Predictions for 2023 by analysts in games

Each year, we ask a panel trusted analysts what they see for the future, and ask them to evaluate their predictions from the year before.

The panel has seen some turnover this year with two of our regulars – the NPD Group’s Mat Piscatella and VoxPop’s Stephanie Llamas – unable to take part. We are thankful to them for all their support throughout the years.

Two new faces have been added to the panel in order to bring it back to its full strength. Karol Severin is a Midia Research senior data analyst and VP of Data, while Lisa Cosmas Hanson (Niko Partners founder) will be presenting predictions from her group.

They are joined by prediction panel stalwarts Piers Harding–Rolls of Ampere Analysis, and Kantan Games’s Dr Serkan Toto. We are grateful to all of our panelists past and present for participating in the New Year’s tradition.

Dr. Serkan Toto, Kantan Games

Predictions from the last year

• Cryptogaming becomes bigger
• Nintendo Announces Mario Kart 9 & a New Mobile Game
• Industry delays are less frequent
• Microsoft continues its charm offensive to Japan

My 2022 predictions could have been better. Nintendo, for example, did not release a mobile app. Pikmin Bloom is a game from Niantic. The game industry also saw a steady stream of delays. This was contrary to what I believed a year ago. I am hopeful that this time, things will improve.

2023 Predictions

Prices will continue rising

While not all studios have increased prices to meet the rising costs of game development, gamers will likely see prices rise across the board by 2023. This trend will affect not only AAA titles, but subscriptions and hardware from Microsoft. Although I don’t expect Nintendo to release new hardware this year, Switch prices should remain stable.

Crypto will have actual games that use top IP

Yes, Konami, Capcom, and Capcom sold NFTs that were based on Street Fighter and Castlevania, respectively. I predict that at least one large company will ignore the crypto winter in 2022 and attempt to marry NFTs, or other crypto elements, with a top IP. In a real game. Ubisoft’s failure to make NFTs appealing for Ghost Recon fans in the early part of last year is not surprising. Korea has many big studios that have done similar things with locally-known titles. But, in this context, I am talking about internationally recognized IPs. The prime candidates in my opinion are the Japanese videogame studios.

Crypto may experience another Axie Infinity moment

Axie Infinity was the first ever scaled blockchain game. At its peak, it had millions of active users. Many thousands, if not millions of creators around the globe are currently working on new titles to prove crypto skeptics mistaken. We should see the first generation of blockchain-based games in 2023. They will be of a different quality and more accessible. One of these could become the “next Axie”. I expect this to happen in 2024, if not.

Gaming won’t be affected by the downturn

Yes, 2022 saw a slightly lower number of gaming companies than 2021. This is due to weakening corona and fewer blockbusters than in 2021, and not because of a softening economy. A possible recession will have very little impact on gaming industry growth in 2023. There is usually a very small correlation between an economic downturn, the size of the gaming industry in a given year and it. 2023 will be no exception.

Piers Harding-Rolls, Ampere Analysis

Predictions from the last year

Hardware and console market to be flat

Wrong. Although we won’t know the total year until a few weeks, the market for consoles is forecast to be down this year. The market would be weakened by delays in AAA games and hardware availability. This was evident halfway through the year.

Switch will be the most-sold console in 2022, and sales to consumers will reach around 21 million

But our end-of-year forecast is closer to 20 million.

No Switch Pro in 2020

Right.

PS5 and Xbox Series X|S to sell around 28 million combined in 2022; supply to be in a better place by the holiday shopping season

Both wrong and right. Sony was unable to supply the PS5 and so it had to lower its forecast. Our original forecast for 2022 was also downgraded. Supply constraints have also impacted Xbox Series X. The PS5 supply increased towards the end of the year.

In 2022, PS5 will outsell Xbox Series X|S in 2022

Right.

PlayStation subscription overhaul, no first-party release on day one

Right.

Xbox Game Pass Growth and Big Third-Party Day One Releases

Right.

Amazon Luna expands to Western Europe

You are wrong again.

A number of telco-based cloud gaming service providers to close

Right. Magenta Gaming, Deutsche Telekom, was closed February 20, 2022.

Netflix will experiment with game streaming

Yes, internally yes. No, externally. Externally, 2023 appears to be the year.

VR: Quest 2, the most-sold VR headset, Quest 3, likely in 2023; PSVR2 likely to launch at the end of 2022

Right.

Mobile: The focus on legal disputes and anticompetitive behavior, IDFA fallout

Right.

