In this article, we will take a closer look at the current state of the gaming industry with fresh eyes, explore game development trends for 2023 and how these emerging technologies are likely to bring changes to the gaming market. Read on to learn more!
Every 15 years or so, it seems, the U.S. economy rolls into a ditch — and the tech industry pulls something remarkable out of its labs. Here we are again! Silicon Valley's favorite bank has failed, while its top firms continue to lay off hordes of workers — but at the same time, industry leaders foresee vast new growth spurred by AI. Today, tech optimists are casting ChatGPT and the new generation of AI it symbolizes as the industry's latest platform shift. They predict that innovation will slip the U.S. economic machine back into gear as in previous eras of the business downturn and tech transition.
GLOBAL MARKET BY SEGMENT
So the fact that total game sales were down a little bit last year is just another example of numbers leveling off, ‘correcting’ themselves after a bigger jump the two years prior (the pandemic spike 2 years back). The pandemic presented some challenges for PC and console games. And those challenges still affect them today, like supply chain issues, teams adjusting to working from home, and ‘the great resignation’. We all know about the game delays, and people struggling to find next-gen consoles or PC parts. It's understandable why console and PC gaming "look" the way they do.
So considering the last facts and the overall market sales trends, it's understandable why console and PC gaming "look" the way they do. But let’s not give up on PC games just yet. The 'Games as a Service' model - no longer reserved just for free-to-play games - is breathing renewed life into many older games. It gets people to play ‘older’ games, has them returning every month, paying for season passes, buying cosmetics, and downloading the latest DLCs.
MOBILE GAMES SPENDING 2019-2022
Global spending in mobile games grew substantially at the start of the lockdowns, and it’s remained about the same since. But Google and Apple have been gatekeepers on the mobile game distribution front for a long time. And in that duopoly environment, developers are looking for new avenues to monetize their mobile games. They’re taking things into their own hands.
REVEALING THE MACRO TRENDS IN THE VIDEO GAME INDUSTRY
As developers, you have to constantly plan ahead for the future. The best way to prepare for the unknown is to gauge what's happening right now and pick your path from the available options. To decide on where to next in this time of uncertainty, we are going to look into 5 major game development market trends:
- new territories, new audiences
- game company mergers
- optimizing production costs and macroeconomy effects
- leveraging the power of AI as a tool for both the “big guys” and the “little guys”
- new delivery tools like cloud gaming
NEW TERRITORIES, NEW AUDIENCES
The first significant trend in video games is the emerging market in new regions. And Africa is the next big thing. And here is why. Africa has 54 countries, which in and of itself already presents a lot of opportunities.
CEO, Co-founder, and Chair at Interactive Entertainment South Africa IESA, Nicholas Hall
At a large corporate level, Africa is seen as the next consumer market that needs to be developed. There’s also a growing interest from the major platform players (Microsoft, Xbox, Nintendo).
With increasing access to new technologies and the internet, more and more people are getting into gaming, especially in certain countries. And Africa is practically the only region on the planet where the general population is getting younger. And it is not a secret that younger people are the biggest players. Moreover, the world's fastest-growing mobile game market is located on the African continent. There are already 186 million gamers in Sub-Saharan Africa. And the majority of them - about 95% - are mobile gamers. Can you imagine how much this number will grow in the foreseeable future?
AFRICA IS YOUNG, MOBILE, AND LOVES GAMES
They’re also paying more for their gaming experiences, too. In South Africa, specifically, this year’s revenue is projected to nearly double from what it was last year. And from 2020 to 2022, game companies of the African continent saw a 35% increase in their revenue and a 43% increase in their transaction count across the continent. Africa is a focus example here, but one can see similar patterns in the MENA region and Asia. We are well on our way to a whole new world of gamers!
BIG COMPANIES ARE GETTING BIGGER
Gaming company acquisitions are still going strong. In 2022, there were about 636 announced deals in the gaming industry. They total about $124.5 billion. About half of that is just Microsoft shelling out some serious cash for Activision Blizzard. At the rate they’re going through, can you imagine what is going to happen if, let’s say... Microsoft buys Take Two, Sony, Ubisoft, or Electronic Arts?
What's the reason behind all these acquisitions? Everyone’s competing for attention and money, they all want to be #1. These companies think of long-term investment, and creating an ecosystem of brands helps them maintain a high level of success.
COMPANY RESOURCES HELP OPTIMIZE PRODUCTION COSTS
Making a AAA game nowadays is significantly more expensive than it was 5 years ago. The average cost of developing and launching a AAA game 5 years ago was $50 to $60 million. Now it's another $10 to $20 million more. Everyone wants to save on expenses and increase their profits, no matter the studio size. How would one optimize the production costs?
When a studio buys another one, it can instantly access new technologies and markets. With a boost in development teams and resources, studios can create more complex, higher-quality games, and ultimately charge more for them. When there are macro forces that can affect your business growth, you have to re-evaluate priorities. At the end of the day, all businesses are focused on their profit margins, and companies are always interested in cutting costs where possible.
