Games console market has had its best year since 2011 thanks to Nintendo’s 'record-breaking comeback'

Key Points
  • In 2017, $41 billion was spent on hardware, games content and services, representing an 18 percent year-on-year rise, according to a study by IHS Markit
  • Nintendo saw its share of the games console market rise, while Microsoft's share declined.
  • Sony is still the biggest player by market share.
A person dressed as the Nintendo character Mario waves at a pop-up Nintendo venue in Madison Square Park, March 3, 2017 in New York City.
Drew Angerer | Getty Images

Consumers spent more on games consoles and related services last year than at any time since 2011, according to a report.

This was largely thanks to "Nintendo's record-breaking comeback," although Sony remained the dominant player, an IHS Markit note released Wednesday said.

In 2017, $41 billion was spent on hardware, games content and services, representing an 18 percent year-on-year rise, the study showed. This was the highest figure since 2011, when spending on the games console market hit $46 billion.

Spending on hardware specifically was up 33 percent in 2017 following the launch of the Nintendo Switch, Sony's PlayStation 4 Pro at the end of 2016, and Microsoft's Xbox One X, which had higher price tags than existing consoles.

Content spending reached $23.6 billion and represented the largest segment of the market.

Subscriptions to gaming platforms such as Xbox Live Gold and PlayStation Plus grew 11 percent year-on-year to $3 billion. Consumers pay a yearly or monthly fee to join these subscriptions services, which offer free games and the ability to play online against gamers worldwide.

The increasing importance of subscriptions to gaming, and users downloading titles rather than purchasing physical copies, shows the shifting sands in the industry.

"We are now approaching a tipping point in consumer behavior, where the digital share of full game sales has started to accelerate away from the transitional norms," Piers Harding-Rolls, head of games research at IHS, said in the report.

"This accelerating picture and the rapid shift to games-as-a-service monetization models is fueling growth in content spending."

Nintendo revival

Japanese gaming giant Nintendo has been on a turnaround path since 2016, pushing into mobile and launching the Switch with some of its most well-known franchises. And the strategy appears to be paying off.

Nintendo's share of the gaming market jumped 9 percent to 22 percent in 2017. Microsoft, meanwhile, saw its share decline to 25 percent from 31 percent in 2016.

This analyst sees more upside for Nintendo in 2018

"The hybrid nature of Nintendo's Switch has allowed it to flex to the buying needs of consumers in different regions, thus making it a globally attractive and relevant product," Harding-Rolls said. "Nintendo's content release slate was also exceptional in 2017, acting as the catalyst for rapid adoption of the console."

Sony remained the largest gaming console vendor.

In 2018, IHS forecasts Nintendo's share of the console market to overtake Microsoft's share. Spending across hardware, content and services for both Sony and Microsoft is expected to fall next year as their consoles enter the "later stages of their life-cycles." Sony will continue to be the number one games console player by market share, IHS said.