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European Video Games Society

10th Workshop
Market trends in the video games
sector: today and tomorrow
17/11/2022
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Welcome and introduction

This workshop is the tenth in a series of twelve workshops to be held throughout 2022 to help inform a
study exploring the value and impact of the video game (VG) sector in the EU. The study will investigate the
impact of the sector on key EU policy areas and explore how the EU can be proactive in developing and
delivering specific policy approaches and objectives. The study will also start to establish a network of actors
and experts across the EU by bringing together stakeholders across the VG ecosystem together and
facilitating exchange.

Key themes: Trends in the VG sector, in terms of industry and market trends, business models and revenue
streams, and audience and customer behaviour.

Key questions: What are the key trends that the industry players and their representatives are seeing
arising in the VG sector in the EU and beyond? What challenges and opportunities do these trends provide
for the VG industry in the EU? What can policy makers and relevant stakeholders do to support the
development of the sector at the EU and Member State (MS) levels?

Setting the scene: welcome, introduction to the project and

presentation on emerging issues
The presentation from moderators looked first at the general context: The VG market grew significantly
during the pandemic, with a growth of +26% in market size and +$39bn in customer spending from 2019
to 2021. Although the sector grew, it is recognised that the past two/three years have been a difficult period
for the industry in terms of securing investment, well-being challenges in the workforce, and general
growing pains' from rapid levels of growth. In addition, it has been projected that in a recovery world after
the pandemic, the VG sector is expected to shrink, with predictions that the market is set to decline by
1.2% in 2022. This is partly linked to the changing behaviours among customers, but also to the fact that
VG sales are not immune to macroeconomic turbulence, and the heavy inflation, the increasing cost-of-
living, and a higher potential for a recession might exacerbate the decline. In addition, in both the EU and
globally, growth is currently often led by mergers and acquisitions. As a result, the industry is increasingly
consolidated in the hands of a few global conglomerates. There are also challenges linked to the extreme
talent shortage, with lack of VG developers but also skills shortages across the sector. In the EU the industry
has seen a growth overall, although uneven if looking at individual MS.

In terms of technical innovation in the VG sector, evidence shows that this is strongly linked to business
models and the availability of hardware. Supply chain challenges are still negatively impacting console and
PC gaming. Machine Learning (ML) is now used widely to personalise content, support product
development, and moderate online communities. It is still unclear to what extent and when the metaverse
is going to change business model dynamics, and immersive applications (VR/XR) are increasingly being
used especially in training and wellbeing applications, although industry commentators report that it is not
clear whether this trend will continue in the future.

In terms of business models, streaming and e-sports have created new revenue streams and value chains,
whereas non-fungible tokens (NFTs) might be embedded in games influencing business models by
introducing scarcity into the gameplay. Cloud-based gaming is recognised as having potential, but
technology and access to technology are still lagging. New players from other creative industries are
entering the market: for example, audiovisual streaming services and platforms such as Netflix announced
they are developing more games to gain user retention on their products and exploit IP.

Finally, the presentation looked at audiences, which are also changing. The boundaries between creator
and player are blurring, although running a profitable games-related business is felt to be increasingly
challenging as competition is increasing. The audience for gaming is becoming more diverse in terms of
gender, age, and type, with increasing average age of players. First-generation game players are now of
adult age and have higher spending power. Mobile games are the most popular among users, representing
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59% of the market, followed by console (22%) and PC (18%). Players are more interested in ‘green’ initiatives
and would like to see more diversity embedded into narratives, to reflect their own perspectives and life
experiences. As mentioned above, there is also a rise in 'ancillary' activities, with for example e-sport and
live streaming, which are driving the creation of new professions, platforms and revenue streams.

Following the presentation of key issue, the moderators engaged with participants, asking whether they
had any initial reactions or comments. Participants highlighted that:

• The project should keep in mind that when looking at future developments, researchers and
policymakers should monitor developments as they emerge in markets in North America and Asia,
especially China. It is also believed that countries such as India, Nigeria and Pakistan have the
potential to become important markets in the near future. This means the EU market, its issues and
its challenges relate as much to the rest of the world than they do in Europe. Others reflected that
Europe is likely to maintain its position as it is the third largest market by consumers and will
continue to play a key role in content production.

• Others reflected on the role of platforms and the implications in the development of the VG industry.
Even now, platforms owned by companies such as Apple and Amazon have effects on the visibility
of games produced by independent studios, as the content highlighted by editors is not via
democratic means, and it sometimes acts as a barrier to entry. An academic researcher attending
the session also reported initial findings from their own research, outlining that platforms have
implications on representation of minority groups in VG (both in terms of workforce and audience).It
was also noted that the main platforms for gaming (Amazon and Apple) are non-European and
effectively have a monopoly on the platform that games developers working in the EU have to use.

