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Development of the Video Games Industry in the 21st Century (In Progress)

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Development of the Video Games Industry in the 21st Century

Sean B. Coates

Intro: The Largest Medium of Entertainment

The video game industry is the largest of all mediums of entertainment, with a projected global revenue of $365.6 billion for 2023. It far surpasses global movie box office sales of $33.9 billion, which still hasn't reached its pre-pandemic levels. In fact the video gaming industry grew very well during the pandemic; with many people locked at home this result makes a lot of sense. Don't worry though, the pandemic is not the focus of this project.

With the video game industry holding this position, and being an avid player myself, I wanted to see how this is reflected in the development of different platforms. Just as we've had many different ways of watching films over the years: cinemas, VHS, DVDs, etc., video games have also been offered on many different systems. They've been played on arcades, consoles, PC, and now to VR headsets and mobile smartphones. The popularity of these platform types have also changed throughout the decades, such as arcades dominating the industry in the 1970s and 1980s, to becoming almost a rarity today.

Motivation

I'm interested in taking a look at how the video game industry has been developing in the 21st century. What platforms are doing better? Which consoles have dominated so far in the 21st century? Are any doing worse? Can we use data to predict the collapse of a gaming platform, or discover the lifespan of a console? What patterns can we find?

For this project I am interested in taking a more quantitative look into the industry revenue and popularity of games. When there is growth in a platform's revenues does it correspond to growth in popularity in only a few titles, or many? As PC revenues grow, are there more and more titles gaining popularity, or are there just a handful of titles leading the rest? As handheld sales decline, does that correspond to a decline in positive ratings for the more lately released titles, or is something else causing this? For this data to maintain consistency, I need to look at both critic and user scores.

Data

For this project I am using three datasets (click here for full data cleaning). The first dataset comes from The Visual Capitalist, and contains overall video game industry revenue per year, from 1971 to 2022, and the revenue broken down by platform types (e.g., consoles, arcade, mobile). The revenue numbers are rounded to the nearest billion USD and adjusted for inflation in 2022 USD.

The second dataset comes from Kaggle, which contains data on video games from Metacritic. Each record has a distinct id with a title, platform, and release date, which are collectively not duplicated, i.e., titles can be duplicated. Each record also contains the metacritic score, which is an average of critic scores, and a user score, which is an average of all given user scores.

The third dataset comes from VGChartz which contains total number of units sold per gaming console in North America, Europe, Japan, and the rest of the world. The platforms are then ranked by total number of units sold globally.

All tables are queried in pgAdmin 4 with PostgreSQL, and for all visualizations I used Tableau Public, which you can view and interact with here.

Methodology: Classifying Notoriety

I filtered out only the games which were released on or after January 1st, 2000, and before January 1st, 2023. The dataset only contains titles released until March of 2023, so I have excluded 2023 from the dataset. My final dataset for this project contains 137,328 distinct titles from 2000 to 2022 (I am aware the 21st century started in 2001, I am including the year 2000 in order to compare positive or negative growth for the first year of the century).

I will be looking at the platform(s) a game was released on, when it was released, and its metacritic and user scores. If a title doesn't have both a metacritic and user score, I will consider it to be in the least well-known category of games. If a title only has one score, then it will be considered as mediocre popularity. Since I don't have the number of users who chose a score for a specific title, I have to assume that the title has only gained mainstream notoriety if it possesses both a critic and user score.

Video Game Industry in the 21st century

Video Game Industry Revenue by Platform per Year

Here we can see each platform's best performing year, with the most recent marked if two or more years are tied. Taking a look at how the industry has been performing since the year 2000, we can see some interesting developments. There is a clear domination of mobile in recent years, the collapse of handhelds revenue, PC revenues overtaking consoles, and the struggling VR/AR. I am going to take a look at them one at a time.

Mobile Market Dominance

It looks like this is becoming the century of mobile gaming. In 2011 mobile gaming revenue became the highest in the industry, just squeaking past consoles at $25 billion, and it has yet to be surpassed. Mobile revenues haven't just stayed in first place, they have far surpassed the other gaming platforms in recent years. It has become the single most valuable gaming platform in the history of video games (remember, these numbers are already adjusted for 2022 dollars).

Mobile Gaming Revenue in the 21st Century

Have we seen this before? Has any other top selling platform stood at almost 82% revenue difference (in 2021, the greatest separation between mobile and PC) to its closest competitor?

Revenue by Platform Since 1971

As you can see here, this has been observed before. In 1980 arcade revenues were 85% more than consoles; however, in real numbers it's much less of a difference. There is also a noticeable shift in revenues in the early 1980s. Arcade revenues decline just as PC enters the market. This was the well-known and well-documented Video Game Crash of 1983, in which arcade gaming never fully recovered from.

Could this be a premonition for the industry today? Are we on the verge of another collapse? Well I believe that's unlikely for the industry as a whole, but a possibility for just mobile gaming, and here's why. In 2019 PC and consoles took a dip from the previous year. While mobile didn't stay on its trajectory, it didn't have negative growth. Looking at 2022 revenues mobile, consoles, and VR/AR all had negative growth, with only PC revenue in the positive. There is a correlation between platform revenues, but it's clearly not perfect.

The prevailing belief is that the crash of '83 was caused by oversaturation of the market, combined with low quality games being rushed out, and the added competition of a new competitor in PC games. Can we see the same trends in mobile gaming today? If not for the entire indsutry, is mobile gaming showing the same signs from the 1980s of taking a nose-dive?

As NewZoo reported mobile developers are encountering more challenges and are looking to expand to other platforms. This means that developers are noticing changes in the market and are preparing for them, which is the opposite of what game developers and publishers were doing in the early 1980s. An important factor to remember is how different games are today. Most titles are sold digitally, and with mobile games that's 100% of them. Publishers and small developers aren't having to invest in manufacturing for mobile gaming, so oversaturation isn't as big of a deal. Your game can sit on the AppStore for years without costing you a cent, only paying Apple a percent of your earnings. Even if the app stores are oversaturated with cheap titles, it's not so much of a problem for consumers. With rating systems and popularity algorithims, the best games, theorectically, get pushed to the front.

The Effect of New Technologies

There is one other aspect to look at here: VR and AR. As stated previously the introduction of PC gaming was one element of the 1983 collapse. Arcades required a lot of investment in tangible assets for suppliers, and for consumers it required travel and continuous costs. On the other hand PC gaming offered the ability to pay for a title once, and play it from home. And unlike a console, where a new device is needed to be purchased, PC games can be played on a system that you likely already own.

VR gaming is a new technology that is gaining moment, but it has yet to grab a real foothold in the gaming market. PC gaming is completely different from arcades, just as VR is to mobile. The major difference today, as compared with the 1980s, is the wide availability of different platforms. Multiple consoles, PC, mobile, and even modern handhelds, are all available to gamers to play as they wish. The collapse of 1983 was a much smaller, less established video game industry than it is today. This could be early signs of a bubble bursting, but more likely it's just a cooling off of mobile dominance. Is it possible that VR will have its day only once mobile gaming declines?

Mobile Title Releases by Popularity

On this graph we can see there is a very sharp decline in titles being released for mobile. Another interesting insight is how the notoriety of releases is being effected by this. As the number of games being released declines, a smaller and smaller number of them are gaining mainstream notoriety. Lastly, we can see that a decline in releases is not correlated to a decline in revenue. The first year where there were fewer titles released than the previous was 2013, and mobile gaming didn't see a drop in revenue until 2022. If mobile gaming had a "revolution" after the release of the iPhone, then it is now already at an end. Users are narrowing down what they like and don't like, and fewer developers are putting effort into releasing new titles. Oversaturation of the mobile gaming market has already occured, and it has survived.

This likely isn't becoming the century of mobile gaming, but it has definitely had its decade. Just like handhelds before them, mobile gaming found a niche in the market, spurned innovation from some of the big players, and will probably begin to see some negative revenue growth (or at least not outpacing its competitors).

