Reality (VR) starts to come into its own.
That the Pandemic is accelerating VR is interesting. For the industry, training in VR increased, particularly in Telehealth. With Remote Work seemingly becoming the new normal, this area may continue to grow. VTubing (Streaming with a Virtual Avatar) is also becoming popular so VR may be making inroads, particularly amongst Gen Z and Millennials. VR Schools are not yet a thing, but soon may be more common.
The global market of VR in gaming is expected to reach $11 billion in 2020 and is expected to grow at a compound annual growth rate of about 30% to 2027, according to Market Insights Reports.
Still, VR remains limited, and a break-out hit for VR remains elusive. Valve’s Half-Life: Alyx was well-received, but was handicapped by high equipment costs for those that did not have VR available. Hardware costs remain prohibitive and until costs are driven down, or true next-gen “full-dive VR” (immersive VR) arrives, I suspect VR will grow slowly but steadily absent a larger motivation such as VR schools.
Looking ahead, the 4th quarter is always the biggest for gaming, between the holidays and the winter cold. This year, with continued restrictions and disruption likely, the social aspect of games keeps people busy and connected. But with fears about the recession, will people invest in games and new hardware? Hard to say what’s in store in this environment. But for now, the trend seems clear – on the principle that if it has to do with staying at home, it’s booming – we can expect strong console sales and software throughout the rest of the year at least. By Adam H. Williams, for WOLF STREET.
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So many things got turned upside down. RV sales & home fitness equipment both “to da’ moon” this year. I personally waited months to order a stationary bike.
Did I want to buy a bike? No, but my fitness center was closed, then open, then closed, soon to open, but probably soon to close in the fall again.
There are two major trends now, play at home, or play in the great outdoors.
“There are two major trends now, play at home, or play in the great outdoors.”
Maybe in the USA, but not in Oz.
In Victoria we can’t go more than 5 kilometers from our house if we are in Melbourne and there is a curfew as well.
And the state government here is trying to pass a law that will allow it to detain you if they “THINK” that you may break the law in the future………
In France, when they had their curfew in March and April, the government had helicopters in the air to watch out for hickers in the woods. You couldn’t even leave your house to go to the grocery store without a written permission – signed by yourself(!).
( A lot of French working here in neighbouring Germany)
Sounds tough. But if I ran a 10k (5k diameter) every day I’d be in a lot better shape than I am now. ;-)
One of the problems of VR, besides price, is that’s there way too many options and that VR machines don’t last an average of six years unlike videogame consoles.
Is a shame Arcades are no longer a thing outside Asia because VR would be great for Arcade machines… once the pandemic ends.
There are VR gaming shops in malls and LV now. Or when they open again.
Where folks can play each other in the VR environment.
It’s pretty cool. An adventure with your buddies with a story line.
Big with birthday parties.
The real upcoming winner in VR is probably going to be sony, they already said the PS5 will feature a new far better vr system than the PS4, combined with cheap price (only $400 for the disc less ps5) and the cheap price of their VR system that hooks to it (not announced yet), they are favoured to win the video gaming VR race. Especially, as Microsoft has stated they have no interest. The PS5 vr once launched should last remaining Ps5 life.
For simpler non gaming focused VR there could be someone else as the lead company, this we will have to wait and see, however, outside some significant niche uses, I don’t think non gaming VR will be all that significant. Right now light gaming and non gaming VR is dominated by Oculus who is owned by Facebook. They also have the only notable wire free VR sets. Right now to handle better VR you need a wire directly connected to a beefy computer or a game console. The Oculus quest 2 can use a built in weak computer for light stuff or be wired to a PC. Samsung who has crappy headsets to turn your phone into VR already sacrificed their VR to Oculus.
Both consoles, PS5 and the new Xbox’s had their preorders sell out immediately and they will continue to sell out, until some point after the pandemic is Over. Right now, the bigger issue is making enough of them.
I remember VR on the PS4. Not only Sony didn’t promote it enough, the only exclusived I cared about was the Psychonauts VR game. Buying a PS4 plus the VR equipment just for one game was not my cup of tea.
So unless Sony has like a “Gamepass” for the VR games, since most VR games are ahort anyway, forget it. Not buying a 70 bucks game that you can finish in less than six hours when you can rent it for twenty bucks a month and get other games too.