Breakout rooms
Participants were then divided into three breakout rooms, where discussion around key trends continued.
Each group used a mural application where moderators added inputs from participants across the three
areas of technology, business models and revenue streams, and audiences. Participants also had the
opportunity to suggest recommendations on how EU companies across the VG value chain can be
supported to adapt to and anticipate trends.

In terms of technology, participants reported the following trends and recommendations:

• Machine Learning has been used in the sector for decades and will continue to be widely used
across the sector. It generates innovation in the quality of games, scenarios and gameplays. For this
reason it is important that professionals are empowered with tools built by the sector for the sector.

• Green and sustainable game design and associated practices will keep on growing. National trade
bodies are starting to produce guidelines on best practices and on how to measure the
environmental impact of specific games. Industry players are also innovating by producing more
sustainable development processes and tools. It is important that policy makers continue to signal
the importance of this aspect in their work with the VG sector.

• Data centres are placing large demands on the national networks, and given the current high costs
of energy, it is likely to become even more challenging in the next months. It would be important
that the EU and MS continue to invest in green energy to ensure a sustainable access to energy
supply. Similarly, investments to stable and reliable internet connections are also needed to ensure
the development of the sector.

• In the future, we will continue seeing new types of game controls, with a further integration of smart
devices into the gameplay. This will have implications on the application of VG in ancillary areas such
as healthcare, education and military.
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• Stakeholders are still cautious when talking about Metaverse and the impact it might have on
consumers and the VG sector, as developments on the market are still small and the industry Is not
seeing massive developments on this front. Costs on development for this application are high, and
few companies are working on this.

• There are still large gaps in research around the impact of VG, including VR/XR on players.

In terms of markets and business models, the following trends and recommendations emerged:

• As innovation becomes more expensive, smaller studios will be even less comfortable with taking
risks. Investing into game development resources and on new technologies will be a prerogative of
larger companies, as there will be less and less capacity to cushion big project failures. More
investment into R&D funding could help in this sense. Stakeholders, however, identified the
importance of maintaining a continuous dialogue with the sector in order to tailor the support to
the needs of the sector, and avoid copying support provided to sectors such as the audiovisual
sector (who have quite different needs). Studios might also need some support on how to apply for
funding, since these processes are alien to many of the players currently active in the sector.

• The development of the industry is limited by talent scarcity (exacerbated by the Russian invasion
of Ukraine) and by skills shortages. Stakeholders do not see any positive trajectory or resolution in
the near future on this issue. When asked about details on skills gaps, it was reported that the issue
is especially around soft skills (collaborative working, communication) and creative skills, which are
often not pursued by students because they are perceived as less in demand and lower paid (“lower
return in investment”). In the future we might see education and skills development opportunities
to be provided by the industry itself via e.g. e-learning courses. This will allow people to develop
their skills by learning directly from the industry, but will also allow the individual companies
delivering tailored training to develop skills responding to their specific needs.

• Companies are seeing an increased number of people demanding to work remotely, following their
experience during the pandemic. It is unclear what implications this will have on the companies, but
it might have impact on staff retention and innovation within teams. This trend also demonstrated
the constraints and limitations of current tax legislation within the EU.

• E-sports will continue to grow. It has reported that sometimes policy makers, especially at a local
level fail to understand the potential of e-sport events might have on local economies, as they bring
visitors and associated spending.

• It is perceived that the concept of ‘game as services’ will have a large impact in the future, but will
need to be supported by a more developed technology and infrastructure. Players such as
Microsoft, Netflix. Amazon Luna, Xbox game pass, look to be the key players in this space.

In terms of audiences participants reported the following trends and recommendations:

• In the future, we will see even more segmentation, with tailored offers and products based on
audience segments. There will also be more clarity and evidence in terms of how different people
respond to different monetisation strategies, as it has been noted that this differ based on the
audience type and their location. For example, we might see more games targeting senior players.
This might mean that innovation on interfaces and game design will be needed. R&D investments
in this sense could help EU companies and professionals in this sense.

• Monetisation is still largely discussed in the sector, with more industry leaders and companies
producing guidance and support for players and, in the case of young players, their carers.

• The cultural value and societal benefits of games are receiving more attention and
acknowledgement. The VG sector is now fully recognised as part of the creative and cultural
industries. Stakeholders generally agreed that this change in perspective might have an impact on
the availability of investment and the profile of the sector into the future.