Video games

Playtime is over; with revenue surpassing one billion euro in 2018, video games are serious business and here to stay.

Playing field

The video games market in the Netherlands continues to grow strongly, with total revenues expected to surpass the €1bn threshold in FY18. The historical and projected growth is mainly driven by:

  • the rise of app-based social/casual gaming, with a CAGR of 10.5%, mainly due to:
    • increasingly capable and cheaper devices
    • a smartphone penetration for consumers aged 13 and older of c. 80%
    • the relatively long time we spend gaming on our mobile devices
    • easily accessible App marketplaces

We believe this strong growth will continue over the forecasted period as mobile game developers are becoming better at monetising their titles. Although market saturation will be reached somewhere around 2020.1

  • a steady increase in traditional gaming revenue, due to the emergence of in-game purchases, DLC and microtransactions on PCs and consoles. A factor of importance is that gaming is becoming an increasingly popular and socially accepted hobby, and the generations that “grew up gaming” will continue to play video games.

1 The projected social/casual revenue growth is at the high end of the spectrum. Due to the hit-driven nature of social/casual games the revenue growth can fluctuate year-on-year depending on major releases failing or succeeding.

Continued success remains elusive for many Dutch game companies.

Advertising revenue remains relatively small, but only represents static advertising as dynamic advertising is included in the Internet Advertising section.

Last year, digital revenue on consoles exceeded physical revenue for the first time, which is in line with the overall shift towards in-game purchases, DLC and microtransactions. 

Video games market (€ millions)
Netherlands Historical data Forecast data CAGR %
  2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 17-21
Physical PC games 28 23 22 21 20 19 18 17 16 15 -6.5%
y-o-y growth   -17.4% -4.7% -5.0% -3.1% -5.7% -5.9% -6.5% -6.9% -7.7%     
Digital PC games 9 12 15 18 19 19 19 19 19 20 1.3%
y-o-y growth   32.2% 23.3% 16.0% 4.9% 1.4% 1.3% 1.2% 1.1% 1.3%     
Online/microtransaction PC games 142 155 167 177 195 205 215 225 235 245 4.7%
y-o-y growth   9.0% 8.3% 5.6% 10.3% 5.1% 4.9% 4.7% 4.3% 4.3%  
Physical console games 191 143 142 141 139 135 132 128 124 121 -2.8%
y-o-y growth   -25.3% -0.4% -0.5% -1.8% -2.5% -2.7% -2.7% -2.9% -3.0%  
Digital console games 42 48 55 63 68 74 80 88 101 115 11.0%
y-o-y growth   12.7% 15.6% 14.4% 8.8% 8.3% 7.3% 11.0% 14.3% 14.3%  
Online/microtransaction console games 21 29 58 71 83 96 109 123 136 150 12.7%
y-o-y growth   38.3% 101.6% 23.4% 16.3% 16.1% 13.7% 12.2% 10.8% 10.7%  
Traditional gaming revenue 433 409 460 491 524 549 573 600 631 666 4.9%
y-o-y growth   -5.6% 12.3% 6.8% 6.7% 4.7% 4.4% 4.8% 5.2% 5.4%  
App-based social/casual 40 76 129 193 259 322 371 400 416 427 10.5%
y-o-y growth   90.7% 68.2% 50.2% 33.9% 24.6% 15.2% 7.8% 3.9% 2.6%  
Browser-based social/casual 15 16 16 15 15 14 14 13 13 13 -2.7%
y-o-y growth   5.3% -1.8% -2.3% -4.7% -2.5% -2.6% -2.7% -2.8% -2.9%  
Social/casual gaming revenue 55 92 144 208 273 337 385 414 429 439 10.0%
y-o-y growth   67.2% 56.1% 44.5% 31.1% 23.2% 14.4% 7.4% 3.7% 2.4%  
Video games advertising revenue 29 32 35 38 43 46 48 51 53 55 5.1%
y-o-y growth   10.7% 8.7% 8.1% 11.8% 6.8% 6.1% 5.2% 4.1% 3.4%  
Total 518 534 639 738 840 931 1,006 1,065 1,113 1,160 6.7%
y-o-y growth   3.1% 19.7% 15.4% 13.9% 10.8% 8.1% 5.8% 4.5% 4.2%  

What’s new?