The PS4 VR sold well for a VR system (VR is still a niche). It got the majority of all AAA VR titles on it as well as some exclusives, so game selection was good for VR. There just isn’t yet enough demand to get a significant amount of good VR exclusives for any VR platform. Half Life Alex is the only significant VR game not on PS4 VR, but, it could come to PS5 VR.
As for game pass, that doesn’t exist for any VR platform, for most games I just wait until they are $5 to $30 with all dlc included.
VR isn’t that big yet, but, for quality game level VR, Sony once they release PS5 VR, will be the likely winner. Another 10 years from now, it could be supported by third party generic headsets with no clear winner, but, for now Sony could be the leader. Alot of it comes down to if the motion controllers for VR could become standardized, if they do, then there could be no clear winner, even if every game console had their own controllers, because, game and applications could be easily ported to everything. And on the computer it then wouldn’t matter what brand headset and controllers you are using.
Arcades are a thing. Just bought a flat pack cabinet, but, Quality Button kits are sold out pretty much everywhere!
Best depression ever continues.
Dems are now really stretching finding whatever reasons to continue their free spending ways. #EveryHomeDeservesAConsole.
No more stimulus please.
Politics “lite” huh? Take a look at the deficit.
Whatever your view on the deficit – the depression is real.
If you shut down the economy, take away jobs, give them an extra $600 per week and force them to stay at home…
They play video games.
Ironically, they are not watching sports. Ratings are at 20 year lows.
You won’t find politics shoved down your throat (yet) with gaming. Sports decided to drink the Kool-Aid and collectively wipe itself out with many of its fan base. Maybe the dumbest execution of “bad business” I have ever seen on such a large scale.
Dear Eloi, We of the ancient and honorable society of Morlocks salute your complacency during these times of high stress. In respect of your willingful acceptance of all this stay-put-and-smile, we invite you to a feast in your honor. Please don’t touch any of those dusty books with their nasty paper full of contagions as you pass the old library on your way to the fallout shelter elevators. We wouldn’t want those sweet tasting brains to lose any if their flavor. Now, just follow the trail of dollar bills on the ground and you will arrive at your appointed destination on time for the air raid sirens, er..the dinner bell.
In certain hot and humid weather conditions my library – average age of the books c 250 yrs, very few less than 100 – smells terrible.
All that old paper and leather, they should be burnt for public health reasons.
From another book lover:
When asked what books I read my response (also to pull their legs a bit!):
“When at the library if I can’t ‘blow the dust’ off of the book I’ve looked at it is not worth the read”.
Of course I got all kinds of oblique looks; they didn’t understand at all!
Books are endurable; electronic readers can be changed in an instant altering sources and history itself.
It depresses me when I think of the amount of my work that’s on Phillips data cassettes and 8″ floppies.
And with all those new console players online, some weird stuff started happening. Socially and competitively, the flooding of the online competitive games with people who did not know how to play well, or at all, really created a chaotic mess. I really miss the days when I could find a serious game, with serious players, at equal skill online in certain games. When the player volumes increased during the pandemic, it was like having kindergarden basketball players mixed with NBA basketball players. The games were not very competitive, especially if you played with a seasoned crew. Either you crushed the other side playing with your seasoned crew, or you had to carry a team of random players if playing without your own crew. And for the first time every, I had to turn off all my messaging as I got so much silly “hate mail” during game and after game, which never really happened before. Players seem to think you are cheating if you are skilled and know tactics, which is kind of impossible to cheat on a closed system such as XboxLive. I started to wonder if the stress of the pandemic was freaking people out as when they went online, many were not very fun to play against. It was a mess, and many of the regulars simply quite playing. Some of the stuff said during game got out of hand beyond anything I have seen or heard over decades of playing online.
Schools were closed.
Some adults freaked out.
What should children be thinking and feeling, looking at their own parents?
Online behaviour is an echo of people’s real mood.
Take it as social barometer.
The scientific use of mind altering chemicals to enhance the belligerence of aggressive young people and turn them into perfected hunter-killers…a theme already in review with I Was A Teenage Werewolf way back in 1957 just two years before the micro-chip invention. Well it may finally be catching up to us. Wonder what’s gonna be on the next reel.
