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[ZhugeEX]

The global gaming market has been booming recently with Newzoo recently announcing that the market is expected to grow another 9.4% this year to reach $91.5 billion. China is also expected to become the largest gaming market this year, but could that be due to the sheer number of gamers or because Chinese gamers are spending more?

The average gamer in the US spends around $80 on video games per year, this can include packaged content in the form of console or PC games and Digital content in the form of full game purchases, DLC and in app purchases. This number is actually down from 2008′s peak of $130 when gaming was thriving thanks to the Nintendo Wii. The reason this number has fallen is because more and more gamers are moving to mobile and PC and playing free 2 play games where they don’t need to spend a penny and if they do it’s only a few dollars here and there.

The decline in video game spending in the US has been quite sharp from 2008 through 2013 but seems to be somewhat stabilising in 2014 and we should see the decline round off in 2015 and beyond as generation 8 consoles grow their install bases and PC and Mobile developers monetize and encourage spending on additional games content. In the US we still see a huge number of gamers purchases attributed to console games, in fact 51% of US households have at least one dedicated gaming device and there are at least two gamers in each of those houses.In the USA the next generation install base for consoles and handhelds has reached 38 million and is set to grow to over 45 million before the end of this year.

In total the US is estimated to have 180 million gamers compared to 440 million gamers in China. However only 35% of those gamers in China actually spend money on games, the abundance of free 2 play titles on browser, PC and Mobile as well as how easy it is to pirate a paid game has meant that the average Chinese gamer spends less than $10 on games per year. If you were just to include gamers that actually spend money in China then that number jumps up to almost $150 per person on average for the total video game market so that shows that there are gamers out there fuelling growth in the gaming industry but it’s only a very small number of the total gaming population.

In China there are now 366 million gamers who play mobile games, that’s more than the population of the US and almost 3x the amount of PC gamers in the country. China has seen a huge change in that more and more “casual gamers” are entering the market thanks to Android and iOS phones being easy to purchase and use. The mobile gaming industry in China grew by about 400% last year compared to the PC gaming industry which remained static YOY. The Chinese gaming industry is going through a huge period of growth and it is expected that average gamer spend will soon break the $10 mark sometime next year.

Whilst mobile has grown drastically in China it’s PC that still remains king when it comes to revenue generation as despite there being less PC gamers in the country they are more willing to spend money on their hobby compared to an overwhelmingly casual mobile gaming audience who are looking for a quick 5 minute game. But mobile is growing quicker than ever in China and revenues are expected to eclipse PC gaming by next year/ The combination of Mobile and PC gaming revenues in China is enough for China to become the worlds largest gaming market this year. It’s estimated that revenue generated in China will exceed $22 billion this year compared to just under $22 billion in the US. From there the Chinese market is expected to grow to $30 billion by 2018 whilst the maturing US market will have just reached $25 billion.

So just why is China’s gaming market growing so much? And why wasn’t the word console mentioned in regards to China above? Well the simple fact is that PC gaming is just more convenient for Chinese gamers. For one, PC games are either free to play or can be pirated easily, this means that Chinese gamers don’t need to spend much on software to try out a game or play their favourite games. PC’s can be built quite cheaply in China but if you don’t have the money for a PC then you can simply visit one of the 140,000 internet cafe’s across the country and play as much as you want for a very low fee. It’s much more convenient than paying $400 for a console and then having to purchase additional content. PC gaming is available to everyone in China and even Western publishers such as Activision Blizzard are taking advantage.

The smartphone market in China is growing at the fastest rate ever thanks to cheap domestic phones and the ease of use. A gamer in China then has access to hundreds of thousands of free to play games from the app store and can start playing. Chinese gamers are more likely to download a game when it has been recommended from a friend or family member and they can play with or compete against them. Many Chinese gamers decide to spend money on smartphone games in order to gain a competitive edge, or to make the experience more fun, or unlock more levels. More and more Chinese gamers are spending money on Smartphone games and this is only set to increase as the number of smartphone users in the country increases.

