As we start the new year, we celebrate 21 years of providing high integrity data, insights and analysis as local experts with global perspective. To kick things off, once again we provide a set of predictions for the video game industry across the 14 markets we cover: Mainland China, Japan, South Korea, Chinese Taipei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, India, Saudi Arabia, UAE, and Egypt.
We estimate that global player spending* on video games was US$175.7 billion in 2022, down 5.6% YoY. The 14 markets where we provide detailed country level data, insights and analysis, reflect 61% of total global games market spend across PC and mobile games, including 60% of mobile and 63% of PC games revenue, based on Niko analysis of the worldwide total mobile and PC game market size in 2022.
Despite the global decline, we continue to see robust performance across the markets it tracks. India was the fastest growing market in Asia with combined mobile and PC game spend increasing 32% YoY in 2022. Our forecast accuracy rate in our market models was very strong, with 10% variance on average across the markets for 3-years out, and 16 of our 18 predictions made in January 2022 were accurate.
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1. Mobile, PC and console games will embrace hybrid monetization more than in prior years
As we increasingly move towards a platform agnostic gaming environment, where cross-platform titles with cross play becomes the norm, we expect to see a blend of different monetization models becoming popular on devices where they previously were not. We believe advertising will play a larger role on PC and console while multi-game subscription offerings will grow on mobile.
2. Game related M&A deal value will dip significantly in 2023
2021 and 2022 were record years for video game related M&A and investment deals as measured by value, with Microsoft’s pending acquisition of Activision Blizzard prime among those. However, deal sizes are becoming smaller and investment in new technology areas, such as blockchain games, cloud gaming, and the metaverse, are down in 2022 compared with 2021. The tough global macro-economic environment will suppress deal sizes in 2023.
3. Innovation in gametech will increase game development efficiency
New breakthroughs across artificial intelligence and cloud computing will allow game developers to create more complex and higher quality worlds in less time and at a lower cost. These technologies will aid creative game development in studios of all sizes, catalyzing building the next generation of games. This will also extend to user generated content as zero-code platforms, generative AI and distributed computing services become more accessible.
4. Over 100 import games will receive an ISBN license in 2023
China restarted the approval of import games in December 2022, with the first batch of titles issued licenses since June 2021. 44 import games were approved in 2022 compared to 76 in 2021 and 97 in 2020. We anticipate that import game approvals will return to a regular cadence in 2023, as domestic game approvals did in 2022, and we expect more than 100 import games to receive an ISBN.
5. Blizzard will re-enter China after it ends its partnership with NetEase in January
Blizzard Entertainment confirmed that it would end its game licensing partnership with NetEase, which will lead to the shutdown of World of Warcraft, Overwatch, Hearthstone and other titles in mainland China this January. We believe that Blizzard will announce an agreement with a new partner after January to relaunch its games in the country, but we don’t expect the titles to go live in 2023 due to the stringent regulatory process.
6. VTubers will become more intertwined with Japan’s games industry
VTubers are starting to play a larger role across the games industry, cooperating with major Japanese game titles and companies. In 2022 hololive VTuber Inugami Korone cooperated with Sega for the launch of Sonic Origin and Apex Legends VTuber avatars, among others. Niko predicts that 2023 will see even more big name VTubers announcing brand partnerships with game titles and companies as the two industries continue to consolidate and intertwine.
7. Korea’s game rating agency will likely restructure following the scandal of 2022
Korea enacted new laws, regulations and policies for the domestic games industry. Following the scandal (see here and here) that hit the country’s game rating agency GRAC in 2022, we predict that it will be restructured, and Korean gamers’ voices will be heard more as a result.
8. Game companies from East Asia and the West to open more satellite offices and studios in Southeast Asia
Following the trend of major companies from East Asia and the West that open satellite offices or studios in Southeast Asia, Niko Partners predicts that there will be more major companies that open new offices or studios in 2023 to capitalize on the region’s growing games market.
9. Blockchain games to decline in Southeast Asia
While 2021 and 2022 were experimental years that saw massive growth of blockchain games such as Axie Infinity in Southeast Asia, the crypto crash, an increase in scams / hacks and the introduction of cryptocurrency taxation laws will lead to lower engagement across blockchain games for the year. However, we expect the region will continue growing as a developer hub and key market for blockchain game players, with the potential for a more positive outlook in 2024.
10. Cloud gaming will launch in earnest in India during 2023
We anticipate the launch of several cloud gaming platforms in India thanks to the 5G roll out across the country. India has traditionally been underserved by cloud gaming platforms despite being the fastest growing games market in Asia. We expect telecoms to roll out their own cloud gaming services first, with Jio Games Cloud already being announced, followed by other B2C cloud gaming services arriving later in the year. Cloud gaming will allow mobile-first gamers in India to access HD PC and console titles that were previously inaccessible.
11. India’s government will make a final decision on real-money games (RMG)
The decision to ban or allow real money games (RMG) in India has previously been left up to each individual state. With the government forming a panel in August 2022, we expect a final decision to be made on how real money gaming will be categorized, regulated, and taxed nationwide. We predict that RMG will eventually be legalized nationwide but have its own distinct games category and a strict regulatory environment, set apart from non-RMG titles.
12. Saudi Arabia and UAE will compete for talent, events, and more
The MENA region has emerged as the next global hot spot for the video games industry with national governments pledging to invest billions of dollars to drive growth. We expect friendly competition between Saudi Arabia and UAE as they look to attract companies, esports tournaments, and talent to the region through new policies in 2023, with each government looking to outcompete the other to become the heart of gaming in MENA.
13. More than 10 international game companies will open offices in MENA
As a result of the booming MENA market, we believe that international game companies will see the value in opening offices and studios in the MENA region to target both local gamers and tap into the growing talent pool. It’s no secret that many international companies already have a presence there and we expect this to accelerate in 2023 as new business friendly policies are implemented by governments across the region.
14. Esports tournaments will be held in a hybrid online + offline mode
We continue to see global esports tournaments return to an offline format that allows for in person viewing but note that 75% of all esports tournaments in Asia are still online-only. Going forward, we expect to see a sharp increase in hybrid events that mix a physical and digital presence, allowing for teams that may not be able to travel to still compete, and fans to choose from offline or online viewing experiences.
15. Mobile shooters will drive esports growth in 2023
Mobile esports is predominantly dominated by MOBA and Battle Royale titles, but we’re seeing signs that traditional team-based shooters will be a key growth driver in 2023. Call of Duty Mobile is already establishing itself as a top mobile shooter esports title and we believe Valorant Mobile will do the same when it releases. Valorant has already become the #1 PC esports title in Asia by number of tournaments in 2022.
16. Esports hotels to grow in popularity as post-COVID travel booms
Esports hotels will grow in popularity in both East and Southeast Asia due to their ability to combine gaming and hospitality. Countries such as China, South Korea, Singapore, and Malaysia will see more esports hotels opened in 2023 with a strong focus on offering high-end experiences for gamers.
How we did in 2022
Niko Partners made 16 predictions for 2022 which you can find here. We found that 14 of our predictions were accurate. Here is a sample of 5 predictions that came true in 2022:
1. We predicted that game approvals would restart in China
China’s video game regulator restarted approvals from April 2022 after a 263-day freeze on issuing video game licenses (ISBNs).
2. We predicted that China’s regulatory environment would shift from reform to enforcement
China’s video game regulator did not introduce new sweeping regulations in 2022 and instead cracked down on non-compliant firms.
3. We predicted that esports would become more legitimate in 2022
The IOC announced that its inaugural Olympic Esports Week will take place in Singapore during June 2023.
4. We predicted that the blockchain / Web 3 gaming space would remain experimental
Game developers continue to experiment in the space, and we have seen a lack of adoption for new titles.
5. We predicted the conversation regarding app store take rates would continue into 2022
The Digital Markets Act in Europe, the amendment to the Telecommunications Business Act in South Korea and Google’s own move to offer alternative in app payment options have happened over the past year.
*Niko Partners includes player spending in and on mobile, console and PC games through in app purchases, subscriptions or premium game sales. We do not include hardware revenue, advertising revenue, real money gaming (RMG) or other game related revenues.