A more in-depth analysis of the UK gaming market can be found from page 44 onwards here:
GAMES MARKET SOFTWARE OVERVIEW
After a broadly flat 2022 the games software market returned to growth in 2023 with annual consumer spend rising by 2.9% year-on-year, hitting a record £4.7bn across the digital and physical segments.
Key highlights include strong gains in the full- game direct-to-console and PC download-to- own markets, which saw sales rise 5.1% and 6.3% respectively, with combined spend approaching £1bn, according to Omdia.
The ‘Other Digital and Online’ segment, that comprises console subscriptions, casual PC, MMOG microtransactions and DLC also returned to growth, with spend nearing £1.9bn, up 6.6% versus 2022.
After years of uninterrupted growth, the ‘Mobile & Tablet’ category, which includes a mix of download- to-own & access-only games, and spend on microtransactions across both, declined very slightly in 2023, falling 0.8% to £1.4bn.
In terms of physical format, boxed software sales, GfK Entertainment reported a second successive year of decline in spending in 2023, with value dipping below £500m for the first time since 1996, down 4.4% year-on-year.
GAMES MARKET SALES BY SEGMENT
The games software market is highly diverse and multilayered, with revenue streams generated across
a variety of devices, formats, and access points.
Within the biggest segment – ‘Other Digital and Online’ – which at almost £2bn represents fully 40% of total software value in the UK, revenues range from monthly Massive Multiplayer Online Game and console-linked subscriptions, to millions of instant microtransactions generated across Free-to-Plays, accessed via PC browsers and social media platforms.
The second largest slice of the games software pie belongs to the equally nebulous ‘Mobile and Tablet’ channel. It is here that the ‘free-to- play’ games model is most effectively monetised, with almost £1.4bn spent in the UK last year on millions of microtransactions and In-App Purchases, representing 29% of total games content spend.
Despite the growing influence of free-to-play and subscription models, demand for the traditional full-game remains solid, particularly on digital formats. According to Omdia, almost £960m was spent by consumers on games like ‘EA Sports FC 24’ and ‘Hogwarts Legacy’, delivered digitally to consoles and PCs, representing a combined 20% of overall market value.
The remaining 11% of the market belongs to the conventional physical disc. While sales have been trending downwards since peak trading in the late 2000s, spend on boxed product was still worth around half a billion pounds in 2023.
GAMES MARKET DIGITAL
The UK’s digital games market continues to trend upwards with more than £4.2bn spent in 2023, up 3.8% year-on-year. While most of the digital market’s key segments turned in healthy, incremental performances last year, the biggest of all - ‘Mobile & Tablet’ - experienced a rare annual decline in spend, albeit a marginal one, down 0.8% to just under £1.4bn.
In contrast to other gaming segments, demand for in-game currencies, game enhancements and other in-app features appeared to flatten during the pandemic, only to rebound during 2022. This decline in spend in what is the industry’s powerhouse segment in terms of value perhaps heralds an outlook of slower growth for the games software market in general.
For now though, other parts of the digital market look robust. Annual spend on console full-games rose yet again in 2023, up 6.1% to around £723m, while PC download-to-own revenues rebounded after last year’s decline, up 6.3% to £237m.
The console subscriptions market, driven by services like Xbox Game Pass and PlayStation Plus, continues to deliver steady annual growth with year-on-year spend up almost 12% to £587m. Downloadable games content delivered directly to consoles (Console DLC) peaked during the lockdown years, hitting
almost £1bn in value during 2021 before declining sharply in 2022. Spend picked up again in 2023 with around £862m spent, up 5% year-on-year.
The Massive Multiplayer Online Games (MMOGs) market, which includes spending on game access through subscriptions and in-game microtransactions, continues to trend ever upwards in the UK with spend hitting £388bn in 2023, up 6.4% year-on- year and now commands nearly 10% of the overall games market in terms of value.
GAMES MARKET PHYSICAL
With consumers increasingly shifting to full-game digital downloads and subscription models, the value of the physical boxed software market has been trending steadily downwards for well over a decade now.
In 2023 the market dipped below £500m, declining 4.4% versus 2022, with annual growth in PS5 and Xbox Series software sales not enough to offset steepening declines in spend on physical games for the Nintendo Switch and other sales for the market’s legacy consoles.
The cyclical renewal of the physical software market, traditionally driven by new console technology, has generally had a much less impactful effect on disc sales over the last decade or so and with market leader Nintendo’s ‘Switch’ console almost 7 years old now, growth is becoming harder to sustain.
Just under £200m was spent on boxed Nintendo Switch software in 2023 which, while still enough to secure the lead in the market, represents a decline of over 10% year-on-year.
PS5 games sales continue to return strong growth, up nearly 24% year-on-year to £190m, and while Xbox Series sales are up 16.4% to £43.4m, that is still lower than the 47.5m spent on games for Sony’s PS4 console which is over 10 years old now.
GAMES MARKET BRANDS
Combining disc sales across all the available platforms under the Nintendo, Sony and Microsoft umbrellas, 2023’s ‘Battle of the Brands’ saw Sony maintain top spot. The combination of rising PS5 disc sales and declining Nintendo Switch sales helped Sony increase its share of the market to 49% of total physical games spend, with Nintendo falling back to 41%. Microsoft share of the market continues to slip, falling from 11% in 2022 to 10% in 2023.