The more things change, the more they stay the same.
When I first started online gaming in the 1980s, I saw the same complaints from the older grad student players about incoming freshman newbies.
Grow up and welcome expansion of the user base instead of trying to be a big fish in a small pond.
Life is becoming more like a video game. This year has felt like living thru a vault tec experiment in fallout.
I don’t even know anyone who plays video games. Most of the summer I kayaked everyday. We garden. Every morning I take my dog for a 2-3 mile walk. We have a week of rain coming and the wood is ready to plane in the shop. The plans are in my head for some Japanese lamps. Books are ordered from the library and music is playing in the living room.
Video Games. Really? God help us when the big plug is ‘it’s just like real and great for birthday parties.’ We’re doomed. Doomed.
This is a World I do not understand or wish to.
God help us.
We used to make our own music. Everyone had a different instrument to learn.
Modern games bring you, virtually for free, two very different types of experience.
The most popular type is violent shooters which generate high doses of adrenaline shots. Very addictive. Suitable for extreme sports lovers in real life. A century ago such people whould do hunting or soldiering.
There are also meditative games that put players slowly in hypnotic trance where colorful buttons are blinking all over the screen. Think of Las Vegas addicts.
Is it bad? Not really, the gaming is a sign that our modern life is comfortable and boring for too many.
Will it last? Several decades. When we burn the last baril of oil, we’ll return to playing our music ourselves.
And we shouldn’t forget that in the great ages of European/Chinese/Indian culture, most people preferred to gamble at cards or dice rather than improve their minds.
Gaming is just the modern equivalent.
Thats like saying every movie is a super hero blockbuster or porn, or that every novel is Twilight or… porn.
Unfortunately, the worst aspects of the gaming industry are more prominant than most. Its just too easy to make money off of addiction, rather than putting effort into something that people will actually enjoy.
“The most popular type is violent shooters which generate high doses of adrenaline shots. Very addictive.”
Also great training of our young to want more and get more as pawns of the MIC…..(Military Industrial Complex) and the so much of the privatized military.
Train them young; they will grow to love their jobs!
Good one P,,, glad to read that I am not the only one ignoring all these V games and V reality in favor of actually doing something productive!! They all sound more like some form of mental self abuse than anything else IMO.
Still stuck in FL to care for 90 yo mil, so now, after five years, harvesting figs, papaya, mangoes, avocado (next couple of weeks),tons of bananas, and citrus next couple of months… also added moringa this year to the mix.
Hoping to head west once again in the spring, to see the grands, other family and friends, God willing and the creeks don’t rise.
Paulo, that’s an accurate summation.
My youngest son works at an IP law firm writing video game patents for various game companies. He has been so busy during COVID that he rarely has time to meet us for (outdoor) dinner.
Drowning in VR is the eventual fate of the humanity. VR is not a normal technology, it’s not even a new paradigm, but it’s the surreal, futuristic offspring of the whole universe, born in the process of technological singularity.
A few decades in the future, everybody (“everybody” here means any independent, integrated, intelligent system; which may be just a computer program, or more generally, a cyborg) will “own” their unique, specialized “personal world”, made possible by AI-based VR.
There will be no suffering, and access to unlimited resources in these AI-based VR worlds. Nobody will have any reason to live in the devastated, abandoned physical world, wrecked by environmental catastrophes, wars, and dictators.
The advent of the VR worlds will rapidly overthrow the global sociopolitical order, will result in societal collapse, and will disrupt even the most solid social constructs. The advent of VR worlds will be the beginning of the “end of history”.
VR will catalyze the domination of the “individual” over the “society”, first initiated by liberalism/capitalism centuries ago, and will quickly conclude in the victory of the “individual”, but destroying all the concepts of “liberty”, “capital”, “society”, “individual”, and the whole discourse and philosophical legacy of the humankind in the process…
I’ve always wondered how economists will react, when VR begins to be a big thing, and how they will try to measure/define indices like GDP and inflation, when the social construct of the “world” begins to decay.
reader from Iran,
Thing is, I’m just not going to use VR. Period. I like AR (actual reality) ?
Well, its OK Wolf; but i’m sure failed, depressed people will use it ;-)
Wolf, I figured you’d take the red pill.
