Worldwide digital games market: August 2016

The total market for digital games in August 2016 earned $6.1 billion, up 11% from 2015. A batch of successful releases across console, PC, and mobile drove double digit year-over-year gains in market growth. Console digital revenue increased 16% year-over-year to $399 million, and premium PC grew 21% to $401 million. Pokémon GO pushed the mobile market to $3.04 billion in revenue, 16% higher than the same month last year. The free-to-play MMO segment experienced moderate growth of 8% to $1.41 billion. In contrast pay-to-play MMO declined 4% to $226 million. Social games revenue remained stagnant, dropping a modest 2% year-over-year to $604 million.

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Top grossing games August 2016

No Man’s Sky demonstrates the risk and reward of underdog hype

After several months of attention from the gaming industry, the release of No Man’s Sky proved a solid success for Sony and Hello Games. Sales of the title generated $78 million in digital sales in its opening month across platforms. While ultra-hyped PR played a pivotal role in fueling sales of No Man’s Sky’s, it also generated a fair amount of backlash from players who felt the game did not live up to its promises. The first week of its release was accompanied by bugs and missing features that necessitated a massive update, after which Hello Games was accused of jilting fans with intentional exaggeration of the title’s multiplayer and customization features. An underdog studio taking big risks to do something novel has powerful appeal within the gaming community, but it remains to be seen if Hello Games has already used up all their good will.

Free-to-play MMO’s last untapped genre: Collectable Card Games

Ever since League of Legends’ groundbreaking success, PC publishers have made a major push into genres compatible with free-to-play monetization. The resulting influx of MOBAs, first-person shooters and role-playing titles have helped push the total market $14.4 billion in 2013 to $18.5 billion this year. Since then genres such as MOBAs have started to show saturation, forcing publishers to expand into a related genres and categories in pursuit of growth. One such genre is the $1.3 billion market for collectable card games, which is one of the fastest growing segments among free-to-play. Total market size is expected to increase by 8% in the next two years. In particular, Hearthstone has helped bring the unique play-style mainstream, and re-opened the opportunity for publishers. Several game companies with rights to compatible franchises are already moving in on the path blazed by Hearthstone. Two of the most anticipated upcoming titles are The Elder Scrolls Legends (Bethesda Softworks, due for release later this year) and GWENT, a spinoff of The Witcher 3 (CD Projekt Red, soon to be in open Beta). The genre’s potential has also prompted some very unconventional experiments as Electronic Arts recently announced plans to create a mobile card game based on their first-person shooter franchise Titanfall.

Hardware keeps Pokémon GO going

A wave of hardware accessories helps Pokémon GO maintain momentum. The day Niantic unveiled a Pokémon GO-branded Apple Watch they also announced that the game has reached over 500 million downloads. Although some monthly users have begun to drop-off and its App Store ranking has fallen, Pokémon GO still holds a top 5 app-ranking in most countries and earned an impressive $204 million in August 2016 revenue. Others are eager to replicate Pokémon GO’s success. Chief among them is Sony, who earlier this year founded ForwardWorks, a studio targeting Japanese, Chinese, and South Korean mobile gamers. In an interview with the Financial Times, Sony CEO Kaz Hirai gushed about Pokémon GO and claimed that augmented reality (AR) functionality “lifts all boats for the video game industry.” Although no ForwardWorks games have been officially announced, it is very likely that AR functionality will be present in future releases.

Nintendo continues its charge into mobile with Super Mario Run

Nintendo recently announced plans for its third foray into mobile, Super Mario Run. The title is a DeNA-developed endless runner/platformer based on the Mario franchise. After some early confusion regarding the game’s monetization system, Nintendo clarified that Super Mario Run will effectively be free-to-play, with additional in-app purchases available. The choice of endless-runner may seem quaint compared to new competitive titles like Clash Royal, but the genre has delivered strong performance over time. Combined downloads for Temple Run and Temple Run 2 sit at 1.4 billion, 1.1 billion for Subway Surfers and over 600 million for Despicable Me: Minion Rush. DeNA’s considerable experience developing high quality mobile games means that the bugs and server issues that plagued Pokémon GO are less likely. Combined with one of the most recognizable intellectual property in gaming, we expect Super Mario Run will deliver a very strong performance for Nintendo.

Overwatch and World of Warcraft show shifting Chinese spending habits

China’s games market may be dominated by free-to-play MMO and mobile titles, but Overwatch’s success indicates the potential for premium games in the country is growing. NetEase revealed in a recent earnings report that Overwatch had sold nearly 3 million copies, surpassing Diablo III’s impressive debut. Excluding royalty payments made to Activision Blizzard, Overwatch generated $382 million in earnings for NetEase. In comparison, Diablo III (which was similarly priced) brought in about $86 million from the Chinese market a year earlier. Up to 40% of full game downloads of Overwatch in August can be attributed to Chinese sales. Similarly, NetEase also recently changed their payment policy for World of Warcraft with the rollout of the title’s new Legion expansion. Rather than let Chinese gamers pay by the hour in tiny increments, players are now required to pay upfront for full monthly subscriptions. Despite this, the expansion was very well received in China with NetEase-processed revenue up to $37 million in August compared to $8 million in July. The success of both titles goes against the assumption that Chinese gamers will never warm up to paying for games upfront, and provides evidence that it is possible to convince Chinese consumers to purchase high quality full-priced games. Whether this will fundamentally change the market remains to be seen, as local gaming behemoth and NetEase rival Tencent is still sticking to free-to-play.