The Rise and Fall of Handhelds

In the early 1990s handhled gaming seemed like the future. Prior to Nintendo's release of the first Game Boy in 1989, handhelds were limited to a single game per device. For the first time users could take one device and their favorite games, in the form of swapable cartridges, with them wherever they went to play on the go. Handheld revenues never sat at the top of the industry, but they definitely held their own through the 1990s and early 2000s, even outperforming PC revenues in 2007. Although there were many competitors to the Game Boy in the 1990s, Nintendo never lost its top place in the market. Even today the name "Game Boy" is synonymous with portable gaming.

Handheld Gaming Revenue in the 21st Century

There was a very clear revenue exchange between mobile and handhelds in 2008, when both platform's revenues were equal at $15 billion. Mobile then surpassed handhelds in 2009 and never looked back. Does this mean that as mobile gaming grew, it caused a collapse in handheld gaming? Is there a correlation between the rise of mobile and the fall of handhelds?

Handheld revenues steadily dropped after 2007, and then in 2020 they were worth less than half a billion dollars. Mobile gaming entered the market in 1996, matched handheld revenues in 2008, and didn't see negative growth until 2022. It seems to me that there is a very clear correlation here. The year 2007 saw the release of Apple's first iPhone, and since then smartphones have become the norm. With smartphone sales rapidly increasing every year it makes sense that consumers would choose not to carry two hand-held sized, gaming-capable computers in their pockets instead of one. If my iPhone plays games just like my Nintendo DS, but it also allows me to make calls, read emails, etc., then why keep the gaming handheld? Just like PC gaming did to arcades in the 1980s, mobile gaming has provided handheld consumers with a more accessible way to play video games.

The difference with mobile, as compared to handheld, is the availability. Handhelds required us to carry around a, sometimes large and inconvenient, device to play when we wanted. We aren't going to see smartphones disappear any time soon, which means mobile gaming can always be there in our pockets whenever we want. How have handheld games been effected by mobile gaming domination?

The Handheld Console War

Number of Titles Released per Handheld Console per Year

In 2008 when mobile and handheld revenues were equal, there was still a rise in handheld games being released. In 2011 when mobile had the highest industry revenues for the first time, we see the first major decrease in the number of handheld titles released for the widely popular DS; although this could correlate to the release of the newer 3DS. With the next generation of handhelds (3DS and Vita), the total number of title releases would increase again, but not reach the heights of the previous decade. Lastly, we can see that 2015 was the first year that that were fewer titles released for every handheld console, expect for the DS, than the previous year; the beginning of the end for handhelds.

Nintendo clearly dominated the handheld market in the first decade of the century; with the PlayStation Portable never being able to truly compete in available titles. As a newer handheld was released from the same company, fewer titles were released for the previous version, nothing unexpected with this. A really interesting insight here is the contrast between the PlayStation Vita and Nintendo 3DS. Where the original DS saw the highest number of title releases, its upgraded version didn't gain the same interest. The PlayStation Portable struggled to get games, but the next-generation Vita saw a large jump in title releases. Both companies eventually saw the writing on the wall and ceased production of their handhelds by 2020.

Popularity of the Last Handhelds

Now we can take a look at the popularity of the last two major handheld consoles. Since both have predecessors, it is not important to view their popularity, as the released titles will naturally fall once the sequel device is released. But what happened with releases in those final years? Were there many games gaining noteriety among the last handheld console gamers? Were developers pushing out titles to a dying platform?

Popularity of Titles Released for the Nintendo 3DS per Year

Popularity of Titles Released for the PlayStation Vita per Year

The above graphs show us the popularity of titles released for the last gaming handhelds from PlayStation and Nintendo. Comparing this to the total number of handheld units sold helps us to understand the final days of this gaming platform.

Total Number of Units Sold in Millions of Units

Both the 3DS and Vita failed to obtain similar numbers of total units sold than their predecessors; although the biggest failure here is the Vita. The original DS is the second best selling gaming console of all time, and even the PSP sits in the top 10. The 3DS does sit ten positions behind its predecessor, but it's still twelth in a list of eighty-three.