Mobile App Stores Open to Third-Party Developers

Wrong. It is not happening in 2022. However, the EU’s most recent ruling indicates that Apple is ready to open its platform to third party app stores.

Blockchain games: Many games will not perform well; funding will drop

True, but closely related to the cryptocurrency crash.

Entertainment IP is Games IP: Adaptations to the video space to grow

Right.

To continue to meet the demand for IP and talent in dev,

Right. 2022 was the biggest year ever for games M&A typified by Take Two’s acquisition of Zynga and Microsoft’s move to acquire Activision Blizzard.

Metaverse: While the Metaverse will not arrive, in-game and platform brand activations for Metaverse brands will increase

Right. Roblox has been especially active.

2023 Predictions

Microsoft and Activision Blizzard

I’m going with the big one.

Is the Microsoft-ABK deal going ahead? Yes, but there are further concessions. These could be focused on Game Pass games inclusion and title availability on all other services. It is more likely that the deal can be concluded with concessions rather than being stopped.

When will the deal be closed? The deal could drag on into 2023, especially if it is challenged in court. The first half of 2023 could be made if Microsoft accepts concessions and does not go to court.

The total market outlook

The global games market fell in 2022. So, how will it respond in 2023? This is the main question at the beginning of the year. Many factors combine to make the market less predictable than in years past. These factors will continue to influence the market to varying degrees in 2023. These include the challenging macroeconomic background, post-pandemic consumer cooling off, the Ukraine War, changes in mobile privacy, delays and disruptions in China’s market, regulation of market and competition, and a lower than optimal availability of console hardware.

Mobile

The main question revolves around how the market for mobile games will develop, as it is the largest segment of the sector. The challenges of ad targeting as well as user acquisition have made it less predictable than ever before. Its performance will determine the growth of the global market in 2023. This is a big change from previous years when the global mobile gaming market was supported by guaranteed growth. I believe that the largest mobile gaming markets (US and China) will stabilize next year following a difficult year. Higher growth mobile markets will also help to turn the sector around.

Apple should allow third-party app stores to be available on iOS. We could also see a mobile version for Microsoft/Xbox Store and a cloud gaming version of Game Pass Ultimate if this is possible.

Console

After a 2022 decline, I expect the console market will stabilize in 2023. It looks very positive for the games releases. With the Switch in its final stages of its lifecycle, the PS5 has a good chance of being the best-selling console in 2023 if it is available. There will be plenty of Switch hardware sales for the Zelda, so it could be very close. I don’t expect a next-gen Nintendo console to be released in 2023, but we do have 2024 in our projections.

Sony’s PS VR2 will be on the market in a challenging macro-economic environment. It is possible to sell between 1.2 and 1.5 million units in 2023. Quest 3 is also expected to be out by the end of 2023. VR gaming will continue to grow, but it will still be niche.

Subscribe to our services

Although the largest games subscription services failed to reach their growth goals in 2022 I believe there are reasons to be optimistic for 2023. Game Pass is expected to increase significantly in 2023 because of the highly anticipated entry of first-party titles. You can expect more mobile games on Game Pass if the ABK agreement goes through. I also expect Sony to release more third-party day 1 releases for PS Plus Extra Premium and Premium, which will drive adoption.

The market for pure-play cloud gaming services is still small compared to the larger subscription market. Services that offer both download distribution and streaming games will have the greatest value. Netflix will offer some streaming services for consumers.

Hybrid monetisation is an option

Combining monetisation models, such as subscription and in-game spend, can increase the commercial viability of subscription services like Game Pass. This is well-established and means that a growing portion of Game Pass titles offer ongoing in game monetisation. (Read more here).

I anticipate a new wave hybrid monetisation experimentation with advertising in 2023. As we’ve seen in the subscription-video-on-demand space, this might extend to lower cost subscription tiers that incorporate advertising. One example is a mobile-first tier that might be cheaper for Game Pass in specific markets. Advertising will also be explored in-game across AAA games. These initiatives won’t deliver any more than small, incremental commercial benefits.

Consolidation of the market

Following the announcement of the Microsoft–ABK deal at the start of 2022, the chances of further huge deals between major publishers has subsided as the financial and economic backdrop has changed dramatically. The market is currently facing more difficult conditions, which will lead to market consolidation. However, this activity will likely be more concentrated on smaller companies and could sometimes be defensive to ensure survival. Mobile games are ripe to see continued consolidation in 2023. The average deal value is expected to continue falling through 2023.

