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While the games industry isn’t growing according to Data.ai and IDC’s latest report, spending declines are leveling off faster than expected.

The firms project that consumer spending on mobile games will reach $108 billion in 2023. This represents about 55% of the global total. Home consoles and PC/Mac will bring in similar totals of $43 billion and $40 billion respectively. Handheld consoles, primarily the Nintendo Switch Lite and Valve’s Steam Deck, are expected to bring in less than $3 billion in spending.

Data.ai and IDC games market spending by device type mobile, console, PC

Handheld consoles are the only segment that saw a dramatic shift in spending over the last year. Waning interest in the Switch Lite drove a decline of 20% in spend.

By comparison, mobile, home consoles and PC/Mac spending shifted less than 5% from last year. Mobile spending fell 2% which Data.ai attributes the decline to crackdowns on app tracking transparency (ATT) and fingerprinting alongside more regulations on adolescent mobile use in China. Meanwhile, home console spend was up 3% based on the strength of PS5 and Xbox Series S|X. Similarly, PC/Mac spend is expected to grow 4% thanks to subscription-based game revenue.

Regional consumer spend on games

On a regional basis, APAC is picking up market share of consumer spending across most devices. APAC’s Q1 2023 consumer spending on mobile grew by 1.7 points, PC/Mac by 2.2 points and home consoles by 0.4 points YoY. Data.ai and IDC attributed the growth primarily to South Korea.

share of consumer spending on games by region in Q1 2023 vs Q1 2022 according to Data.ai and IDC

Markets outside of North America, APAC and Western Europe generally saw a lower share of consumer spending on games in Q1 2023. Data.ai and IDC pointed to the war in Ukraine, inflation-related issues, and their secondary effects as the primary causes. Brazil, Turkey and Mexico led growth among the “rest of the world” markets.

Growth of cloud gaming and handheld consoles

One key area of growth highlighted in the report is growing adoption of cloud-streamed gaming (CSG). IDC projects consumer spending on CSG to grow 50%, reaching $3.8 billion across all platforms globally in 2023. This translates to 60 million monthly active users worldwide.

Notably, mobile devices are playing a larger role in the cloud gaming market. About half of MAUs will access CSG on mobile devices at least part of the time. IDC expects smartphones and tablets to account for 26% of hours played via cloud gaming services. Partially, this is a result of ISPs bundling cloud gaming services in developing markets.

In comparison, hand-held gaming sales — primarily the Nintendo Switch Lite — are lagging, there is growing interest in Valve’s Steam Deck and its competitors. The Switch Lite has shipped more than 21 million units globally through Q1 2023, though the console is at the end of its lifecycle. Meanwhile, Valve shipped just shy of 2 million Steam Deck bundles by the end of the first quarter this year.

While the data is preliminary at best (given the small sample size of 12 for Steam Deck consumers), there are some key demographic trends between Switch Lite and Steam Deck users. In general, Steam Deck users are trending towards older, male consumers compared to Switch Lite’s userbase.

Mobile gaming continues to be a disparate landscape. Data.ai highlights this variety by analyzing four very different games — Monopoly Go, Honkai: Star Rail, Royal Match and FIFA Soccer — that defined the first half of 2023 in its report. Together, they highlight the importance of IP, tie-ins to real world events and effective monetization strategies.

More games are also using a variety of monetization strategies on mobile. Ads continue to play a key role in the ecosystem, even if consumer sentiment around all (tracked) ads formats is declining. Notably, Data.ai’s data set does not currently include blended or integrated ads, which can be less disruptive to users.

That being said, app tracking transparency (ATT) doesn’t appear to be driving the souring sentiments toward mobile ads. ATT rolled out on iOS in Q2 2021, but sentiment is declining on both iOS and Android at similar rates. While enforcement could be coming, the decline in targeting data is currently impacting monetization more than user experience.

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