Video games are a big business. So big in fact that it’s bigger than even the film industry—the global film industry. In 2015, the total revenues for the video game industry in the United States alone hit $23.5 billion—a 5% jump over 2014. It’s a number that continues to rise as the industry gets ever larger in every aspect, be it AAA game releases like Call of Duty and Battlefield or indie titles that serve smaller, niche markets. Smaller titles like Stardew Valley, a game developed by a single man, earned over 1.2 million sales since its release in February this year.
And there is no bigger, more profitable industry than the mobile games industry, which hit $34.8 billion in 2015. Games like Clash of Clans (whose developer Supercell was recently acquired by Tencent for 8.6B) and Hearthstone made up 85% of all app revenues in the iOS and Android markets. The number is expected to grow to a sprawling $74.6B by 2020 according to a larger report by App Annie.
Games in both mobile and standard formats are growing due to the strong monetization in markets like the North America, Europe, China’s major cities, Japan and South Korea. Even smaller markets like the Philippines and Vietnam are starting to take notice.
More popular games, like Clash of Clans and League of Legends, are marketed as “free to play,” and depend entirely on in-app purchases to rake in a profit. Others, which are branded “premium games” generally cost more up-front but have little to no support for in-app purchases. Arguably, the games that are free to play tend to cost more money down the line as players end up spending hundreds of dollars investing in virtual card decks and fantasy armies. Even AAA titles like Call of Duty and Overwatch for the PC and console now feature strong “in-app” components or microtransactions to encourage players to spend even more on the game despite having already shelled out for full priced titles.
Most recently, Twitch even introduced a microtransaction system allowing players to donate “bits” to their favorite streamers as they watch them. Twitch takes a small cut, while streamers keep the rest.
Looking at where things are headed, it’s easy to see why the industry’s become the largest and most profitable there is. Until Hollywood figures out a way to monetize movies with in-app purchases, it’s unlikely that they’ll ever be able to catch up.
