Week 2 EOC: Boston Consulting Group - Video Games

Due to the latest hardware and software innovations, the videogame industry has maintained a constant flow of revenue this past year. In 2015, free-to-play as well as multi-player made the biggest splash, while mainstays like Sony and Microsoft continued to cash in due to the release of widely anticipated games.

Stars – “The big moneymaker in absolute dollar terms was PC-based gaming, which includes free-to-play titles, subscription-based games, social games like "Farmville," and other downloads. Games on the platform pulled in $32 billion in 2015.”

(http://www.cnbc.com/2016/01/26/digital-gaming-sales-hit-record-61-billion-in-2015-report.html)

“The shift to digital is well under way, but physical persists. By 2019, global digital distribution of traditional games will generate revenue of US$12.89bn, or 19.6% of traditional gaming revenue. “

(http://www.pwc.com/gx/en/industries/entertainment-media/outlook/segment-insights/video-games.html)

Free-to-play as well as online multiplayer games seem to the major players in the videogame market right now. Games such “Farmville” and “League of Legends” generate billions of dollars in revenue, and it’s potential is unknown. I believe the rise of social, the flexibility of this market, as well as positive word-of-mouth guarantees massive streams of revenue for years to come.

Cash Cows –“While the ESA did not break out hardware sales in its 2015 figures, January 2016 saw an 8% drop in sales of eighth generation consoles (the PS4 and Xbox One).” (http://fortune.com/2016/02/16/video-game-industry-revenues-2015/)

Eighth generation consoles such as the Playstation 4 and the Xbox One, as well as the Nintendo Wii currently continue to generate huge revenue due to the popularity of games such as “Call of Duty”, “Destiny”, and “Fallout 4”. It reached its peak back in December 2015, but it’s ceiling is highly dependent on the releases of popular games, limiting it’s potential to when a highly anticipated series comes out.

Question Mark – Nintendo continues to play second fiddle to Sony and Microsoft in the video game market, and there isn’t a sufficient pattern that suggests that it could suddenly be worth investing in. The Wii console has taken a backseat to consoles offered by Sony and Microsoft, although it’s seen a slight uptick in hardware sales back in 2014.

Dogs – Seventh generation consoles such as the Playstation 3 and the Xbox 360 saw a steep decline in sales, falling by a dismal 81% in early January. Due to the availability of newer generation consoles, it is safe to say that its best days are over.