About US$59 billion of 2022’s console revenues will be from software sales, composed of video game titles, subscriptions (more than US$10 billion), and in-app payments. Console hardware sales are expected to top US$22 billion, subject to the resolution of supply chain issues that had constrained the supply of the latest-generation consoles released at the end of 2020. Importantly, pricing for the newest gaming consoles has proven resilient, with launch prices able to be maintained longer than for prior generations of consoles.3
Beyond 2022, console software sales are expected to continue growing, reaching close to US$70 billion by 2025.4 Over this period, digital game purchases, including downloads, subscriptions, game passes, and in-app payments, are expected to rise as a share of sales from 65% in 2022 to 84% in 2025.
Diverse innovations are bolstering the console ecosystem
The games console is at the center of an expanding ecosystem that continues to innovate in content, experiences, and business models. These innovations are transforming the console ecosystem from one based on final products generating one-off sales—whether a physical console or a game title—to a perpetual and evolving entertainment service that encourages daily, often multiplayer gameplay, generating a steady stream of revenue.
Subscriptions are a critical development. We forecast that console owners will have more than 200 million multiplayer and game subscriptions in 2022. By 2025, these subscriptions will likely generate more than US$11 billion in revenue, up from US$6.6 billion in 2020.5 A console owned for eight years may garner as much subscription revenue as from the sale of the console itself.
Another notable innovation is downloadable content (DLC), which offers gamers new “chapters” of gameplay and storylines, the use of virtual currency, and in-game add-ons such as better gear and distinct outfits. Some titles have also evolved into games-as-a-service with constantly updated storylines, content, and events that encourage regular play. For example, Rockstar’s Grand Theft Auto 5 began in September 2013 as a top-tier single-player experience, but has since expanded into a multiplayer service in an evolving game world—making it the bestselling game in the US market between 2010 and 2019.6
Another approach is the annual, rather than occasional, release. This tactic is common among sports titles such as FIFA, Pro Evolution Soccer, and Madden. Because players in each real-world team are constantly changing, with major transfers taking place once or twice a year, sports titles are suited to annual updates. This type of annual game can also be bundled with additional revenue streams, such as in-app payments and game passes.
Yet another innovation is that console game makers, successfully taking a leaf out the mobile playbook, are now offering free-to-play games that are monetized through in-app purchases. The best-known example of this is Epic Games’ Fortnite, which has generated billions of dollars in spend.7 In some cases, games that were formerly sold outright, such as Rocket League, have switched to this model.8 Popular multiplayer titles are looking a bit like immersive social media, with greater socialization and personalization of avatars through purchased “skins” (clothing, hairstyle, and so on) and “emotes” (most commonly gestures and dance moves).
A final spur to console game growth is its increasing integration with mobile. While games have historically been designed for either of the two very different device types, console titles are now starting to be integrated with complementary smartphone apps, allowing players to commingle in the same game from any device. In 2022, we expect this nascent trend, called cross-play, to accelerate. An early example of console-mobile integration is Call of Duty, one of the most popular multiplayer console franchises. The franchise has introduced a mobile version of its games, designed to keep people playing and invested while on the go and away from the big screen. According to one estimate, Call of Duty: Mobile boasts 200 million active users overall and about 30 million daily active users.9
The jury is likely to still be out in 2022 over whether console-mobile integration is net positive for consoles. Over time, cross-play might dilute the value of a given console, or at least undermine the role of new releases that are exclusive to a single platform. This highlights a mounting tension in the gaming ecosystem: Top game franchises are jostling for prominence with the hardware that runs them.