Play
Traditional & Social Gaming and Esports
The growth in the Play segment has been significant, becoming one of the cornerstone sources of revenue in the Entertainment and Media industry.
Advertisers’ ability to integrate through gaming infrastructure has continued to be a major factor of this growth, with advertising revenue – including in-app, integration into game, and Esports advertisement and sponsorship revenue – seeing year-on-year growth of 8.8 percent in 2021. Developing technologies such as Web3.0 and the adoption of 5G are expected to play major roles in the years to come, as the Gaming industry seeks to be a leader in innovation, and the challenges that coincide with it. Overall, the Play segment is expected to maintain strong growth, adding another $A2.4 billion by 2026, taking total revenue to just over $A7.3 billion. With a 2021-2026 CAGR of 8.2 percent based on the midpoint forecast, Australia’s growth rate is set to exceed both the UK and Canada.
Total Play Market(A$ millions)
Total Video Games & eSports Market CAGR 2021-2026 by Country (%)
Traditional Gaming
The Games Market continues to make strides as an E&M industry leader in innovation and growth
The Games sector in Australia remains one of the biggest winners in the post-pandemic entertainment and Media landscape, yet is also one on the cusp of change, with many aspects of this sector promoting innovation and development, each with their own hurdle to overcome in the next few years. Gaming remains the second- highest consumer revenue generating sector behind only Internet Access, with total interactive games revenue reaching A$4.92 billion in 2021, representing year-on-year growth of 12.1 percent.
Social Gaming, already offers a wide range of ways for players to spend in-game, and remains remains the driving force of growth for the Gaming sector. Some of these opportunities for revenue include cosmetics, in-game currencies, pay to play, and subscriptions. Social gaming, having increased by 18.3 percent in 2021 to A$2.02 billion, will remain strong with the ongoing adoption of 5G for anywhere-gaming and the transition towards free-to-play and digital-only versions of games. This sub-sector is forecast to reach A$2.92 billion by 2026 at a CAGR of 7.7 percent based on the midpoint scenario.
2021 Games & eSports Revenue Share
Gaming Advertising Revenue 2017 - 2026
Despite the introduction of a tax offset to encourage investment and developers to enter the australian market, talent in the sector remains scarce
The Australian Government continues its push to attract more entrants into the game development market, introducing the Digital Games Tax Offset which became available on July 1, 2022. This will provide a 30 percent tax offset for game development businesses, with the aim to attract more foreign mid-to large-sized development companies into the market, as well as promoting investment in Australian startups. With this comes an increase in demand for talent, a growing concern amongst the industry. Initiatives such as the Australian Priority Migration Skilled Occupation List aim to alleviate this concern, making it easier to earn a visa for specified roles and skills, with game development being one. It is expected, however, that a lack of talent in the market will remain a primary hurdle for development companies entering Australia, though if overcome, could pave for way to significant growth.
Supply restrictions hamper hardware sales, whilst physical sales expect to see further decline
Traditional gaming revenue increased by 7.7 percent in 2021 to A$1.6 billion, despite physical sales (across both PC and consoles) continuing its structural decline by 8.4 percent to A$356 million. This coincides with further sales of digital-only consoles released in this most recent console generation. This generation’s lifecycle could see an extension due to the ongoing supply restrictions on semiconductors that limit the availability and sales of PC hardware, and consoles alike. This however will not impact the sale of digital purchases, which based on the midpoint forecast, are expected to support growth of gaming purchases at a 2021-2026 CAGR of 7.5 percent, reaching $2.3 billion by 2026.
Digital-only game streaming services and 5G-enabled anywhere-gaming on the rise
Following suit with other E&M segments, subscription is on the rise in Gaming. Game subscription services, regardless of the device used to play, have grown to the fourth most popular platform for gaming behind consoles, mobile, and PC, and reaches 48 percent of game-connected households according to IGEA.54 Subscription services are expected to continue to grow in popularity and service offering. In June 2022, Playstation released additional tiers of their subscription service, Playstation Plus, enabling people to digitally download and play a wider range of games from previous console generations on their current. As of the end of 2021, providers have also started offering cloud based game streaming options, with the beta launch of Xbox Cloud and GeForce Now. This enables users to play games regardless of location and hardware requirements, as long as they have a sufficient internet connection. NVIDIA, developers of GeForce Now, partnered with Western Australian ISP Pentanet to power the service in Australia.
Sony have also had a game streaming service since 2014, but have yet to enter the Australian market, likely due to the service being restricted by Australia’s Internet infrastructure, as the concurrent download requirements remain relatively high. Internet infrastructure remains the primary restriction on the growth of game streaming services. Although unlikely to completely replace fixed broadband in the medium term, the ongoing adoption of 5G will aid in the adoption of streaming gaming services, as well as the mobile gaming market, with it being one of the primary target platforms for game streaming.
Gaming & Web 3.0
Gaming at the forefront of Web3 development
Web3.0, the latest generation of internet technologies encapsulating all things Blockchain, NFT and Metaverse, has already begun incorporating itself into the Games sector, with development already underway on major gaming projects. Despite its nascence, the demand for Web3.0 gaming is very apparent, as seen with sales numbers of VR headsets rapidly increasing globally. Headsets are expected to surpass 14 million units worldwide this year, a 36 percent increase year on year, with Meta’s Oculus Quest 2 likely being first in market share.55 The Gaming sector is recognised as a leader in the journey towards Blockchain, which is anticipated to reach mass consumer adoption through the development in Blockchain technologies and increased interest in metaverse applications.
