While 2016 will be remembered as a year of technological advancement in video games, with the release of a slew of VR headsets, 2017 will determine the commercial viability of virtual reality gaming. With costs associated with the platform decreasing and rising game availability, we expect global volume sales of AR/VR headsets to reach 10.7 million units in 2017. The year ahead will also see the release of a new console from Nintendo, as well as the Xbox Scorpio. Combined with a continued sales boost from PlayStation pro that we expect to last into 2017, it looks to be another year of positive growth for static consoles. However, the ubiquity of smartphones makes mobile games the biggest and most accessible gaming platform. Content producers are beginning to see the value of mobile games as advertising tools, and this business model will see growing use in the course of the coming year.
Critical year for virtual reality
2016 saw the introduction of much anticipated virtual reality headsets for computers and consoles. Products like the PlayStation VR, Oculus Rift and HTC Vive represented a significant improvement in experience quality over mobile-based systems like Samsung VR, but this came at a significantly higher cost. Through most of 2016, high prices and a small library of compatible games kept sales of VR headsets to early adopters, but the release of the PlayStation VR in Q3 has put virtual reality into focus for the holiday shopping season. While hardware updates and new releases will continue through 2017, the focus will be on game development for virtual reality. And while designing entire games around VR will likely be the path most developers take, we expect to see a growing number of computer and console games including a VR mode or episode into larger games, an approach that allows experimentation within the new medium with significant risks.
The flattening console cycle
The popularisation of console-based VR over the forecast period will even out the fluctuations in sales of static consoles, with launch year peaks followed by declines. Therefore, we expect no significant fall in static console sales in 2017, but significant growth is also not a likely scenario. We expect to see continued upgrades to PlayStation Pro, as well as Xbox Scorpio later in the year. In addition, sales growth will be supported, but to a lesser extent, by the release of Nintendo Switch in spring 2017. While Nintendo has had hit as well as miss products, the company commands a loyal following and a portfolio of video game properties like Mario, Zelda and Pokémon capable of moving significant volumes off store shelves.
Mobile games as advertising
The success of Pokémon Go in 2016 remains a significant positive factor in the prospects for Nintendo Switch as the game brought the Pokémon franchise to a new generation and rekindled nostalgia in the coveted millennial demographic. However, the game’s popularity lasted only a few months, highlighting the problem of player retention that has long plagued mobile games. Despite their short life expectancy, mobile games command large audiences and can generate revenues from in-game purchases. With global sales of smartphones topping 1.6 billion units in 2016, mobile games are emerging as a great interactive advertising tool for entertainment franchises that also generates revenue. Hasbro has plans to roll out a new free-to-play mobile game in 2017, Forged to Fight, ahead of the release of the next Transformers feature film. This will not be the first mobile game to feature content from Transformers, but Forged to Fight looks to be the most serious incursion into mobile by the franchise.