The games console ecosystem celebrates its 50th birthday in 2022 in robust health: record revenues, a full slate of latest-generation devices and a strong foundation for further growth.1 Deloitte Global predicts that the console market will generate US$81 billion in 2022, up 10% from 2021. Revenues per console player, of whom there will be 900 million by the end of the year, are expected to average US$92 per person—substantially more than the projected US$23 per PC gamer and US$50 per mobile gamer.2
About US$59 billion of 2022’s console revenues will be from software sales, composed of video game titles, subscriptions (more than US$10 billion) and in-app payments. Console hardware sales are expected to top US$22 billion, subject to the resolution of supply chain issues that had constrained the supply of the latest-generation consoles released at the end of 2020. Importantly, pricing for the newest gaming consoles has proven resilient, with launch prices able to be maintained longer than for prior generations of consoles.3
Beyond 2022, console software sales are expected to continue growing, reaching close to US$70 billion by 2025.4Over this period, digital game purchases, including downloads, subscriptions, game passes and in-app payments, are expected to rise as a share of sales from 65% in 2022 to 84% in 2025.
The games console is at the centre of an expanding ecosystem that continues to innovate in content, experiences and business models. These innovations are transforming the console ecosystem from one based on final products generating one-off sales—whether a physical console or a game title—to a perpetual and evolving entertainment service that encourages daily, often multiplayer gameplay, generating a steady stream of revenue.
Subscriptions are a critical development. We forecast that console owners will have more than 200 million multiplayer and game subscriptions in 2022. By 2025, these subscriptions will likely generate more than US$11 billion in revenue, up from US$6.6 billion in 2020.5 A console owned for eight years may garner as much subscription revenue as from the sale of the console itself.
Another notable innovation is downloadable content (DLC), which offers gamers new “chapters” of gameplay and storylines, the use of virtual currency, and in-game add-ons such as better gear and distinct outfits. Some titles have also evolved into games-as-a-service with constantly updated storylines, content and events that encourage regular play. For example, Rockstar’s Grand Theft Auto 5 began in September 2013 as a top-tier single-player experience, but has since expanded into a multiplayer service in an evolving game world—making it the bestselling game in the US market between 2010 and 2019.6
Another approach is the annual, rather than occasional, release. This tactic is common among sports titles such as FIFA, Pro Evolution Soccer and Madden. Because players in each real-world team are constantly changing, with major transfers taking place once or twice a year, sports titles are suited to annual updates. This type of annual game can also be bundled with additional revenue streams, such as in-app payments and game passes.
Yet another innovation is that console game makers, successfully taking a leaf out the mobile playbook, are now offering free-to-play games that are monetised through in-app purchases. The best-known example of this is Epic Games’ Fortnite, which has generated billions of dollars in spend.7 In some cases, games that were formerly sold outright, such as Rocket League, have switched to this model.8 Popular multiplayer titles are looking a bit like immersive social media, with greater socialisation and personalisation of avatars through purchased “skins” (clothing, hairstyle and so on) and “emotes” (most commonly gestures and dance moves).
A final spur to console game growth is its increasing integration with mobile. While games have historically been designed for either of the two very different device types, console titles are now starting to be integrated with complementary smartphone apps, allowing players to commingle in the same game from any device. In 2022, we expect this nascent trend, called cross-play, to accelerate. An early example of console-mobile integration is Call of Duty, one of the most popular multiplayer console franchises. The franchise has introduced a mobile version of its games, designed to keep people playing and invested while on the go and away from the big screen. According to one estimate, Call of Duty: Mobile boasts 200 million active users overall and about 30 million daily active users.9
The jury is likely to still be out in 2022 over whether console-mobile integration is net positive for consoles. Over time, cross-play might dilute the value of a given console, or at least undermine the role of new releases that are exclusive to a single platform. This highlights a mounting tension in the gaming ecosystem: Top game franchises are jostling for prominence with the hardware that runs them.
Consoles have a great deal going for them heading into 2022, with the most prominent bulge being to the revenue line.10 The newest generation of consoles has only just launched, with three models debuting in 2020–202111 and multiple major new titles are planned for launch in 2022–2023.12 With a six-year average lifespan, new consoles will likely remain at the centre of the most compelling game experiences.
Consoles also likely won’t lack for future customers and this will have implications for other media categories that are competing for the same eyeballs. The console user base is young, aging well and expanding. Deloitte research on US consumers has found that the majority of 14-to-24-year-olds rank gaming as their favorite form of entertainment, even ahead of TV and streaming video.13 As this generation ages, it will likely retain gaming as a prominent part of their lives. Gaming has been growing among millennials and Generation X as well. Middle-aged players who grew up with consoles as kids have remained loyal or returned to them as 40- and 50-year-olds.14
The pandemic has further accelerated adoption and engagement with gaming. During the pandemic, parents spent more time gaming with their kids—a social activity that may well endure.15 As COVID-19 recedes, out-of-home activities will likely compete for entertainment time, but gaming has held strong even in cities that have reopened.16 Even before the pandemic demanded remote socialising, the most popular games, such as Fortnite, Call of Duty: Warzone and Apex Legends, were based around social experiences, further strengthening retention: Leaving the game may mean disconnecting from friends.
From a competitive standpoint, cloud gaming has been expected to usurp the console, but its threat level is likely to be meek in 2022. In part, this is due to network readiness: This year, most homes globally will lack the required connectivity to run high-performance cloud gaming while sustaining other home broadband needs. Even a 720-pixel (lower than HD) cloud gaming experience may require a dedicated 20 Mbit/s connection. Further, cloud gaming requires upstream handling of player inputs, placing additional demand on the data connection—and possibly the data plan.17 From a game experience perspective, too, the offer of 4K from cloud gaming services will become ever less compelling as the installed base of 4K (and 8K-ready) consoles steadily increases.18 It’s small wonder that, though publishers have allowed some of their titles to be ported to cloud services, they have found little incentive to release games exclusively on a cloud platform. For cloud gaming to take off, it will likely need to clearly offer better value than the console—such as delivering on the promise of much larger and richer game worlds capable of hosting thousands of players in the same instance (most multiplayer games have a cap of 150 players in the same world).
Console makers should, however, plan for a future where a growing proportion of game execution and delivery happens over the network. The best way for the console ecosystem to compete may be to meld the best elements of the console, which is essentially a high-performance edge computing device, with the best of the cloud, which already includes online marketplaces and multiplayer play. Console makers could also develop, acquire, or license more content IP, reinforcing their role as game development studios. They can explore how the console could guarantee quality of service in the home and play a stronger role in gating content, social moderation and purchasing for different family members. Additionally, console makers could consider offering premium hardware options or the ability to add additional graphics cards that cater to gaming communities such as those participating in competitive esports, which have typically preferred the customisation and extensibility of PCs.
All in all, consoles are far from the has-beens that one might think such a venerable platform may have become. Their ability to deliver compelling and highly social game experiences, coupled with business models that allow for recurring revenue, is keeping them very much alive, well and poised for future growth. Happy 50th!
Deloitte’s Global Telecommunications, Media & Entertainment practice focusses on helping companies thrive in the sector’s continually evolving business landscape. Our breadth of knowledge can help organisations uncover opportunities and understand trends that can spark new growth.