Interactive games & esports

Executive summary

Interactive games and esports have prospered during COVID-19, with people looking for alternative forms of entertainment during lockdown periods, and whilst their favourite sporting codes were on hiatus. Whether or not the games and esports industry sustains the same momentum as life returns to normal will be dependent on the extent to which they are able to retain the audiences they have gained through ongoing product innovation and accessibility. In 2019, the interactive games and esports market was worth A$3.175b, and this is expected to grow at a 6.87 percent CAGR to 2024 based on the mid-point forecast scenario, driven by app-based games and esports.

Forecasts at a glance

Total Online/Microtransactions Revenue (A$ millions)

CAGR 2019-2024 based on gradual recovery trajectory

Online/Microtransactions 12.07%

 

Total Esports Market (A$ millions)

CAGR 2019-2024 based on gradual recovery trajectory

Esports      11.13%

Mobile Games Revenue (A$ millions)

CAGR 2019-2024 based on gradual recovery trajectory

Mobile games  6.02%

Total Interactive Games and Esports Market (A$ millions)

CAGR 2019-2024 based on gradual recovery trajectory

Total 6.87%

With total video games and esports revenue of A$3.175b in 2019, Australia is one of the highest per capita spenders on video games in the world.

One contributor to the success of the video games market in Australia is the relative high cost of video games, which are among the highest priced in the world. An increasing number of publishers and platform-holders have expressed a desire to reduce these price discrepancies as they are increasingly difficult to justify in the era of digital distribution.

Gaming consoles are continuing to evolve via upgrades to hardware, and despite a surge in physical console sales since the pandemic began, app-based mobile games will drive the most revenue growth for the sector.

Console games have traditionally been the cornerstone of the video games market in Australia. The console market is dependent on regular hardware updates to deliver higher-quality experiences and maintain consumer interest. The largest recent hardware launch was of the Nintendo Switch, which has enjoyed strong sales since its 2017 appearance and has reignited interest in the portable console market previously thought to be near-moribund in the face of the growth of smartphone-based games.

Meanwhile, Sony and Microsoft have continued to release incremental upgrades to their existing home consoles. Both have now gone one step further announcing the launch of the PlayStation 5 and Xbox Series X respectively, which will come in both traditional and digital formats. These upgrades has been mooted for some time and early indications are that the enhanced user experience will justify the hefty price tag for avid gamers.

While the value of the traditional gaming market has continued to grow, app-based mobile games have been a significant driver of growth in the Australian video games market in recent years. Mobile gaming revenue accounted for 31.7 percent of total video games consumer revenue in 2019.

Higher smartphone ownership (though this market is now essentially saturated), more capable devices, and better monetisation strategies have all contributed to greatly increased revenue from mobile games, but the phase of rapid expansion is coming to an end.

There is little more room for growth in the addressable market of smartphone-owners in Australia. There is a sense that the mobile games market has begun to be over-reliant on a handful of mega-earners like Clash of Clans and Game of War, which have now been on the market for many years. However, in-game microtransactions continue to fuel growth, with revenue forecast to grow to A$1.565b in 2024 based on the mid-point forecast scenario.

COVID-19 introduced new audiences to esports with the introduction of new esports events to satisfy Australians’ desire for sport content prior to the creation of player ‘bubbles’.

With a long held passion for live sport, the closure of sporting venues and halting of major sporting competitions across the world starved Australian audiences of their regular sporting fix. Adapting quickly to the situation, a number of sports were able to follow the lead of global brands such as FIFA, MotoGP, NASCAR and the NBA, by hosting esports events between players from rival teams and codes, streaming them online for audiences to watch early in the crisis and before player ‘bubbles’ were established.

One of the most significant esports events in Australia during the height of the pandemic was the introduction of the V8 Supercars All Stars Eseries, taking drivers from the track into synchronised simulators. The event brought esports to a new audience on broadcast television, with high production values. This sort of innovation will not only broaden the reach of traditional sports, but also reinforce the legitimacy of esports in the entertainment landscape.

While esports have continued to grow through COVID-19, future growth is expected to be at a slower rate than in many markets of a similar size.

Australia’s total esports revenue was A$5.0m in 2019, comparable to other mid-tier markets in Mexico, Brazil and Spain. Despite significant recent growth (revenue was just A$1.0m in 2015), Australia’s esports market is now growing at a slower rate than many of the markets of a similar size, at a 11.13 percent CAGR based on the mid-point forecast scenario, but is still expected to reach A$8.0m by 2024. When compared to other forms of media and entertainment, a double-digit CAGR is still a strong result for this sector.

ESL is very active in the Australian market, organising an ongoing series of competitions under the ESL AU & NZ Championship umbrella, and putting on two now-regular high-profile esports events: the Melbourne Esports Open (which, as well as attracting sponsorship from the likes of McDonald’s and JB Hi-Fi, also enjoys significant support from the City of Melbourne) and the Intel Extreme Masters in Sydney, which features a Counter-Strike: Global Offensive tournament with a prize pool of US$250,000.

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