Last week, market research behemoth Circana released a comprehensive report and presentation about the “Five Trends Impacting the U.S. Video Game Market“. Savvy analyst Matt Piscatella walked online viewers through a ream of stats and information about how gaming has settled into a “new normal” in 2023, following the boom and droop of the pandemic, and its aftermath.
Piscatella is executive director of video games at Circana, with a resume that includes stints with Warner Bros’ gaming operation and Activision. Circana is a new name in gaming analytics, but given that it is formed from a merger between NPD and Information Resources Inc., it draws upon a long legacy of solid data collection and reporting.
“By the time the year ends, we’re expecting 3 percent growth in consumer spending in the video game space to about $58.3 billion,” said Piscatella, explaining some of the underlying dynamics behind those stats. Growth is coming firstly from increased availability of new consoles, most especially PlayStation 5, and from a collection of major releases this year, such as Bethesda’s Starfield, which is out this week.
Although overall sales are down on the pandemic peak, they are up slightly from the same period (12 months ending in July) last year, and 13 percent higher than pre-pandemic levels. Hardware volumes are up 19 percent year-on-year, mostly driven by PS5, but also by a Nintendo Switch mini-boom, triggered by the release of The Legend of Zelda: Tears of the Kingdom.
But the market is also hampered by wider economic and demographic factors, most especially as consumers face rising prices for everything from groceries to cosmetics. These are proving to be especially impactful – at least so far as video game spending goes – among lower income households, and younger adults. Piscatella rightly called this a worrying trend that might lead to the gaming consumers of the future drifting away.
“We’re seeing a pretty significant shift away from low income households towards high income households when it comes to hardware mix,” he said, indicating a ten point swing for households bringing in $100K or more, versus households earning $50K or less.
“The new generation systems are more expensive. We have higher prices in everyday spending categories. That’s resulted in the higher income households having more purchasing power when it comes to the hardware market. And the lower income households [are] really starting to get squeezed out of this hardware market. This is very concerning to me, especially when we’re talking about younger people or college kids – keeping them in the ecosystem and engaged in the console space.”
But economic pressure is a universal problem. “The consumer is under some pretty intense pricing pressure right now,” he said. “When we chatted with folks in July, and we asked ‘have higher prices impacted your overall shopping behavior during the most recent six months compared to last year,’ – only 12 percent of people said that it hasn’t changed their behavior at all … The higher prices people are seeing are definitely having an impact on how people are shopping.”
He warned that uncertainty about student debt relief could also have an impact on spending, with 45 million people in the U.S carrying student debts that amount to an average of $500 a month.
“That’s a big chunk of change that could absolutely impact where people are allocating dollars and discretionary spending categories, particularly for a luxury good like video games,” he said.
Like most market sectors, physical gaming shows a rise in average prices for goods, and a decline in unit sales. However, this is less to do with the kinds of price increases that we’ve seen in other sectors, and more to do with a shift in spending towards high-end consoles, like PS5.
In comparison to previous console generations, the new crop of machines are more than holding their own. PlayStation 5 is trending ahead of both PlayStation 3 and PlayStation 4. Sony has taken a significant early lead over Microsoft’s Xbox Series, but the latter is still ahead of its highly successful Xbox 360, at the same stage in their life cycles. Meanwhile, the Switch has sold more than the phenomenally successful Wii.
Circana’s stats show some demographic curiosities when it comes to gaming. Audience sizes among young adults has seen a decline, while the audience among people aged over 44 has grown. Again, Piscatella put this down to economic factors, as well as the fact that the generations who grew up with gaming consoles are getting older, but no less keen on gaming.
Gender-wise, the split among console games is 53 percent male to 47 percent female, while on mobile, 54 percent of players are female. On PC, it’s evenly split 50/50.
Although pent up demand for new consoles drove a lot of growth in the last year, the next few months are likely to be about content. This summer has seen some massive releases, including Zelda, Stargate, and Baldur’s Gate 3, with more blockbusters on the way, such as Assassin’s Creed Mirage, Spider-Man 2, and Super Mario Bros. Wonder.
“We have so many big games coming through the second half of the year,” said Piscatella. “Maybe too many. But I think we’re going to be in pretty good shape when it comes to comparing with the second half of 2022’s slate. Of course that makes the second half of ’24 a little bit tougher, but we’ll worry about that next year.”
You can watch the full presentation here.