The console video game industry is finally getting out of its rut. Sort of.
Video game industry executives for years have predicted that software sales would rise along with the release of new consoles from Sony and Microsoft. But in the six months since the PlayStation 4 and Xbox One hit the store shelves, market researcher NPD has said retail software sales in the U.S. have contracted instead.
But the tide is turning. Just as some of the largest game makers prepare to gather in Los Angeles for the annual E3 trade show next week, PricewaterhouseCoopers says game sales will finally begin growing again, though at a slow pace.
PwC said it expects sales of console video game software around the globe to rise more than 7 percent this year to $26.9 billion, up from $25.1 billion in 2013. That's better than the 4 percent increase seen last year, and the nearly 11 percent decline in 2012.
Sales will further rise, PwC said, to $31.9 billion by 2018, up nearly 19 percent from this year's estimate.
While these latest estimates will be welcomed news to game makers and investors, they're a fraction of the 28 percent growth the industry saw in 2007, shortly after the last batch of new video game consoles hit the market.
"Typically, with the introduction of the consoles in the past, you see big upticks in new sales," said Sean De Winter, who advises companies for PwC. That's not happening this time around, despite intense interest in the devices.
One area of growth that continues to rise is revenue from in-game ads, like the banner that pops up in the middle of a session with "Angry Birds." That segment of the industry, which didn't contract along with console game sales in 2012, is expected to rise 13 percent this year to nearly $2.9 billion. By 2018, advertising is expected to top $4.4 billion, up more than 55 percent from estimates for this year.
PwC says mobile games, as well as titles for computers that are primarily played over the Internet, will fare well. Mobile games sales this year are expected to jump more than 11 percent to $10.5 billion, up from $9.5 billion in 2013. Sales of games played primarily over the Internet, such as "League of Legends" from Riot Games, are expected to rise nearly 9 percent to $23.3 billion.
One of the gloomiest segments is one that's getting some of the most attention. In the past couple of years, influential game maker Valve has announced its "Steam Machine" video game consoles made in partnership with more than a dozen PC manufacturers. Virtual reality technology has also become a popular topic in recent years, spurring a gaggle of start-ups to begin making all manner of products for these devices.
Yet, despite this renewed interest in the PC market, sales of games made for PCs are expected to drop nearly 3 percent from this year to just over $7 billion by 2018. The steepest drops will happen among sales of game disks, which are expected to nearly halve over the same period $1.08 billion. Many of those sales will transition to digital downloads, which are expected to reach nearly $6 billion by that time.
Products like Oculus Rift, the maker of which Facebook purchased earlier this year for $2 billion, are still too new as well. De Winter said there's no real indication of how well these types of products will be received by the broader market or what their trajectory will be.
"It's nascent," he said, adding that expected sales of the device's games are factored into his estimates. "We have to take a wait-and-see."