I am afraid that resources shortage (food, energy, water) will prevent this cyberpunk from coming.
Many sci fi authors envision such a world. VR becomes the reality. Ironically, people would start to look like the aliens depicted om tv and the movies: Big heads and eyes with skinny arms and legs; perhaps being fed nutrients intravenously to sustain life hooked up to a computer in the most efficient manner for less waste, and more cerebral focus. Just like in real life, survival and success would depend upon your ability to “play the game” and luck, except life actually becomes a digital game. We are aware of it this time- we are the players and actors
with blue and red pills.
I like the odds of the Orion’s Arm/Elon Musk route: human brain uploading and advanced AIs become a thing, and most humans minds end up in pure virtual worlds, completely detached from their bodies.
This kinda sounds like the above scenario, but doing away with human bodies is supremely efficient and economocal. A mainframe eats, poops, and breaks much less than hundreds of human meatbags.
How many will be uploaded to /dev/null?
How do you go to the toilet in VR?
You advance until your VR headset does “bummm” againt a wall. That counts for one turn.
If you hear “bump”, especially in toilet, that means you are not alone.
But don’t worry, there will be an app that will help you to count the turns. The day it goes IPO, the shares will go to the moon.
Forgot to mention, Two years ago (2018) I read a market analysis report that forecast “Virtual reality content market” will explode at a CAGR of 120% during the next five years…
It means getting 51.5 times bigger in just 5 years! this is by far the fastest exponential growth in a market that I’ve ever encountered. Maybe my analysis is not just a sci-fi illusion, because serious fundamental analysts also predict a big revolution…
Hey, remember how “GAMES IN 3D!” (3D CGI graphics) was gonna be the next best thing and 2D gaming was gonna be a thing of the past?
Or more recently, how movies in 3D was going to save the movie industry and all great movies would be in 3D from now on after the success of James Cameron Avatar?
Yeah, you’re right; but as the much-hated saying goes: “past performance is no guarantee of future results.”
Wonder how that ‘played out’ in Australia and in Melbourne.
Here is the current state of easing requirements for us:
“More significant lockdown measures, including the five-kilometre radius rule and the 9pm to 5am curfew, will not be lifted until late October as the road map stands – and only if the number of “mystery” cases with an unknown source over the previous 14 days is fewer than five. Currently, the number of mystery cases (measured between September 7 and September 20) is 41.”
So we have to hit a number that is ridiculous (FIVE) and the number of five means almost perfect health on the part of 6 million people.
No doubt we’ll be locked down for months and months……………….
More time to play games, right?
Like Russian Roulette, perhaps?
That’s a game for people imprisoned in their apartments going mad alright…..
“In terms of hardware specs, PS5 and Xbox X are relatively comparable, with PS5 offering a bit higher performance, according to IGN.”
IGN is a trashy source (try Eurogamer instead, for a big but competent outlet). In reality, the PlayStation 5’s performance sits squarely between the Xbox Series X and S.
One interesting twist in the VR market: Oculus now requires Facebook accounts for logins. This sounds trivial, but the (consumer) VR market is almost entirely made up of hardcore tech enthusiasts, and thats a group that tends to hate Facebook.
Also… just reading some of the comments, I can see there’s not a huge gamer demographic here.
The video game industry is so “HOT” right now that Microsoft just paid $7.5 billion for Zenimax the parent company of Bethesda which makes popular video games such as Fallout and Doom, just to name a few.
Bethesda games are hilariously buggy so on that axis, they are a good fit for Microsoft.
Also, no mention of the PC market!?
Gaming laptops are out of stock around the world. Nvidia just had the most under supplied GPU launch ever, even though they made *more* GPUs than the last launch. AMD and their partners are selling boatloads of Ryzen platfoms, and Renoir (the laptop part) orders are getting cancelled because theres so much demand. Even Intel, with their massive stumbles, cant make enough chips to sell.
TSMC is also beating their own expectations, and the memory crash many were expecting never came. The reasons are complicated, but absolutely ridiculous gaming demand is a big factor.
As I said … best depression ever.
The cheapest respectable gaming laptop is probably 2K a pop.