One area which has already seen integration with Blockchain and NFTs is Esports, with many major Esport organisations having released a series of NFTs or partnering with Crypto Exchanges. It isexpected that further integration with Esports will happen sooner than with Game Development, with potential for player cards, tradable items, or merchandise to be represented by NFTs. This is already a market with pre-existing concerns around online gambling, and the lack of established regulation, which could potentially introduce new policies for Blockchain in Australia.
Regulation and policy is expected to create a bumpy road ahead of Web 3.0 entering the games market
The aim of Blockchain games is to innovate the way players interact with gaming, allowing for greater ownership of in-game assets, often stored in the form of an NFT within a decentralised ecosystem. Blockchain games are likely still a few years away from major releases, and one of the main challenges will be how policy and regulation will develop in line with technological advancement and its journey to release. The topic of Blockchain and NFTs is already quite polarising, and industry and governmental work is still to be done to solve questions such as how to account for ‘real world’ value changes, applicability of taxation, and how national and international legal frameworks apply. The Federal government has stated some pre-existing reservations around Loot Boxes and microtransactions56 – a market that saw strong revenue increases across all platforms, and which heavily contributed to mobile/social gaming revenue – and will likely see integration with Blockchain in coming years. As yet, Australia has not seen any major regulations enacted, despite other countries having done so already. It is expected pushes for regulation in this space will increase as Web3.0 develops further.
What is Web3.0?
Web3.0 is the third generation of the Internet, and is considered to be the form that the Internet is transitioning into now. To better understand Web3.0, it helps to have some context around what Web1.0 and Web 2.0 were.
- Web1.0 was the initial adoption of the Internet, often seen as the read phase of the Internet. It was a decentralised place where no major companies ruled yet.
- Web2.0, the current generation, revolved much more around user generated content, and participation via social media. This came with heavy business implications moving towards centralisation amongst large web companies we all know today. This is considered the read/ write phase of the Internet, with data and privacy becoming more of a commodity.
So Web3.0 is seen as the third generation, but what exactly does that mean? In a sense it encapsulates all new and emerging web technologies we’re seeing today, from Blockchain & NFTs, to the Metaverse. This sees a shift back to decentralisation, with many of its platforms, apps, and organisations expected to be built on distributed technologies such as Blockchain, and the associated cryptocurrencies and NFTs. In response to Web2.0 viewing data as a commodity, this shift will likely prioritise increased data security and privacy for users. Additionally, the open and communal nature of Blockchain means that a lot of use cases will be public, transparent, and collectively by the people, rather than banks, media and social media platforms. Due to this, Web3.0 is anticipated to be the read/write/own phase of the Internet.
Glossary
Blockchain - A chain of data ‘blocks’ that are cryptographically linked to each other in chronological order. It is stored as multiple copies across a network, and any addition or change to the chain’s data has to be verified by each node of the network, making it difficult to tamper.
NFT (Non-Fungible Token) - Digital items that are represented by data on a smart contract enabled blockchain that’s unique through identification codes and metadata making them Non-Fungible. Unlike Cryptocurrency, a fungible token, they cannot be exchanged for another piece as if it were of equal value, similar to that of art. Due to it being on a blockchain, NFTs can have its property rights recorded, with traceable ownership.
Metaverse - A real-time and always on virtual world that aims to merge the physical and digital through the use of Virtual and Augmented Reality.
Decentralised ecosystem - Decentralisation promises a system where ownership is distributed amongst its builders and users rather than centralised entities. A decentralised finance system would be without intermediaries such as banking institutions or digital payment services. This would mean all transactions are direct between the payer and payee.
Esports
Esports maintains growth despite a lack of Major Australian events, as they begin to return in 2022 for the first time since the COVID-19 pandemic.
The Esports sub-sector grew by 16.4 percent in 2021 to A$15.7 million, despite no major events being held in Australia since 2019, primarily cancelled due to the COVID-19 pandemic. As a result of this, non-advertisement and sponsorship Esports revenue decreased for a second year running, by -3.56 percent. A full return to Australia may be slow, as lack of top-line revenue and poor Internet infrastructure had already been seen as disincentivising for global businesses operating here, a decision sped up by the pandemic. As Internet infrastructure and 5G adoption improves in Australia, it will allow for Esports events to rebuild, with the midpoint forecast showing a CAGR of 26.17 percent for non-advertisement and sponsorship Esports revenue. DreamHack marks one of the first major events to make its return to Australia, scheduled for September 2022, whilst other events such as Intel Extreme Masters Australia have yet to confirm a return.
More broadly, Esports is also seeing a shift in perception, beginning to be recognised more closely with traditional sports. Australia will be representing the Oceania region in the inaugural Commonwealth Esports Championship in August 2022. Additionally The Australian Esports Association (AESA) came together with the eSafety Commissioner and 24 other sporting agencies to discuss and sign the Online Safety of Commitment in response to increasingly high levels of online abuse across all sporting codes.
Total Consumer eSports Revenue 2017 - 2026
Total Yearly eSports Revenue by Subsegment (A$ millions) midpoint forecast
Contact us
Bhushan Sethi
Joint Global Leader, People & Organisation, Principal, PwC United States
Tel: +1 (917) 863 9369
Peter Brown
Joint Global People & Organisation Leader, PwC United Kingdom
Tel: (+44) 7789 003712
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