Microsoft and Sony opt for mid-cycle hardware upgrade and Nintendo innovates with hybrid console

New hardware releases are shaking up the console market with all three major platform suppliers launching new devices in 2016 and 2017. Sony and Microsoft have opted for “mid-cycle” refreshes which maintain compatibility with existing games while adding improved features and visuals, particularly support for 4K resolutions and HDR (high dynamic range) video.

Sony’s PS4 Pro launched in November 2016, while Microsoft is planning a November 2017 launch for the Xbox One X. The latter is a more ambitious upgrade, although its launch price of €499 is likely to be a stumbling block for many consumers.

Nintendo, meanwhile, has opted for an entirely different strategy by launching the Switch, an all-new hybrid console, in March 2017. The device is based on tablet technology, but is designed to be used both on the go and connected to a TV. The Switch has enjoyed strong early sales, but to secure long-term success it will need greater support from third-party publishers than has so far been forthcoming.

Nintendo is also – for the first time in its existence – moving its intellectual property beyond its own hardware platform, Super Mario Run being the prime example, although results lagged expectations.

eSports slowly gaining some traction, but we believe the Dutch market will remain small

eSports are slowly gaining some traction in the Netherlands, but is lagging compared to the rest of the world. One notable event was the launch of the E-Divisie in February 2017, with FIFA17 players representing each of the eighteen Eredivisie teams in a digital league. Reception of the E-Divisie was, and still is, mixed. This is perhaps exemplary of the low maturity level in the Netherlands when it comes to organising eSports events.

It is difficult to make a living from eSports in the Netherlands, with notable exceptions being Fabian Diepstraten (League of Legends) and Thijs Molenaar (Hearthstone). The current Dutch presence on the international scene is limited and there aren’t any Dutch eSports players in international top 100 lists anymore. Whereas in the past Sander ‘V0o’ Kaasjager (Painkiller, now retired) and Manuel ‘Grubby’ Schenkhuizen (Warcraft 3) almost made it to the top 10.

Outlook

We see a number of user experience changes in the gaming marketplace, but these will take time to fully materialize

The consoles of Nintendo, Sony, and Microsoft, and the PC have been the dominant ways to game for the last decades. For most of this timespan, they have remained separate camps. Once a gamer has opted for a camp, they are likely to stick with it, due to friends that have made the same choice, the cost of acquiring a new console or PC, the (exclusive) gaming franchises that they have grown to like, and the perceived “inferiority” of the other camps.

We see an increasing number of games offering cross-platform support, breaking down the separated camps of consoles and PCs. Notable examples are Rocket League, Street Fighter, Minecraft and Portal. Although cross-platform gaming is on the rise, we don’t expect this to become a major force in the market, as the applicability highly depends on the type of game.

Cross-platform support only makes sense for games where the pace is slower or those games with a “level playing field” where the same input method (e.g. a controller or keyboard and mouse) is required or dictated by the game.

 

Virtual Reality (VR) and Augmented Reality (AR) are also on the rise. We also do not expect these to be a major force in the market until 2020 due to immature hardware, lack of content and high cost of entry. It will likely take at least two more hardware cycles before these to truly become mainstream.

The Dutch gaming industry is dominated by a few larger players. The rest of the market consists of small (<25 FTE) firms, for whom continued success remains elusive

The Dutch gaming industry consists of more than four hundred companies involved in the creation and publishing of games, including:

  • Guerilla games (> 200 FTE) who are known for Killzone and recently released Horizon Zero Dawn, also to global acclaim. Horizon took six years to develop, with the involvement of 250 people and a budget of €45m.
  • &Ranj and &Samhoud (circa 150 FTE) who develop serious games in education, healthcare and corporate, with over 400 games created to date.
  • Spil Games (circa 125 FTE), who produce and publish both mobile and web games.
  • Ronimo (circa 20 FTE) who made Awesomenauts and Swords and Soldiers.
  • Triumph (circa 15 FTE), famous for Overlord and Age of Wonders.
  • Grendel Games (circa 13 FTE), who focus on developing educational games. Grendel Games recently gained fame with a game surgeons can use to practise some of their vital skills.

Some of the companies mentioned above have a long history spanning multiple decades. However, the games industry remains a tough industry. Making games is a highly complex activity, which is compounded by the rapid pace of innovation, and the many companies involved in putting a game on the market (all requiring a share of any revenue). This means that continued success will remain elusive for many game companies, particularly smaller ones.

Contact us

Martin Kazimier
Senior Consultant
Tel: +31 (0)88 792 47 33
Email

Jeroen de Visser
Senior Manager
Tel: +31 88 792 72 81
Email

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