What grows faster than Covid 19? The answer is the income of Americans. Suddenly they can afford all sorts of stuff they couldn’t afford before.
I mean it’s time for Coronavirus 20. Hoping for a number of mutations every month, so that income can grow even faster.
Nearly every student in the country (world?) suddenly needs a laptop for at-home schooling—this is a huge part of the increase in computer demand.
My laptop is 300 bucks (from Walmart) brand new. OP is talking about GAMING laptops. Those are expensive.
Same with smartphones. Apple’s making a killing. Yeah you need smartphones nowadays, but do you need a BRAND NEW iPhone? Doubtful.
Do you understand CORRELATION ? Ho-ly sh-eat.
Same issue with engineering-capable laptops – 2-3k $ a pop.
EJ – You’re absolutely right – PC gaming is huge right now. I alluded to it here or there but there’s great examples like the Recent Nvidia card has sold out. However, it’s difficult to tease out mid-year (particularly this year) just how much is gaming, how much is work/school from home, and how much is internet scalpers trying to cash in on the new hotness. Still though – next gen consoles are a once in a 5+ year event and set the trends for the plebs without powerful PCs so they definitely stand out. :)
Lo, look at all the console peasants!!
Gaming has come so far for me after nearly 35 years of my hobby. Seeing the new MS Flight Simulator 2020 is certainly something compared to when I saw the first MSFS with wire graphics and I think I had an amber CRT monitor. Gaming is my primary form of entertainment (no TV) and lest you think I wasted time “Gaming away my Life,” I have earned four degrees including a JD, put my kids through school, have a great pension, and lived in SEA 6 months last year.
I do hate some of the free to play games and the “wallet warriors” and toxic players. Give me a good single player game and I am set. Dollar for dollar, the best entertainment value out there. Hopefully it will not get as messed up as holly-weird.
Wasteland 3 anybody?
Signed TonyMike from the PC Master Race
Tonymike – I agree, gaming can be a really healthy hobby and often can teach things like history or engineering, or drive skill development. The new Flight Simulator is a great example – how many pilots or aviation careers will be launched? I personally know 2 architects who found a passion via video games. My love of engineering traces back to Tetris and economics career was developed by a few great games like Civilization or SimCity.
Like any hobby, there can be excess – a bookworm who gets too caught up, a cinephile who spends way too much time on the couch, a gourmet overindulging- but a few hours here or there is a great way to pass the time (particularly in quarantine) and given 63%+ of the US is a gamer, it’s now more common than not. Gaming definitely has its own culture war, likely predating the one now at large, but I think the market can speak – we can only hope!
This comment is absurd, sorry.
Gaming is “really healthy”? I have never heard that. Quite the contrary. Have you seen the video-game addicts of the past 25 years? I won’t list the titles of very disturbing games that have been the inspiration for many horrific atrocities that never existed in years past.
I don’t know a single person who started a career based on their video game proclivities. You know 2. For every 2, 20,000 didn’t. Not a good statistic to base reality on. I am a literal Tetris Champion and have no desire to work in Engineering. I have a degree in Economics and was a SimCity addict—I see no correlation between the two, other than money involvement.
typing in the dark.
Like no movie or other form of western entertainment has not done this?
“I won’t list the titles of very disturbing games that have been the inspiration for many horrific atrocities that never existed in years past.”
Could you entertain me and tell me some of them, so that I can counter with at least five movies?
@tonymike – this article isn’t about movies and i never mentioned movies — why are you going on about movies?
Your comment is absurd, sorry.
Couple of notes:
VR: I don’t see it going anywhere. The problem isn’t the hardware cost – that’s a short term issue.
The real problem is content. It is enormously expensive to create VR content – and that problem isn’t going away anytime soon. A similar problem exists for quantum computing: even if workable quantum computers at sufficient capacity and scale existed, it would take million monkey/million years to get usable quantum scale programs created.
Sony “win”: I would point out that Xbox didn’t exist before November 2001. Sony was the enormously dominant console company prior to that – it is impossible to term Sony as “winning” when Xbox’s entry into the console market sent Sony into a tailspin that they only exited in 2018…
Well, I guess Gamestop began their PS5 preorders. They sold out so fast. Oh well, PS4 it is for a while longer. Did you get your preorder in?