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What does the future hold for gaming in South Africa?

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The latest PricewaterhouseCoopers (PWC) report and outlook for entertainment and media is out, and it reveals three things for gaming in Africa: growth, growth, and… growth. And did I mention growth?

That in itself should be no surprise, as that has been an ongoing trend for gaming generally for a few years, but there are areas (and regions) where the growth is larger than others. The report covers gaming and the industry related to it in South Africa, Nigeria and Kenya and includes the bane of all ‘core’ gamers (but a crucial part of the industry in truth), the casual and social markets. In fact, the report states that this year, the social/casual market is expected to overtake the ‘traditional’ gaming market (consoles and PCs) in terms of total video game revenue and will continue its growth by an compound annual growth rate (CAGR) of 8.9% until 2019 where it will reach approximately R1.9 billion. It should be noted that this year mobile games was placed in the casual and social markets, whereas before it was a category on its own. Casual gaming is now split between browser based and app based.

The big business of gaming will continue

The PWC report states from the offset that “video games will grow healthily through to 2019,” at a CAGR of 6.6% with the industry reaching R3.6 billion at that point.

This figure is more than double that of the 2010 figure, which saw the industry at R1.6 billion, and up from the R2.6 billion in 2014.

The growth is pretty impressive but when compared to Nigeria and Kenya, those two markets appear to real powerhouses. Both countries can expect to see their CAGR push past 14% by 2019, with the social/casual market dominating the total video game revenue in Nigeria.

One of the areas often ignored (or forgotten about) by gamers in general is the impact of the growing number of local game developers. According to a recent survey (by Make Games SA), there are around 40 developers actively involved in game development (and employing around 150 people), and in 2014 those developers added R53 million to the industry. This was a whopping 83% more than 2013, and while no additional figures were given in the suggestion of growth, you can probably expect the local game developers to play a significant part in the general growth of gaming going forward.

Yes, it is PC vs console (vs mobile)

Since 2011, mobile (and/or social/casual if you prefer) has taken the lead in South Africa when it passed console gaming as the dominant platform in terms of consumer spending on video game software and services. This growth of the platform – as mentioned above – is set to continue and is partly down to increasing microtransactions and what is probably just down to ease of access when it comes to mobile devices as a gaming platform.

In the traditional market of consoles and PCs, growth will be at a CAGR of 3.9% and will be worth R1.6 billion by 2019, but when further broken down, a new trend appears to be emerging.

The PC growth rate will outperform the console market over the period, but in terms of pure numbers will still remain behind consoles. The CAGR for PCs will be at 6.6% by 2019, while consoles will be at a pretty dismal 2.0% in comparison.

Value wise, consoles will be selling around R865 million against the PC market’s R731 million. Both look pretty small when compared to the consumer spending mooted for social/casual gaming (which includes mobile and browser games) in 2019, which will be a whopping R1.937 billion – more than the combined value of the ‘traditional’ market.

Then there’s the possible impact of digital on the physical disc landscape in South Africa. The PWC report summarises and suggests that:

“South Africa, however, will benefit less than other markets from the switch to digital game Distribution.”

Consoles will see just 23% of its revenue via digital platforms (including online or microtransactions) by 2019, which is attributed to the current “underdeveloped status of broadband infrastructure,” with part of the digital money “instead flowing into South Africa’s social/casual market.”

The numbers for console and PC across both physical and digital make for interesting reading and - for those that enjoy it – analysis. Console revenue via physical means has stayed (and will continue to do so) largely unchanged over the years, going from R633 million in 2010 to R669 million in 2019. Digital and microtransactions on console has risen markedly from R8 million to just shy of R200 million.

In comparison, PC revenue via discs has slowly declined from R271 million in 2011 to R216 million in 2019. However, online distribution and other digital income is expected to be substantially higher than the R55 million in 2010. Digital games revenue will climb by a CAGR of 8.8% to R138 million in 2019, while microtransactions will hit R377 million, which is a phenomenal growth of 15.8%.

Overall in South Africa, by 2019, the console revenue will see physical game sales constitute 77% of income, digital 13% and microtransactions 10%.

Talking about console gaming, according to the report: "Consoles demonstrate that consumers still feel there is no substitute for a games console when it comes to a premium gaming experience."

Let’s wrap it up

The online and digital revenue component of PCs is really the one aspect that closes the gap on consoles in this country, but even combined, ‘traditional’ gaming has its real competition from the social/casual market. Of course, we all know now that the current exchange rate is going to play havoc with game prices generally on console and PC, so whether those changes will have a further impact still is not known.

On the flipside, should the price of consoles or PC hardware itself come down (and the exchange rate play nice), there may be an increase in the number of homes sporting consoles and PCs, but let’s be honest, almost everyone can get access to a smartphone these days, so it seems mobile will always have the biggest install base in South Africa, and therefore a continued lion’s share of the local gaming industry.

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