A group of analysts believe that video game revenue will come entirely from digital sales by the year 2022. That means that gamers need to start working on upgrading hard drive space on their PCs and consoles because there will come a time when video games are no longer available in physical form.
Any player of video games has already noticed the trend of digital games becoming more popular. Independent studios already rely almost entirely on digital revenue, with some games only seeing releases as downloads. Players may not like it - at least those who like to have something they can hold in their hand - but like everything, online is where the money is at.
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A report written by Michael J. Olson and Yung Kim for Piper Jaffray [h/t Wccftech] shows that sales for physical video games drop about 10 points per year. They estimate that by the year 2022, revenue from video games will come entirely from digital sales. There is also an increase in subscription services, including services such as PlayStation Plus and Xbox Live, that offer video game downloads each month. Other revenue models to consider include services such as PlayStation Now and Xbox Game Pass that allow gamers to stream and play older games for a set subscription fee each month.
These analysts expect that streaming and subscription models will continue to boost digital sales and that these models will become a major area of focus over the next 3-5 years.
"Streaming games from the cloud, without need for dedicated hardware or massive downloads, would materially grow the TAM (total addressable market) for high end console-style titles. Specifically, today the primary market for major video game publishers is tied to consumers that own an Xbox One, PS4 or gaming PC, which currently has an installed base of 150-250M (depending on how gaming PC is defined) and a minimum price point of $199 (Xbox One S), which creates a barrier to entry for many would-be gamers. With ongoing datacenter build-outs and improving internet speeds, streaming games from the cloud could be a commercial reality within 2-3 years."
Sales from digital downloads of video games continue to rise around 25 percent each year. As of May, players spent around $9.1 billion on digital game downloads. In comparison, they only spent $7.3 billion the previous year. Free-to-play games, such as Fortnite, take in around $200 million per year. Downloadable mobile games also continue to increase in sales every year by around 36 percent.
Digital game downloads also offer benefits for players, too. Being able to digitally download any title allows gamers instant access to what they want to play when they want to play it, although the downside is that the used game market will end up quietly going away (something that is already starting to happen). Digital is already highly popular with music, television and movies, so it's no big surprise that gaming will soon go that way as well.