Once a year, accounting and consulting firm PwC sorts out its predictions for games, technology, and entertainment. This year, it is predicting moderate growth of a 6.3 percent compound annual growth rate for U.S. console video games through 2021, but it believes that virtual reality and esports will grow at much faster rates.

Console game revenue was $21 billion in 2016, and it is expected to grow by a 6.3 percent CAGR to $28.5 billion in 2021 in the U.S. That doesn’t include PC games microtransaction revenue, which is expected to grow from $3 billion in 2016 to $4.2 billion in 2021 at a 7 percent CAGR. That growth is due to the ongoing success of free-to-play games, more subscription services, and a PC industry reinvigorated by esports.

Overall console revenues have been boosted by digital revenues, which are growing from $2.3 billion in 2016 to $3.7 billion in 2021, a CAGR of 9.8 percent. The social and casual game category will see revenue rise from $7.9 billion in 2016 to $12.1 billion in 2021, at a 9 percent CAGR. In 2017, PwC predicts that social and casual will surpass console video games in 2017.

Above: Apple VR demo

Image Credit: Dean Takahashi

Meanwhile, PwC is very bullish on VR. It estimates 68 million VR headsets will be in use in the U.S. by 2021, with the unit numbers growing at a 69.2 percent CAGR during the period. VR is expected to add nearly the same revenue as TV advertising during the period, growing from virtually nothing in 2016 to $4.6 billion in 2021.

But PwC noted the downside of VR is that it is a “highly immature market with underdeveloped business models, flaky hardware, and lots of experimental or low-quality content.” In 2017, PwC believes VR will see advances in “inside out” movement tracking and lower cost headsets.

Meanwhile, PwC believes U.S. esports will grow from $108 million in 2016 to $299 million in 2012, rising at a 22.6 percent CAGR. The U.S. is the largest market in revenue terms, having overtaken South Korea in 2015, although the latter will stay far ahead in terms of per-capita revenue.

Esports streaming advertising revenue is forecast to rise from $33 million in the U.S. in 2016 to $148 million in 2021, becoming the biggest contributor to total e-sports revenue in the process. Esports sponsorship revenue – of teams and tournaments – will be the second-largest contributor to total e-sports revenue, rising from $44 million in 2016 to $84 million in 2021, growing at a 13.6 percent CAGR.
Not only does the ongoing popularization of competitive gaming by broadcasters bring new consumers into the gaming fold, but the games themselves help to boost online/microtransaction revenues on both consoles and PCs.

PwC makes integrated forecasts for 17 industry segments across 54 countries for the global entertainment and media markets.