Worldwide digital games market: September 2016

Total digital games revenue rose in September by 5% from 2015 to $6.2 billion. Mobile continues to enjoy year-over-year growth, along with Free-to-play MMO.

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Destiny highlights the importance of additional content releases for AAA titles.

Over the past few years, AAA console publishers have become increasingly dependent on additional content releases to extend the lifecycle for major titles. Activision Blizzard has had the greatest success perfecting this formula with heavyweight franchise Call of Duty. Since April 2016, Call of Duty: Black Ops’ additional content revenue has never dipped below 80% of total digital revenue.

This September, Activision Blizzard demonstrated their mastery over the monetization technique with a newer franchise: After delaying the release of Destiny II, Activision instead switched tactics and released the Rise of Iron expansion instead. As a result, the title’s revenue sky-rocketed from $7.2 million to $59.1 from August to September 2016, putting Destiny at the top of console rankings.

September’s $493 million worldwide console market is already a competitive battleground for major AAA publishers, but the growing number of legacy franchises with large bundles of additional content released between sequels will make the platform even more competitive and inhospitable for newcomers this holiday season. Franchises like Destiny and Call of Duty can not only charge a premium upfront price, but continue to take the lion’s share of console spending for months or even years.

New Twitch features may change how eSports and gaming video content are monetized.

The gaming video content segment has seen significant growth over the past year. However, effective monetization continues to be an issue. Since late September, Twitch has harnessed Amazon’s resources (the former was acquired in 2014 for $970 million in cash) to release a swath of new features aimed getting online viewers to spend more while watching others play games competitively and casually.

Firstly, Twitch is encouraging users to directly monetize via subscriptions tied to Amazon Prime. Amazon Prime subscriptions now come with automatic access to a feature called Twitch Prime, which includes free access to bonus in-game features, discounts on newly released physical games and a free subscription to a new streamer each month. By encouraging users to link their Twitch Accounts to their Amazon Prime Accounts, Amazon is paving the way to double Twitch subscription revenue.

Secondly, Twitch recently rolled out a new feature called “cheering.” Users can now acquire a virtual currency called “bits” by watching ads or paying directly for them. While this feature is new to Twitch, Chinese streaming platforms like Douyu have already successfully monetized it: viewers frequently gift hundreds of dollars worth of emotes in a few minutes. Twitch will take a 30-40% cut of all revenue donated in this way, which will help push total donation revenue for gaming video content up past $1 billion worldwide in 2017E.

Finally, during Twitchcon Amazon Game Studios announced plans for an additional virtual currency known as Stream+. Twitch wants to increase the excitement of viewing live-streamed eSports by allowing viewers to make real-time bets on gameplay. Breakaway, a multiplayer brawler developed by Double Helix Studios (acquired by Amazon in 2014) will have Stream+ functionality built-in from the ground up. If Twitch can navigate the tricky legal regulations surrounding virtual betting, they not only will be able to increase the excitement of live-events but may also open a new channel for monetizing eSports.

A flood of sports investment will help eSports up its sponsorship game.

As the hype surrounding the $892 million eSports market has grown, investment is picking up from an interesting source – traditional sports franchises and owners. September and October saw a wave of investments and acquisitions: The NBA’s Philadelphia 76ers acquired both Team Dignitas and Apex Gaming, uniting them under the banner of Team Dignitas; aXiomatic, an eSports ownership company led by the owners of the Golden State Warriors and Los Angeles Dodgers, picked up a controlling stake in Team Liquid; Paris’ Saint-Germain football club scooped up European League of Legends team Team Huma; Memphis Grizzlies owner Stephen Kaplan also increased his stake in the Immortals; and former NBA star and current star of the Chinese Basketball Association Stephon Xavier Marbury sparked a storm on Chinese social media after publicly announcing plans to start his own eSports team.

More important than the size of these investments are the partnerships they provide to grow the scope of eSports sponsorships. For eSports to develop into the powerhouse game companies and teams are hoping for, it will need a sizable foundation of sponsorship revenue. As a young industry, eSports still has not established the infrastructure needed to drastically increase sponsorships, but this will change with veteran leaders from traditional sports at the helm. There is likely to be an increase in mainstream sponsorships in the near future, and eSports sponsorship revenue is forecasted to grow significantly by next year.

PSVR rolls out with a bang.

Sony’s PlayStation VR finally launched on October 13. Even though preorders of the headset already sold out months in advance, the launch was still a success. Gamestop reported that PSVR sold out faster than any other hardware in the company’s history. Over 50K units were sold in Japan during launch week, and the headset also sold out on Amazon. Sony Interactive Entertainment’s Europe President Jim Ryan recently commented that headset pre-orders were in the “many hundreds of thousands,” with Sony scrambling to manufacture more hardware to meet demand.

Sony hit the sweet-spot with consumers in terms of pricing, hardware requirements and performance. While not as powerful as the HTC Vive or Oculus Rift, PSVR is nearly half the price and does not require a high-end PC. On the other hand, it significantly outperforms mobile rival Samsung Gear since it plugs into the PlayStation 4. Although PSVR hardware itself was well-received by critics and consumers, its bundled software failed to impress. Sony is committed to bringing AAA titles to its VR platform over next year but PSVR is ultimately facing the same chicken-and-egg problem as the Vive and Rift. Top-notch virtual reality games need to be built specifically with VR in mind, but many AAA publishers are unwilling to invest in titles before the hardware becomes more popular with consumers.

Top Grossing Mobile Games by Revenue, September 2016

1 Pokemon Go Niantic
2 Monster Strike Mixi
3 Clash Royale Supercell
4 Mobile Strike Epic War
5 Game of War: Fire Age Machine Zone

Top Grossing PC DLC Games by Revenue, September 2016

1 Overwatch Activision Blizzard
2 Counter-Strike: Global Offensive Valve
3 Minecraft Microsoft
4 Guild Wars 2 NCSOFT
5 FIFA 17 EA

Top Grossing Free-to-play MMO Games by Revenue, September 2016

1 League of Legends Tencent
2 Crossfire Neowiz Games
3 Dungeon Fighter Online Nexon
4 World of Tanks Wargaming
5 Dota 2 Valve

Top Grossing Pay-to-play MMO Games by Revenue, September 2016

1 World of Warcraft Activision Blizzard
2 Fantasy Westward Journey Online II NetEase
3 Lineage I NCSOFT
4 Star Wars: The Old Republic Electronic Arts
5 Tera Online En Masse

Top Grossing Social Games by Revenue, September 2016

1 Slotomania Caesars Entertainment
2 DoubleDown Casino IGT
3 Candy Crush Saga Activision Blizzard
4 FarmVille 2 Zynga
5 Jackpot Party Casino —Slots Slotomania

Top Grossing Console Games by Revenue, September 2016

1 Destiny Activision Blizzard
2 FIFA 17 Electronic Arts
3 Call of Duty Black Ops III Activision Blizzard
4 Grand Theft Auto V Take Two
5 NBA 2K17 Take Two