After record sales for PC games in 2020, growth slowed in 2021. Nevertheless, PC game sales are expected to remain at high levels in the coming years. The PC has become a true cross-platform play for both console and mobile game manufacturers. Going forward the line between game hardware platforms will become increasingly blurred even as a growing number of consumers own high-end PCs.
In 2021, PC game sales were up 2% to $37 billion. The new DFC Intelligence forecasts estimate that growth will be stagnant over the next 3 years. However, this is still up over 20% from pre-pandemic sales.
GAAS in the East; P2P in the West
The main divide in PC games remains between games as a service (GAAS) and pay-to-play (P2P) games. Asian markets are dominated by GAAS business models while pay-to-play dominates in Western markets.
The difference between business models becomes evident when looking at the growing cross-platform movement for PC games to mobile and console systems. In Asia, there is growing synergy between mobile and PC games that use a GAAS model. In Western markets, the core synergy is between console and PC games that use a premium pay upfront model.
China based companies Tencent and NetEase remain the largest PC game publishers with combined 2021 revenue up 10% to $9.6 billion. Both companies receive most of their revenue from mobile games as a service model.
Roblox, the Metaverse and Cross-Platform Play
Perhaps one of the biggest surprises in 2021 was the growth of Roblox. Roblox had a record-setting IPO and in 2021 the company passed long-term leader Electronic Arts in PC game revenue.
Roblox is interesting because it is a free service that lets independent developers create their own games that can be sold to other users. The company is a prime example of a metaverse company.
The concept of the metaverse and cloud games is an important driver for the PC game market, but it is also an example of a cross-platform play that can be hardware agnostic. As discussed in the recent DFC report….. more interactive events will be via social networks that can be accessed from any device with an Internet connection.
The just-released event The Walking Dead: Last Mile is an example of this type of product. The Walking Dead: Last Mile is a four-month Facebook Gaming exclusive classified as a Massively Interactive Live Event (MILE). The game event is accessed via Facebook.
Will Microsoft Dominate?
The potential acquisition of Activision Blizzard could make Microsoft the dominant player in the PC game space. Activision Blizzard is the largest player in the Western PC game market by a significant margin. Furthermore, the company has a strong presence in Asia and is a leader in mobile games.
Furthermore, both Activision Blizzard and Microsoft use NetEase to publish games in China. NetEase saw its China-licensed PC game revenue from these companies grow 24% in 2021. Meanwhile, Microsoft’s Game Pass service is increasing the synergy between PC games and the Xbox video game console platforms.
However, core Western PC game consumers remain skeptical of GAAS models. This is perhaps best seen by the June release of the Blizzard mobile game Diablo Immortal. Diablo Immortal was developed with NetEase and seems mainly targeted for an Asia audience.
Diablo Immortal is a free-to-play mobile/PC game with monetization occurring through microtransactions. The game was review bombed on sites like Metacritic, primarily for its microtransaction model.
The dichotomy between GAAS games and pay-to-play products represents a major divide in the video game space. The audience for GAAS games is about 10 times that for P2P products in terms of number of consumers. However, average revenue per user is significantly higher for P2P products.
In most cases, developers need to decide whether to go with a free microtransaction model or have users pay upfront. Trying to have both models in a single game has a poor track record. Even with growth and the emergence of cloud gaming and the metaverse, the PC game market remains divided between very different products, audience types, and business models.
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