Consoles still remain bigger than Mobile in the US this year, although that will change very soon, but in China consoles don’t represent much at all. Consoles had been banned for 14 years prior before the Xbox One went on sale in 2014 and whilst there were grey imports of Gen 6 and 7 consoles during those years, they never reached more than 2 million shipments per year. This year a report from Niko Partners estimates that only 550,000 PS4′s and Xbox One’s will be sold in the country by the end of 2015, a far cry from the current US install base of 16.2 million.

Both Sony and Microsoft have made it clear that they want to enter the console market in China to ship 100 software titles per year, increase the attach rate to over 3:1 for software and increase the install base of consoles in the country. Penetrating this market will require Sony and Microsoft to change their business models and bring custom versions of its most popular franchises as free-to-play online games to increase brand awareness. Once they’ve done this they can introduce more paid services for that game and other games. They also need to work with local Chinese developers to ensure that Chinese gamers are able to play their favourite PC or mobile games on console with unique enhancements and exclusive content to encourage hardware purchases.

This isn’t something that can happen over night but I’m hopeful that we will see more Chinese gamers and in turn more active developments in China with new game titles launching internationally as well. Overall the console market in China will never be massive but there is an opportunity for Sony and Microsoft to tap into a niche of gamers who are willing to purchase their hardware and stay for the software.

 

[ZhugeEX]

Well everyone clearly got bored after the second paragraph.....

 

[tokeedasmokee]

I feel like this is why MS targets the US. Americans will likely put a lot more money in their systems than in other places, so it's a solid business model to focus here.

 

[dramatis]

May be a solid business model, but the industry could probably grow some more, and China/India/Brazil are places where they can grow, just a matter of how.

 

[Familienoberhauptvogel]

Does this fall in line with spending power differences?

 

[BronzeWolf]

I suspect Americans make 8x or more on average.

 

[LegalEagleMike]

GAF spends 100x more.

 

[Deft Beck]

GAF spends 100x more.

NeoGAF users represent an enthusiast niche of gamers. The majority of gamers purchase several high-profile games per year and play those for extended periods of time.

I question if this data takes used game sales into account.

 

[DieH@rd]

Great breakdown.

As for Chinese console market, growing that will take time... but big three are playing the long game, so there is no rush.Maybe China will be ready to more openly adopt consoles on the launch of 9th gen, after they have had 4-5 years of experience with PS4's generation.

BTW, what's the state of Xbone software in China? Were there some new releases after console launched there?

 

[Inuhanyou]

I feel like this is why MS targets the US. Americans will likely put a lot more money in their systems than in other places, so it's a solid business model to focus here.

Eurozone also spends a significant amount. Same with Asian territories not named China.

MS spends money in America because that is where they know best, they know what to target and whom to target.

In Europe and other countries they are unsure of themselves and who they are targeting. So they just shove out American focused services or none at all which alienate tons of overseas gamers.

 

[Ushay]

Boy do we have an expensive hobby. And I don't regret it one bit!

 

[NinjamicWZ]

Things can change slowly over time (laws, infrastructure, economy and culture) and getting into a market at the ground floor, to grow from there, is probably easier than trying to break in later. Even if mobile ends up 100% of China (why wouldn't it be? people need to stay in touch), you'd be remiss to not cultivate another market and subsist because someone else will if you don't.

 

[4Tran]

This is a great piece. There aren't many surprises here but it's good to A) have some actual numbers and to B) have it all in one place. The figures indicate just how much the console manufacturers have to do to convince Chinese gamers to spend on software. The big current players in China already have their niches so they're not invested in changing things. However, if they do manage it, the rewards could be enormous. Unfortunately, it feels like only Sony is interested in putting in the effort so if a turnaround happens, it's going to be a long way from now.

Does this fall in line with spending power differences?

It doesn't. American GDP per capita is only 4.5x that of China. There are more people in China who can afford to spend a lot on games than there are people in the US. There's a reason why more iPhones are sold in China than in the US.

What's really happening is right in the OP: Chinese gamers have their needs satisfied by F2P and at internet cafes so individual gamers don't have to spend very much on software. There's also no console culture in China which exacerbates the difference.

 

[MrCunningham]

Do the underground markets and piracy help the Chinese save money in this case?

 

[Regiruler]

Boy do we have an expensive hobby. And I don't regret it one bit!

Honestly, it's not that expensive of a hobby.

