US to overtake China as world's top gaming market in 2019

Out of the total $152.1bn in revenue, the country is expected to generate $36.9bn

This year the US is expected to surpass China as the largest gaming market by revenue for the first time since 2015, partly due to Beijing's freeze on new game approvals last year, according to a recent report. Yet, It might be also because of PlayStation and Xbox.

The 2019 Global Games Market Report, released by gaming analytics company Newzoo on Tuesday, predicts the US gaming market will generate $36.9bn in revenue in 2019, up 21% from last year. China, on the other hand, is projected to book $36.5bn in gaming revenue this year, down from $37.9bn in 2018.

"A nine-month freeze on game approvals during 2018 in China left its mark on the domestic games market," said Tom Wijman, senior market analyst at Newzoo.

What he is referring to is the Chinese decision in March 2018 to halt approvals for the monetization of new gaming titles amid a reshuffle of the country's content regulatory agencies and criticism of games with violent content being "poisonous" to young people. During the freeze, gaming companies were still allowed to continue filing applications and distributing new titles, but they were not allowed to make money from those games through, for example, in-app purchases. This continued until December, which meant Chinese publishers could not monetize any new games throughout most of 2018.

The move had in result a significant impact on the country's largest publishers, and an even worse one on small and midsize publishers in the country, Newzoo outlines. Tencent Holdings, for example, reported a 32% net profit drop in the fourth quarter of 2018 and its slowest annual profit growth in 13 years for all of 2018. To make things worse, the company is waiting for approval of some of its most highly anticipated mobile games, including "Fortnite," which slowed the revenue growth in smartphone games, Tencent's largest single revenue generator. Industry analysts estimate that more than 7,000 games are also still awaiting approval in China, and currently no applications for new games are accepted due to the enormous backlog.

Newzoo, however, stresses that the consequences from the Chinese freeze are not the only reason behind this year's almost unexpected US' dominance in the gaming sector. Part of it comes from the launches of the Project Scarlett (the codename for the new Xbox) and the expected release of a new PlayStation console from Sony. Nintendo may also put out new versions of the Switch, its successful hybrid console.

“It is a combination of both new console users and, in general, massive growth in console spending boosting the US market. About 50% of the US' games revenues come from console,” he said, adding that his company forecasts another 13.4% growth in 2019.

"The current generation of console will have its two best years in 2018 and 2019 off the back of a consistently strong lineup of new releases, a growing user base thanks to the hype surrounding Battle Royale, and the Nintendo Switch outperforming expectations," he continued.

Still, the research company estimates China will reclaim its position as the No. 1 video game market by revenue in 2020 after the effect of the approval freeze wears off despite the growing interest in the American gaming industry.

Meanwhile, the 2019 Global Games Market Report highlights other interesting trends as well. In 2019, the global games market is estimated to generate $152.1bn in revenue, a 9.6% year-on-year increase. From this number, the Asia-Pacific region is expected to generate $72.2bn, accounting for 47% of total global game revenues, making it the largest gaming market by revenue for the second year.

At the same time, Newzoo projects Latin America to grow 11.1% year-over-year to $5.6bn, becoming the fast-growing market in the world, with a compound annual growth rate of 10.4% (for the years 2018-2022, Newzoo reported). In addition, 45% of of the global revenues will come from mobile, which would continue to keep its place as the largest segment in the gaming market.

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