THE IPHONE MOMENT OF AI
AI tools in our industry have actually been around for several years now. Lots of big studios have already been exploring how AI can help their development pipeline. Ubisoft is working on AI-powered animation and an AI tool to fix bugs. Nvidia is tinkering away on their Omniverse, seeing how AI-powered 3D workflows can work. Activision Blizzard is exploring AI-powered music generation. How do you feel about AI-created games? What impact do you think they will have on the industry?
Game developers have always been quick to implement new technologies. Because as much uncertainty as there is in the gaming industry, two things remain constant: competition and disruption.
To stay “on top of your game” – you have to adopt disruptive technology. And constantly adapt. That’s what the gaming industry has been doing since the very beginning. AI can help level the playing field between those big studios with millions of dollars at their development disposal, and the indie studios who… well, don’t have quite that much. Generative AI can help create game assets at a large scale and at high quality. Teams can use AI to automate time-consuming tasks, like playtesting and troubleshooting.
Generative AI tools that can be implemented in game development:
- GPT-3/Chat GPT: a language generation tool
- Neural Style Transfer: a technique that can convert one image style to another
- Deep Learning Super Sampling (DLSS): an upscaling technology, that allows games to run at higher performance while keeping the graphics quality intact
- Procedural Generation: used to randomly generate game content (levels, environments, etc.).
- Anti-fraud - helps identify and stop fake users and prevent cheating
- Reinforcement Learning: enables game developers to create AI agents that can learn on their own by playing and taking actions within a game
- Voice synthesis: generate lifelike voices
- In-game chatbots
- Dynamic Adjustments: enables games to automatically adjust to player behavior
- Gaming Analytics: track player behavior, and play patterns and provide data-backed insights
Moreover, the generative AI technology sector is growing day by day where tools in different areas are born every day - from learning and management assistants to AI fashion advisors, podcasts generated solemnly by AI, etc. To find an excessive list of generative AI tools, follow this link.
CEO and Founder of Verisoul, Henry LeGard
There are two different kinds of work: tasks and orchestration. And right now, AI is good at tasks (it can win a game of chess, or it can take a prompt and do something). What humans are still differentially better at is orchestration - this is knowing what to do next, knowing how to fit the space or the need. So, right now it's not possible for a machine to analyze a market or a problem and figure out what to do next. Humans are still differentially better at orchestration, but in the next 10-50, we'll see this more AI emerge where machines may actually be able to orchestrate tasks.
NEW DELIVERY TOOLS ARE ALREADY HERE
And just like the hunt for the next technology to boost development pipelines, the industry is also on the hunt for new delivery tools. We’ve got PCs, consoles, smartphones, tablets… But how else can players access your games, and on what? There’s one device that’s been around for decades - smart TV. The TV might become the number one gaming device. Giants like Apple, Google, and Amazon are already exploring ways to make streaming games on TV more accessible and user-friendly. Because streamed games also present an excellent opportunity for cloud gaming to take the lead in our industry.
CLOUD GAMING IS FUTURE-PROOF
By 2024, experts estimate that the global cloud gaming market will be about $6.3 trillion.
Even in the future, if we don’t have physical storage for our games, that won’t matter. Everything will be in the cloud!
Here are three big things about cloud gaming:
- First, 5G. By 2025, analysts estimate that, worldwide, 1.2 billion people will have access to 5G. 5G access means that cloud gaming experiences will be faster and more reliable than ever. The low latency of 5G will make real-time gaming smoother, reducing lag and buffering issues.
- Second, customization. With options like AI integration, different graphics settings, and input devices, gamers will have more control over their gaming experiences.
- Third, it’s naturally cross-platform! People can access and play games on any device that meets system requirements and has a stable internet connection. Some cloud gaming platforms have also been integrating AR and VR into their streaming services, which add unprecedented flexibility and immersion for players.
Investing in cloud gaming capabilities today can set your gaming business up for long-term success. It’s a shift in how people buy and play games. The industry moved from cartridges and floppy disks to CDs, and then to platforms like Steam. And now digital distribution channels are evolving. They’re mobile, they’re in the cloud.
CONCLUSION: HOW TO STAY RELEVANT
How do you stay relevant and successful this year and beyond?
- There are new markets you can explore for your game and your brand.
- And there are new technologies that can level the playing field for everyone, like AI and cloud gaming.
- Expand into new regions, accept more local currencies if you're already selling your game globally, or broaden your audience reach by diversifying your digital distribution platforms.
Long-time industry veteran and President of Xsolla, Chris Hewish gave a thought-provoking talk at GDC 2023 about recent industry performance and upcoming trends. Topics covered in this presentation include new emerging markets, the impact of ongoing consolidation, how artificial intelligence impacts the workforce, the rise of user-generated content, the future of NFTs, and how evolving visions of the metaverse will shape the industry as we know it. You can check out the full GDC talk down below: