Video games

Playing field

The Netherlands is the sixth-largest video games market in Western Europe and the fifteenth-largest globally, with revenue exceeding €1.0bn in 2018. The video games market has been enjoying strong revenue growth in recent years thanks to the increasing popularity of social/casual gaming. We believe the social/casual gaming growth rate will decline to single digits after 2018 and that the segment will reach its saturation point by the early 2020s.

Various strands of innovation, from new consoles to the potential of VR and eSports, provide consumers with a constant stream of new experiences that will continue in the coming years.

In addition, positive spill-over effects from the Video Games segment are becoming increasingly visible in other media segments. Most notably, online video and digital advertising revenues from people moving away from linear television, to watch gaming streams on other platforms such as Twitch and YouTube.

What’s new

Although large-scale sandbox environments and competitive multiplayer gameplay have been around for some time, a combination of the two models has been a white spot for gaming companies. The release of PlayerUnknown’s Battleground and Fortnite has fuelled an exceptional surge in this genre, in terms of both gamers and game viewers (15m to 20m on a weekly basis on Twitch). Both games are largely cross platform, but differ in accessibility. Fortnite is free to play (but made over €270m in revenues in May 2018 largely through in-game purchases of cosmetics), whereas PlayerUnknown’s Battleground is not. Dice has already announced that the new Battlefield franchise will include a game mode representing the battle royale genre (due October) and it will be interesting to see how other games try to get a piece of this fast-growing pie. On the other hand, whether the genre is just another hype or a sustainable business model remains to be seen. Sustainable success in the video games segment requires an understanding of the target audience to maintain relevance, an efficient way to engage them, an effective monetisation strategy, a seamless technological experience, and a good dose of luck to capture a share of the consumer’s leisure time.

Video games market (€ millions)
Netherlands   Forecast data   CAGR %
  2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 18-22
Physical PC games 23 22 21 20 19 18 16 14 12 10 4.9%
y-o-y growth   -4.7% -5.0% -3.1% -5.7% -7.9% -9.5% -11.9% -15.7% -18.8%     
Digital PC games 12 15 18 19 19 19 20 21 22 24 -12.9%
y-o-y growth   23.3% 16.0% 4.9% 1.4% 3.3% 3.8% 4.8% 6.0% 6.1%     
Online/microtransaction PC games 155 167 177 195 205 215 225 235 245 255 4.8%
y-o-y growth   8.3% 5.6% 10.3% 5.1% 4.9% 4.7% 4.3% 4.3% 3.9%  
Physical console games 143 142 141 135 135 128 122 116 110 104 4.4%
y-o-y growth   -0.4% -0.5% -4.3% -0.5% -4.7% -4.9% -5.1% -5.2% -5.2%  
Digital console games 48 55 63 69 75 81 90 103 118 137 -5.0%
y-o-y growth   15.6% 14.4% 9.3% 8.8% 7.8% 11.4% 14.7% 14.7% 15.7%  
Online/microtransaction console games 29 58 71 83 97 111 125 139 154 169 12.8%
y-o-y growth   101.6% 23.4% 16.8% 16.6% 14.2% 12.6% 11.2% 11.1% 10.1%  
Traditional gaming revenue 409 460 491 521 549 572 598 627 661 698 11.8%
y-o-y growth   12,3% 6.8% 6.1% 5.4% 4.1% 4.6% 5.0% 5.3% 5.6%  
App-based social/casual 76 129 193 259 322 371 400 422 433 443 6.2%
y-o-y growth   68.2% 50.2% 33.9% 24.6% 15.2% 7.8% 5.5% 2.6% 2.3%  
Browser-based social/casual 16 16 15 15 14 14 13 13 13 12 6.6%
y-o-y growth   -1.8% -2.3% -4.7% -2.5% -2.6% -2.7% -2.8% -2.9% -2.9%  
Social/casual gaming revenue 92 144 208 273 337 385 414 435 446 455 -2.8%
y-o-y growth   56.1% 44.5% 31.1% 23.2% 14.4% 7.4% 5.2% 2.4% 2.1%  
Video games advertising revenue 32 35 38 43 46 48 51 53 55 56 4.2%
y-o-y growth   8.7% 8.1% 11.8% 6.8% 6.1% 5.2% 4.1% 3.4% 2.4%  
Total 534 639 738 837 932 1,005 1,062 1,116 1,162 1,210 5.4%
y-o-y growth   19.7% 15.4% 13.5% 11.3% 7.9% 5.7% 5.0% 4.1% 4.1%  

Outlook

The overall outlook for the video games market remains bright. Its fundamental strengths persist, and even though we expect the growth rates of recent years to cool somewhat, the market will continue to expand steadily. The forward march of technology means that video games can offer an improved gaming experience and therefore reach a wider audience, ensuring a solid basis for growth.

Revenue from sales of boxed video games have been in steady decline for several years, but this is relatively modest compared to the collapses seen in the physical music and home video markets.

In response, publishers are trying to compete more effectively by offering more digital sales and discounts and by shifting towards microtransactions and subscriptions to reduce their reliance on upfront sell-through revenue. Recently, the increasingly common practice of randomised reward packages, known as “loot boxes”, has come under fire. Games with loot box systems, such as Star Wars: Battlefront II and Middle Earth: Shadow of War, have suffered fan backlash. More seriously, several jurisdictions, including the Netherlands, have determined that certain kinds of loot boxes are gambling and should be regulated as such. Publishers appear to be getting the message, and at E3 2018 were keen to emphasise the absence of loot boxes and other unpopular revenue-generating techniques from their games (e.g. paying for DLC). The shift to microtransactions is well under way, but companies need to tread carefully; if accelerating the process means alienating gaming communities and regulators, it’s not a price worth paying.

Contact us

Martin Kazimier

Manager, PwC Netherlands

Tel: +31 (0)88 792 47 33

Jeroen de Visser

Director, PwC Netherlands

Tel: +31 (0)88 792 72 81

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