Niko Partners has been studying the Asia games market since our first baseline study on China’s games market in 2002. Since then, our coverage has expanded to not only include mainland China, but also Indonesia, Malaysia, Philippines, Singapore, Thailand and Vietnam in Southeast Asia, as well as Chinese Taipei, and more recently India, Japan, and South Korea. Here are Niko Partners’ 2020 Predictions for the games industry in Asia.
You can also check how we did with our 2019 predictions here.
1. Asia will be home to 1.5 billion gamers in 2020, worth over $65 billion
China is the largest games market in Asia and the world, generating over $33 billion in domestic games revenue in 2019. This year we project that China’s games market will generate approximately $36 billion from over 720 million gamers in the country across Mobile, PC and Console. We project total Asia games revenue (inclusive of China, SEA, China Taiwan, India, Japan, and South Korea) to exceed $65 billion in 2020 with the number of gamers reaching 1.5 billion across the region. There is a big market opportunity in Asia, so developers and publishers should be working to take some of that market share.
2. 2020 will be Year 1 of 5G Cloud Gaming
We believe that 2020 will be year 1 of 5G Cloud Gaming in Asia. Cloud Gaming will allow gamers to play AAA games anywhere, at any time and on any device with a fast internet connection. Cloud gaming platforms will remove existing cost and platform barriers for high quality games and drive additional growth on top of existing games spending. Whilst cloud gaming platforms such as PlayStation Now, Google Stadia and Yahoo Game Plus! already exist, they primarily target console and PC players. With 5G launching across multiple countries in Asia, we expect to see cloud gaming services launch into the market that take advantage of mobile ubiquity and fast 5G connections to provide AAA quality gaming to smartphone owners. New cloud gaming services from game publishers, mobile network operators and others will drive adoption of cloud gaming on mobile devices in Asia this year. We expect 5G to be a key driver of cloud gaming this year, providing fast download speeds and low latency consistency to ensure a smooth gaming experience.
3. Mobile esports, franchising, and subsidies will drive growth in Asia
Esports continues to be a driver of growth for games in Asia in 2020. 2019 was another important year for esports in the region. Esports were introduced as a medal sport at the 2019 Southeast Asian Games, and three of the six games at the event were mobile titles. Mobile esports will precipitate a shift from a limited number of high-profile, spectator-focused esports productions toward a much larger number of open tournaments carried out regionally and locally. Mobile games have lower barriers to entry and higher install rates in comparison to PC and console games. This allows for better economics and higher dollar-to-player value in producing tournaments. Favorable regulation has created esports incentives as countries across the region recognize esports as a tourism and media industry. More teams and franchises are appearing across the region, and countries that were slow to adopt esports are now entering the game, which will produce more high profile esports competition across the region.
4. The bulk of regulatory change in China is behind us, fewer major changes ahead
With a new regulator introduced in 2018, as well as a nine-month temporary game approval freeze, China’s games market has seen a number of new regulations introduced over the past two years that have had an impact on the number of new titles released and revenue growth. A new approval process was introduced in 2019 alongside new policies to curb gaming addiction among minors. We believe that all of the reforms are complete at this point and that future regulations will focus on minor points. Chinese games companies have already seen the impact of these new policies in 2018 and 2019. Therefore, unexpected regulatory disruptions to our market model forecast are unlikely in 2020.
5. The number of female gamers will continue to rise
As smartphone ownership rates have increased in Asian countries, for males and females. Females account for nearly half of all mobile gamers in Asia and are a ready audience for game developers and publishers. We anticipate that game developers will pursue multiple ways to reach female players including: tailoring existing games to female players by tweaking art styles, designs and adding various items and cosmetics, creating new games aimed at female gamres, and by growing the number of female esports fans by running mobile esports tournaments and developing professional female esports players.
6. New entrants will challenge current heavyweights
Tencent and NetEase are established as the top game developers in China, yet new entrants such as Alibaba and Bytedance are likely to take some of that market share as they increase game development in 2020. Alibaba invested RMB 30 million to establish a games unit for the company last year and is already seeing results with Romance of the Three Kingdoms Strategy Edition, which has been a Top 10 game since it launched in September. Bytedance, which owns TikTok, has over 500 million MAU across its app ecosystem. The company has already experimented with mini games in its short-form video app, acquired multiple game developers and opened up new studios to develop mobile games. We anticipate both companies to release hit games in 2020.
7. Asian game developers will expand internationally
Chinese game exports have grown at a faster rate than domestic games revenue in recent years. This was primarily driven by the temporary game approval freeze in 2018, during which many developers switched from a China-first development philosophy to one that increased focus on the global market. Chinese developers have not only exported self-developed titles, they have also partnered with overseas publishers to license IP and create new titles for a global audience. Companies like Tencent and NetEase are currently staffing up development studios in North America to infuse global elements into its titles. The Asian developer global expansion will continue in 2020 in earnest.