Off the top of my head, trading card games, instruments, and anything involving robots are easily more expensive.

 

[Havoc2049]

Is Minecraft popular in China?

 

[Cerato]

Why does anyone think newzoo knows the things they claim to know?

 

[Chairmanchuck]

Is Minecraft popular in China?

It is huge here. "Every" child I know plays it. But of course they play pirated versions.

 

[dark10x]

$80 per year on average? That's it? I probably spend that much in the first two weeks of the year.

 

[Inuhanyou]

$80 per year on average? That's it? I probably spend that much in the first two weeks of the year.

Your not average

 

[Aaronrules380]

$80 per year on average? That's it? I probably spend that much in the first two weeks of the year.

I imagine it's lumping in Smartphone gamers, which brings the number down siginificantly, since most of those will pay nothing or barely anything given the abundance of free to play. Plus there are far more of them than console gamers

This also explains the huge decline since 2008, since the emergence of smartphones is pretty much occuring in the same timeframe (original Iphone launched in june 2007)

 

[jacobeid]

lol shit I thought I was doing really good just having crossed $300 spent on game software this year.

Definitely one of the cheapest hobbies to have as an adult.

 

[SatelliteOfLove]

Thanks for the analysis

I imagine it's lumping in Smartphone gamers, which brings the number down siginificantly, since most of those will pay nothing or barely anything given the abundance of free to play. Plus there are far more of them than console gamers

This also explains the huge decline since 2008, since the emergence of smartphones is pretty much occuring in the same timeframe (original Iphone launched in june 2007)

+Great Resession +death of instrument games +softening Nintendo juggernaut

 

[JeffZero]

GAF spends 100x more.

Haha, quite so. Although... I'm really pulling that down a little bit by being here. I spend countless hours reading up on the industry, but I really don't have much money at this stage and even if I did it'd probably go elsewhere. I buy 2-3 games a year.

 

[BigDes]

Average white collar wage in China is 800-1000 dollars a month.

 

[ZhugeEX]

Does this fall in line with spending power differences?

I suspect Americans make 8x or more on average.

Whilst what you say is true, it's not that big of a difference. Not 8x, more like 4-5x.

Great breakdown.

As for Chinese console market, growing that will take time... but big three are playing the long game, so there is no rush.Maybe China will be ready to more openly adopt consoles on the launch of 9th gen, after they have had 4-5 years of experience with PS4's generation.

BTW, what's the state of Xbone software in China? Were there some new releases after console launched there?

Thanks. Sony and Microsoft are aiming to get at least 3 million gamers onboard in the next few years and get them to buy at least 3 games each. They will do this by releasing compelling software titles that appeal to Chinese gamers.

In regards to Xbox there are some more games coming out, Halo MCC just launched there, Ori and the Blind Forest launched couple of days back and there are more exclusives like Forza 6 and Rise of the Tomb Raider coming to China in the future. Microsoft are even doing Chinese dub for some game which is good to see! But I think they focus too much on their own IP and not enough on getting new IP or Chinese IP on the console, they have a few like Neverwinter and Smite but need more!

This is a great piece. There aren't many surprises here but it's good to A) have some actual numbers and to B) have it all in one place. The figures indicate just how much the console manufacturers have to do to convince Chinese gamers to spend on software. The big current players in China already have their niches so they're not invested in changing things. However, if they do manage it, the rewards could be enormous. Unfortunately, it feels like only Sony is interested in putting in the effort so if a turnaround happens, it's going to be a long way from now.

What's really happening is right in the OP: Chinese gamers have their needs satisfied by F2P and at internet cafes so individual gamers don't have to spend very much on software. There's also no console culture in China which exacerbates the difference.

Thanks 4Trran. You're right that the rewards could be enormous if Sony or Microsoft get it right but that's a very very tough thing for them to do. And yes, there is only very small niche console culture. Nothing mainstream.

Do the underground markets and piracy help the Chinese save money in this case?

Yes, piracy is huge and that costs nothing. If a Chinese gamer wants to play a PC game they can just pirate it for free. If they want to get it from a seller then it's also very very cheap.

This is an outdated example but relevant to console. Console piracy is massive in China on older systems, for example in 2003 the average cost of PS2 game in the USA was $50 but in China you could buy pirated copies for $10. Massive difference.