GAMES MARKET HARDWARE
According to GfK Entertainment, over 2.6 million games consoles were sold in the UK during 2023, returning market volume to growth, up 8.8% year-on-year. In terms of value, just over £934m was spent in the UK, up 10.8% versus 2022.
The easing of global chip shortages and attractive game exclusives drove PS5 sales up sharply, rising by 55% in volume to over 1.2m units and 46% in value to £529m, making it the dominant console in the market with a 57% share of total spend in 2023.
The Nintendo Switch lost its crown as the UK’s most popular console, which it has held since 2019, with around 720k units sold over the course of the year, delivering £187.7m at retail, down 17% year-on-year.
Microsoft’s Xbox Series console sales continue to falter, falling by 14.2% to around 650k units in 2023, with value down to £211.2m., -16.7% year-on-year.
Perhaps the most surprising performance in the console market came from the PS4 with volume sales rising by 633% year-on-year as component availability improved. Around 24k units were sold in 2023 generating £6.2m in value.
AVERAGE SELLING PRICES
The average cost of a game across both the physical retailer landscape and digital channels remained remarkably stable in 2023.
GfK Entertainment recorded the average cost of a boxed game at £35.70 last year, just 0.4% higher than in 2022. According to Omdia, the average selling price of a full- game digital unit – across PC and console – declined by 1.9% to £15.13. It should be noted that deeper availability of catalogue and budget titles in the digital space keeps average prices well below those found at physical retail.
Despite shifting slightly upwards, the market’s lowest average selling prices for boxed games remain in the home delivery channel at £35.29 (+0.9%), almost £2 cheaper than those found in the high street specialist channel, at £37.21.
Despite carrying increasingly shallow ranges focused on smaller charts, average prices in the supermarket channel dropped from £37.57 in 2022 to £36.27 last year.
PRODUCT AVAILABILITY
With the current console lifecycle across all three major platforms entering a matured phase it is increasingly important to release new content and develop fresh IP to keep the consumer engaged.
To this end, 899 new physical format console games titles were made available to the market in 2023, an increase of 5.0% versus 2022, the sixth consecutive year of growth and highest yearly total since 2012.
GfK Entertainment analysis reveals that the total number of physical games titles available in the UK pushed through the 5k mark in 2023, with an 11.6% increase in the games specifically for consoles. That was enough to offset the declines seen across handheld and PC platforms.
BRICKS AND MORTAR VS ONLINE
Harnessing the capacity to offer a maximised range of products and coupling it with the spontaneity and convenience that is available to online and digital operators, modern entertainment retailing has borne witness to a dramatic shift of spend from traditional bricks and mortar shops to digital services and physical online operations over recent years.
This dynamic has been no more apparent than in the UK’s games retail industry where opportunities to download games pretty much instantly, or to spend money on downloadable content, or to sign-up for digital subscriptions, is available at the click of a mouse or button.
This shift is to online is illustrated in the adjacent tables showing that, in 2023, over £4.6bn – or 97.5p in every pound spent - was transacted either over the internet at physical online retailers, or digitally for digital-only products.
After the small rebound in spend bricks & mortar games retailers enjoyed in 2022 as the UK emerged from the pandemic lockdowns and returned to the high streets, share of overall trading shifted back online in 2023. Sales of games software taken over-the-counter last year were worth £120m, accounting for just 2.5% of total spend.
GAMES RETAILERS & DIGITAL SERVICES
As the games software market continues to evolve at pace in the UK - and specifically the shift to digital - it is important that we reflect the adaptations being implemented by the physical retailer estate to adjust.
To this end, we have two sets of tables and charts included here: one that only shows the principal retailers that sell physical boxed games, and one that also includes retailers selling gift cards that contain digital content, ranging from credit for services like Xbox Live and PlayStation Store, to Minecraft Coins and Roblox Robux.
For the sixth year in a row the number of UK retailers selling boxed games software has fallen, according to figures produced by GfK Entertainment. In 2023, 3,858 outlets recorded sales of software discs over the course of the year, compared to 3,925 in 2023, a fall of 1.7%.
Most of that decline is accounted for by the grocery channel where a further 263 stores withdrew from the category altogether in 2023. This was offset to some degree by an increase in outlets in the ‘Game & software specialists’ channel, up from 405 to 634. It should be noted, however, that GfK increased their syndicating retailer base in 2023, with more specialist operators reporting their sales, leading to an overall increase in store numbers.
When you also include those retailers selling digital content cards, the base increases dramatically. 3,434 extra supermarkets are included in the numbers, boosting the overall total number of retail outlets to 7,325.
GAMES RETAIL PHYSICAL
ERA’s ‘Physical Formats Share by Retailer Type’ table looks at the traditional physical boxed games market and measures value shares by retail channel.
These charts show the dramatic loss of market share high street specialists and supermarkets suffered during the pandemic-affected years of 2020 and 2021, and how they have struggled to regain that lost ground since.
High street specialists like Game saw their share of the market decline by well over half during Covid and while it recovered significantly in 2022, it is clear that many consumers kept their spend online with home delivery operators like Amazon.
The graphs also reflect the UK’s grocery channel markedly reducing space committed to the games category and by 2023 only two supermarkets maintained any games software presence at all. Again, it appears that the home delivery sector has benefitted from this exit more than the high street specialists, increasing their share of total market spend from 71.7% in 2022, to 75.8% in 2023.