Many blockchain gaming companies that have secured funding in the early stages of 2021 and 2022 will not be able to obtain additional funding in 2023. They will likely go out-of-business.

Generative AI

While there is much excitement surrounding the use of generative AI in games, some of the current commentary may be overestimating the impact of this technology. Like other dev tools, AI-related tools – whether standalone or built into other products or toolsets – will be increasingly used in specific dev processes and will be trained for others, but I don’t expect it to radically disrupt staffing or resourcing immediately. It will take a lot of testing to determine what works in this industry and what doesn’t.

Karol Severin, Midia Research

2023 Predictions

In 2023, perceived value will be the king.

Inflation and tightening disposable funds will have a major impact on 2023. The two main goals of consumers are to decrease their overall spending and/or increase the money they spend on their purchases. Due to high entry-costs and high prices for individual games, gaming has had high costs in the past. Gaming isn’t as evenly distributed between ages as music or video, even though gamers are getting older. When it comes to household savings games will be a potential target to reduce for the subset of older gamers (budget holders of younger gamers)

Gamers companies will need to manage the difficult task of increasing their value for money while keeping their entry costs flat or lower in 2023. This macroeconomic climate will make it difficult for traditional unit-sales-dependent business models to survive. These conditions are favorable for many games industry players. These success levers are most likely to be the winning strategies for 2023.

• Games subscriptions as a (perceived) money/value saver (compared to the traditional £20-£89 proposition which is still fresh in gamers’ minds)
• Gaming is more accessible if you are less device-agnostic.
• Consumer cash flow is made easier by large-sum spending (e.g. Monthly payments for hardware
• Mobile gaming and free-to-play will have a greater user growth rate than other formats (even more than usual, since many value-seeking players will likely shift some of their gaming time towards mobile). This is especially true if they have to cut back on their console or PC spending.
• Delivering cross-entertainment value. A game’s entertainment value is more than just its gameplay. This gives them a higher status on household entertainment priority lists.

In 2023, there may be more strategic mergers in games. This is one way to offer more value to gamers (e.g. Through subscriptions, it is possible to combine games IP libraries.

In addition to the value theme, I will also be making two additional tactical predictions.

VR emerges in 2023 from the ashes disillusionment

VR’s initial hype was at the start of the 2010s. However, expectations were high by the end of 2015. VR was a hot topic in the early 2010s, with high expectations for future growth. However, VR’s cost and lack of content and use cases meant that VR needed to experience a deep depression and learn how to improve friction.

VR penetration has been hovering around 5% in the US for the past half-decade. In 2022, significant progress was made in addressing key friction points. This includes expanding the use cases and content offerings (e.g. Meta quest will soon get Xbox Game Pass. This will improve the technical capabilities and help companies to see the value of establishing a presence in virtual worlds. This will result in a significant increase of VR ownership and use by 2023. VR usage in the US will nearly double by 2023.

Xbox will reduce the lead of PlayStation in terms console ownership

The bad macroeconomic climate is well-suited to Xbox’s cross-platform, hardware-agnostic efforts. It also combines well with Xbox’s focus on providing value for money to consumers and reducing the need to spend large sums at once. These dynamics combined mean that Xbox is more likely to prosper in a recession than PlayStation. Xbox will reduce the gap in console ownership and usage by a lot in 2023.

Lisa Cosmas Hanson, Niko Partners

Predictions from the last year

Hanson and Niko Partners did not participate in the last year’s column. However, they published their predictions for the Asia gaming market in 2022. (Niko specializes on market intelligence in Asia and the Middle East.

Niko correctly predicted 14 of the 16 predictions made last year. This included the call that China would resume its game approvals process (it took place in April), that esports will be legitimized (the IOC announced the inaugural Olympic Esports Week in June 2023), and the fact that blockchain/Web3 gaming would continue to be experimental (developers are still working with the tech, but there hasn’t been enough adoption for new titles).

2023 Predictions

Niko Partners projects that the global player spending on video games (not including hardware, ad revenues or real-money gaming), was $175.7 billion by 2022. This is 5.6% less than last year.

Niko Partners has maintained strong performance across all the markets it tracks, despite global decline. India was Asia’s fastest growing market with mobile and computer game spending rising 32% annually in 2022. The forecast accuracy rate of our market models was excellent with an average 10% variance across markets for three years.

Predictions for the entire region

Hybrid monetization is more common in the future for mobile, PC, and console games than it was in previous years.

As we shift towards a platform-agnostic environment for gaming, where cross-platform games with cross play become the norm, we expect to see a mix of different monetization models being popular on devices that were previously not available. We expect advertising to play a greater role on PC and consoles, while multi-game subscriptions on mobile will grow.