8. New monetization methods will lead to increased engagement and spend
Free to Play (F2P) is the most popular business model in Asia today, with most games offering virtual items or loot boxes that can be purchased with a virtual currency. We are noticing that battle pass systems, such as those found in Fortnite, and subscriptions, such as Apple Arcade, are becoming increasingly popular and we believe these new monetization methods will lead to increased engagement and spend in 2020. Honor of Kings recently added a battle pass system to its game, allowing players to spend a set amount of money to gain access to valuable virtual items as they progress in the game. Further, subscriptions offered both in-game and by app store platforms likely will be popular this year. Xiaomi Game Center offers a Super Member subscription that offers various in-game rewards, discounts on in-app purchases, the ability to test games first, and more, for RMB 45 each month. The rewards and discounts can save players up to RMB 1,920 each year. This is another example of history repeating itself, as 15 years ago in China there was a subscription model only.
9. Switch and new console launches will drive growth
Japan is the main console market in Asia, and we project strong growth this year driven by continued hardware sales of the Nintendo Switch and Switch Lite, the launch of PlayStation 5 and new software releases. Whilst console gaming remains fairly niche in China, SEA and Korea, increased game localization, regional pricing strategies, and new product launches will drive growth regionally in 2020. The Nintendo Switch officially launched in China at the end of 2019 and we forecast a boost in legal console hardware and software sales in 2020.
10. Competition in the game live streaming market will increase, centered around licensing deals and mergers
Twitch and Youtube are the dominant game video platforms outside China, but not in China. There we find multiple platforms, including publicly traded market leaders Douyu and Huya, both of which are backed by Tencent. There is heavy competition from Kuaishou, also backed by Tencent, as well as Bilibili, which recently paid $113m for the exclusive rights to stream the League of Legends World Championships. Panda TV was another key game live streaming platform, but was unable to compete and closed in 2019. In China, we forecast further consolidation in streaming platform providers, and multi-million dollar licensing deals to be signed for tournament rights as competition increases among the remaining platforms.
11. Governments in Asia will support and focus on gaming and the esports industry
Governments, especially in Southeast Asian countries, have been putting their stakes in the gaming and esports industry in recent years. Malaysian government’s inclusion of MYR 20 million ($500,000) budget for the development of esports in 2020 as well as Indonesian government’s inclusion of “game and app development” as one of the main sectors of growth at the Ministry of Tourism and Creative Economy are some of the examples of how national governments are ramping up. We anticipate increased involvement by governments, especially through state-owned enterprises (SOEs) in esports tournaments and game development.
12. PC gaming will resume growth, thanks to Steam and WeGame
A lack of new releases, aging legacy titles and a shift to mobile had caused the PC games market growth to soften across Asia. Games such as PUBG and DOTA Auto Chess started off as successful PC titles but became more popular on mobile. In 2020 we believe that new game releases from both domestic and foreign game developers, particularly on Steam and WeGame (in China) will drive the PC games market back to growth.
13. Thailand will become the first billion dollar market in Southeast Asia
We predict that Thailand will become the first market in Southeast Asia to exceed $1 billion in video game revenue this year. Thailand is one of the fastest growing gaming markets in Asia with the number of mobile gamers increasing faster than smartphone user penetration. Thailand’s ARPU is also the highest in Southeast Asia and the country has a high number of paying users. While a generational divide exists between the younger and the older generations about gaming, gaming has become widely accepted in popular culture with major brands and influencers all becoming a part of the esports scene in the country. This makes Thailand an extremely important market for game developers and publishers looking to release games in Southeast Asia
14. Global game companies to move production into Southeast Asia
In 2019, we saw two major game companies, Sony and Nintendo, moving or opening new facilities in Southeast Asia. Sony opened a new studio in Malaysia (the first of its kind in the region) while Nintendo moved some of its Switch manufacturing facility to Vietnam. We predict that similar moves will continue as global game companies are more likely to see Southeast Asia’s potentials for production of both gaming software and hardware. Some of the notable moves that will take place in 2020: Ubisoft kickstarting its new studio for mobile game development in Da Nang, Vietnam; Belgium’s Larian Studios to expand to Malaysia; and Blizzard’s continuous partnership with Indonesia’s Salim Group for potential investment and marketing activities.
15. Tencent will continue its silent global domination
We expect that Tencent will continue to invest in games developers, publishers, and technology providers in 2020. The company has excelled at identifying companies to add to its portfolio. The games industry portfolio investments now exceed 60, probably even more. We forecast that Tencent will acquire or take significant investment in at least 1 major global game company and at least 5 small or mid sized game and technology companies.