Is Minecraft popular in China?

Yes. It's not massive or as popular as some other IP but it's growing really fast on PC due to piracy and is also available on Mobile.

Microsoft are bringing the game to Xbox One as well but it's hard to determine the impact this will have on console sales in the country as it's already available on more convenient platforms.

$80 per year on average? That's it? I probably spend that much in the first two weeks of the year.

It's worth bearing in mind that this is just for video games software and does not include hardware. That being said this average also includes mobile or PC or other gamers who may not spend anything at all.

What is surprising is that in the US only 60% of people who play games will spend money on them. The rest either play f2p games or don't spend money themselves but just play on friends/family games etc....

Even more shocking is that China's game market is only funded by 35% of the gaming population who spend money on games. So in China they may have more people and more gamers but a small percentage actually pay money into the industry for software.

 

[Blackstarhat]

$80 per year on average? That's it? I probably spend that much in the first two weeks of the year.

$80 is low I probbley spend $2000 on games a year.

 

[ZhugeEX]

$80 is low I probbley spend $2000 on games a year.

If you just count gamers who actually spend money on games then the average jumps up to $225 per gamer for total industry spend.

If you count everyone, including casual gamers and those that don't spend on the industry then It's much lower.

 

[jholmes]

$80 per year on average? That's it? I probably spend that much in the first two weeks of the year.

Seriously, this isn't enough to get both MGSV and Mad Max. This isn't even enough to cover what a good chunk of the people reading this are buying this week let alone the whole year.

Contrast that with this:

The average gamer in the US spends around $80 on video games per year ... This number is actually down from 2008′s peak of $130 when gaming was thriving thanks to the Nintendo Wii.

...and you see why some people are pessimistic about the state of the industry.

As for China obviously they have less disposable income and spend what little they do spend on F2P microtransactions so it's sort of apples and oranges here. Obviously I don't think China is the great frontier for consoles, definitely not soon and probably not ever.

 

[Fat4all]

The average has hovered around $120-80 for a long while now in the U.S. The game industry has been worried about that average for years, and was always looking to develop that second game people would buy every year (as the priority game is usually CoD for the average gamer).

OT: that's not a surprising figure for China. Their gaming industry up til recently has been nothing but piracy and F2P gaming.

 

[the_batman]

were the chinese even legally allowed to purchase video games before recently?

 

[OnADock]

were the chinese even legally allowed to purchase video games before recently?

They could buy Chinese video games.

 

[ZhugeEX]

were the chinese even legally allowed to purchase video games before recently?

Yes.

You are thinking of the console ban.

But they could buy video games for PC or Mobile or whatever.

 

[NolbertoS]

Gaming is such an expensive hobby. I wanna take down my spending from 100x to 50x now . It helps when rhe gf is a gamer too, so we both have the same hobby

 

[Aaronrules380]

Seriously, this isn't enough to get both MGSV and Mad Max. This isn't even enough to cover what a good chunk of the people reading this are buying this week let alone the whole year.

Contrast that with this:



...and you see why some people are pessimistic about the state of the industry.

As for China obviously they have less disposable income and spend what little they do spend on F2P microtransactions so it's sort of apples and oranges here. Obviously I don't think China is the great frontier for consoles, definitely not soon and probably not ever.

It's a pointless comparison, since the decline is most likely due largely to the rise of smartphones which happened at exactly the same time. I honestly wouldn't be surprised if the number rose if we took out smartphone only gamers, if only because the first people to jump ship to smartphones were likely at the bottom of the spenders in the first place

 

[the_batman]

Gaming is such an expensive hobby. I wanna take down my spending from 100x to 50x now . It helps when rhe gf is a gamer too, so we both have the same hobby

stuff like Best Buy's GC helps a bit.

 

[ZhugeEX]

It's a pointless comparison, since the decline is most likely due largely to the rise of smartphones which happened at exactly the same time. I honestly wouldn't be surprised if the number rose if we took out smartphone only gamers, if only because the first people to jump ship to smartphones were likely at the bottom of the spenders in the first place

That's 100% correct and mentioned above.

The rise of mobile gaming has introduced more gamers who don't spend at all dragging the average down where as before if you were a gamer it meant you had a console or PC and spent 10's of dollars on software for just one game title.