Both handheld consoles had similar beginnings, with around 80 games each being released in their first year gaining mainstream noterierty. With the sharp increase in least known titles (as well as the total number of titles) released for the Vita, it looks like many developers saw its potential and believed in the success of the device; however, this didn't last. On the other hand the 3DS had a much more steady rise and fall over its lifespan, and two sharp increases in the least known titles. The first is a natural rise after the console's release, same as the Vita, but the second comes years later. This is likely due to the fall of the Vita's popularity. The commercial failure of the Vita is often attributed to PlayStation itself, who announced only 3 years after its release that they were no longer developing games for the handheld console. If handheld console game developers saw this collapse of the Vita, it makes sense they would look to its competitor. Although it doesn't seem like handheld consumers dropped their Vitas and picked up 3DSs. In total numbers, there were many more games released for the Vita compared to the 3DS. It looks like the number of released titles wasn't as important for handheld gamers, they just preferred Nintendo's. This is likely due to Nintendo continuing to develop games for 3DS for much longer than PlayStation was willing to for it's Vita.

By the latter half of the last decade the era of handheld consoles came to an end. PlayStation announced they were not developing a successor to the Vita, and Nintendo looked to merge handheld and home consoles with their new Switch. But this isn't necessarily the end for handheld gaming.

The Return of Handhelds?

The one interesting point about handhelds is that they look to be making a comeback; however, this is not the traditional handhelds like the ones I've been discussing here. Nintendo, ASUS, and Valve all have handhelds on the market (and they aren't the only ones), and all are looking to expand and innovate in this field. There is one very interesting difference between the old handhelds and the new ones. Valve's Steam Deck and ASUS's ROG Ally don't play exclusively released titles, they bring the experience of PC gaming to a mobile setting. The Nintendo Switch provides not only a similar, but a much more optimized experience. The Switch allows users to play games like a console, at home on your TV, or switch (no pun intended) to a portable, handheld device to play from anywhere you want. This experience doesn't require two devices. You take the handheld device off a docking station, attach the controllers, and then go where you please. The Steam Deck and ROG Ally allow users to pause a game on the mobile device, and then continue it on their PCs, or vice versa. There are also many popular mobile games being released today for console and PC as well. Can you see where this is headed?

The take away from this is that innovative platforms don't exist in a vacuum. Handhelds like the Gameboy paved the way and proved the interest in on-the-go gaming. The rise of smartphones provided more access to mobile game titles. Now that PC and consoles are the preferred choice for casual gaming, the interest in a mobile component hasn't just gone away. The ability to play our favorite games from anywhere we are is likely a niche in the market. The handhelds of yesteryear and the mobile games of the last decade are filled with exclusive titles. The handhelds being released today are the next step of innovation.

It's unlikely mobile gaming would be where it is today if it wasn't for the handhelds we used to know. And the handhelds being released at this moment are taking inspiration from both. The industry is on the cusp of another new innovation in portable gaming.

Which Consoles Have Dominated in the 21st Century So Far?

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How long is the lifespan of a console?

Is it possible to measure the lifespan of a console? Taking a look at how many years and how many games are released for a console gives an indication of its lifespan.

Number of Titles Released per Console per Year

There is very clearly an uptick in the total number of releases over time. It makes sense that as interest grows around gaming, more developers will jump into the market. The massive increase in industry revenue in the 21st century isn't being fueled by a small number of games, but instead by many games from many companies.

The other thing to point out here is the consolidation of console gaming by the big three: Nintendo, Sony, and Microsoft. Historically there have been a variety of console makers, each trying push their way into homes. Sega famously gave up on the "Console Wars" after the failure of the Dreamcast, and instead focuses on game development these days. If there was a console revolution, it now seems we are long out of it. The PlayStation, Xbox, and Nintendo systems are well established as the leaders in console gaming, and it will take a lot to push them out. For gamer the argument now is about which next-generation console is more deserving of a purchase. For the most part gamers are repeat customers, with the major companies relying on brand loyalty to ship their newest platform.

The PC Master Revenue Stream

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Is there correlation between revenue growth and title releases?

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Conclusion

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