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 shrinking and investment in new technology areas such as blockchain gaming, cloud gaming, or the metaverse is down in 2022 than in 2021. In 2023, deal sizes will be affected by the tough global macro-economic environment.

Innovation in gametech will improve game development efficiency

Game developers will be able to create higher quality, more complex worlds with new breakthroughs in artificial intelligence and cloud computing. These technologies will enable creative game development at all levels in studios of any size, which will help to build the next generation. These technologies will be more accessible to users, as distributed computing services, generative AI, and zero-code platforms make it easier for them to generate their own content.

Mainland China

In 2023, we anticipate that imported game titles will be granted ISBN licenses

China’s videogame regulator approved ISBNs to 384 games domestically and zero import games for 2022. Prior to the game license freeze that ran from August 2021 to April 20,22, the last imported game was approved by China’s video game regulator in June 2021. There is a lot of backlog, and there are many titles from various countries that are quality.

After NetEase’s January 31st partnership, Blizzard will enter China again.

Blizzard Entertainment announced that it will end its partnership with NetEase to license games. This will result in the shut down of World of Warcraft and Overwatch, Hearthstone, and other titles in China. While we expect Blizzard to announce an agreement with a partner after January, to relaunch their games in China, we do not anticipate the titles going live until 2023 because of the strict regulatory process.

East Asia

VTuber industry to be more connected with Japan’s game industry

VTubers are becoming more prominent in the game industry by collaborating with Japanese game companies and titles. Inugami Korone, hololive VTuber, worked with Sega to launch Apex Legends VTuber avatars and Sonic Origin in 2022. Niko predicts that in 2023, there will be more big-name VTubers announcing brand partnership with game titles and companies. The two industries are continuing to grow and intertwine.

After the scandal of 2022, Korean game rating agencies will likely restructure

Korea passed new laws, regulations, and policies to support the domestic games sector. After the scandal (see also here and here) which rocked the country’s GRAC game rating agency in 2022, we predict it will be restructured and that Korean gamers will have more voice.

Southeast Asia

East Asia and West game companies will open more studios and satellite offices in Southeast Asia.

Niko Partners predicts, following the West and East Asia-based companies opening satellite offices or studios to exploit the growing Southeast Asian games market, that more companies will open offices or studios there in 2023.

Southeast Asia: Blockchain games are in decline

The years 2021-2022 were exciting years for blockchain games, such as Axie Infinity. However, the crypto crash and increase in scams/hacks along with the introduction of cryptocurrency taxation laws will result in lower engagement in the year’s blockchain games. The region is expected to continue its growth as a major market for developers in blockchain games, and we anticipate a more positive outlook in 2024.

MENA

Saudi Arabia and UAE will be competing for talent, events and more

The MENA region is the new global hot spot for video games, with many countries promising billions of dollars in investment to boost growth. As they seek to attract companies, esports tournaments and talent to the region, we expect friendly competition between Saudi Arabian and UAE through new policies in 2023. Each government will be looking to outcompete each other to become the center of gaming in MENA.

More than 10 international gaming companies will open their offices in MENA

We believe that the booming MENA gaming market will lead to international game companies opening studios and offices in the region. This will allow them to reach local gamers and tap into their growing talent pool. There are many international companies that have established their presence in the region. We expect this trend to continue in 2023, as governments adopt more business-friendly policies.

Esports

Esports tournaments can be played online and offline in a hybrid format

Global esports tournaments are returning to offline formats that allow for in-person viewing. However, 75% of all tournaments in Asia remain online only. In the future, we anticipate a rise in hybrid events which mix a digital and physical presence. This will allow teams who may not be able travel to still compete and allows fans to choose between online and offline viewing options.

Esports will grow in 2023 thanks to mobile shooters

MoBA and Battle Royale are the dominant mobile esports titles. However, there are signs that traditional team-based shooters may be a significant growth driver in 2023. Call of Duty Mobile is already well-known as a mobile shooter esports title. We believe Valorant Mobile can do the exact same thing when it launches. Valorant is already the most popular PC esports title by playing in more tournaments than any other Asian title.

As post-COVID travel booms, esports hotels will continue to gain popularity

Due to their unique ability to combine gaming with hospitality, Esports Hotels will continue to grow in popularity in East and Southeast Asia. Esports hotels will be more popular in countries like China, South Korea and Singapore. They are focused on providing high-end gaming experiences.