 

[Ryng_tolu]

i usually spend over 1000 € all year since 2010... any information for the Europe?

 

[Marow]

Mind if I ask where the numbers come from? There's no links on your website where this originally is from, so I'm honestly curious.

 

[Fat4all]

stuff like Best Buy's GC helps a bit.

The average gamer doesn't have that, OR the GameStop card for that matter.

IIRC the average gamer buys their games(s) from Walmart still.

 

[Mauricio_Magus]

80 bucks a year?


what?

I'm spending 100 bucks on MGSV and Danganronpa AE next week already.

 

[jholmes]

It's a pointless comparison, since the decline is most likely due largely to the rise of smartphones which happened at exactly the same time. I honestly wouldn't be surprised if the number rose if we took out smartphone only gamers, if only because the first people to jump ship to smartphones were likely at the bottom of the spenders in the first place

I'd disagree to some extent as at least some of those smartphone people were the types buying a Wii and Carnival Games or whatever. Lord knows it wasn't anyone here that bought Carnival Games.

But honestly if that's a pointless comparison, comparing U.S. gamers to Chinese gamers is at least equally pointless, right? The divide between consoles and smartphones over there is the size of the Grand Canyon.

 

[ZhugeEX]

Mind if I ask where the numbers come from? There's no links on your website where this originally is from, so I'm honestly curious.

Newzoo, IDC, CNG, Euromonitor

http://www.cgigc.com.cn/d/2015/report_2015_1-6_game.pdf

 

[ReBirFh]

May be a solid business model, but the industry could probably grow some more, and China/India/Brazil are places where they can grow, just a matter of how.

The How is the easier part. Just make the software cheaper and proportional to the average income of those nations instead of proportional to the US price. When a single game costs 1/3 of the minimum monthly salary you won't be getting many sales from your potential audience, only from those that can buy no matter what the price is.

 

[shandy706]

$80 a year sounds insanely low.

I often spend more than that a month if you averaged out a year.

 

[Aaronrules380]

To give an example of how Free to play numbers can dilute a market, compare the average chinese gamer with the average chinese gamer who spends money numbers as posted here. Those who spend money spend 15 times as much as the average for all chinese gamers, which means 14/15 gamers in China spend absolutely nothing. Lets say that number is more like 8/10 in America, it means those who actually spend money are spending $400 on average right now

 

[t26]

80 bucks a year?


what?

I'm spending 100 bucks on MGSV and Danganronpa AE next week already.

Their games cost a lot less. Chinese version of Ao no Kiseki LE for PC only cost 200 RMB (a little more than $30 USD) when it first came out.

 

[ZhugeEX]

In China the retail price of console games is $40, compared to US which is $60.

The consoles are pretty much the same price.

What's funny is that the Xbox One is actually still more expensive than the PS4 in China, especially if you buy the Kinect version.

Both consoles ship with at least one free to play game and that will expand shortly.

The main factor preventing console growth in China is the start up cost & the fact that it isn't as convenient as what is already available (PC & Mobile).

 

[Memorabilia]

This has me thinking about the topic on a bit of a side tangent.

Americans spend more for lots of things in various markets and often get less product for their money. Some of this is due to having higher discretionary income (say, for videogames) and some of this is due to American corporations having monopolies/duopolies in nearly every market w/ zero enforcement of the Sherman antitrust act since the early 80s since said corps own the US govt. Think about pharmaceuticals...Americans pay 50-100x more for the same drugs than most people in most other countries (tho the shady TPP aims to change this so some other countries get screwed as bad as the US on drug prices). Or, hell, US high speed internet where regional monopolies have stunted growth and over-charge Americans for sub-par bandwidth.

Basically, sometimes having a "bigger $$$ market" isn't necessarily healthy since the revenue in question is generated due to price fixing. The videogame market is probably somewhat of an exception to this since there is still pretty good price competition. But, notice the prices of digital don't budge downward as quickly as physical? There's a reason for that and at its heart its the primary motivation Microsoft had for hoping to destroy or at least limit the used games market w/ the Xbones original launch plans.

 

[Koppai]

Lol at $80, im probably near $2,000 already.