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Online Gaming Markets to 2007: The New Opportunities
Screen Digest, June 2004, Pages: 85
The total online PC games market will top $1bn in the West in 2004 and is expected to exceed $2bn by 2007. Growth is currently being driven by pay-per-play browser gaming, massively multi-player online games (MMOGs) and aided by the resumption of growth within the online games advertising market as well as the successful introduction of new models such as casual games servicesubscriptions. Over the longer term, broadband games-on-demand services areexpected to make a growing contribution.Pay-per-play browser gaming, where users pay to enter skill-based games tournaments to compete for cash and other prizes, is the hottest of the new online gaming sub-sectors. Its dramatic growth over the last two years has already precipitated a service provider (and investor) land-rush. A $35m market only three years ago, pay-per-play gaming reached $137m in 2003 and is forecast to grow at an impressive compound annual growth rate (CAGR) of 40 per cent to 2007 to become the second largest online gaming sub-sectorbehind MMOGs.The MMOG market continues to grow, defying industry scepticism. Continuedexpansion will come from both existing MMOGs as well as a range of high profilereleases expected over the next two years. Europe, a relatively untapped MMOG market to date, will become the largest growth opportunity as the North American market approaches saturation. The increasingly busy release schedule will also lead to over-supply issues and the re-appraisal of current modelsand pricing strategies.Whilst hard-core online gaming still remains a predominantly male activity, growth within the casual games market is being driven by women and in particular middle-aged unemployed women—what we have termed the ‘bored housewife’ market. Every single casual online gaming sub-sector is now dominated by female gamers, from pay-perplay to casual games subscriptions—with some service providers reporting female:male ratios as high as 70:30.Advertising on casual games services resumed growth in 2003, the first time since 2000. This was principally driven by the resumption of growth in the online advertising market overall, but is being assisted by advergaming(games that heavily feature an advertiser’s brand) and the improved understanding and attractiveness of casual gamer demographics.Casual games service subscriptions is another new online gaming model which is currently experiencing extremely rapid growth, albeit from a very small base. Although average revenue generated per subscriber is low (2003 average $5.50/month), volume growth has been remarkable to date and almost all majorcasual games sites now plan to launch a subscription service in the next 12 months.The digital delivery market for full-sized (boxed) games is showing increasing promise, particularly as new forms of download business model come on stream. Some broadband Internet Service Providers are also gaining market traction through the deployment of streamed games-on-demand services. Key lessons are being learnt about how to effectively operate such GoD services and the market should show good growth rates over the next few years, driven by expanding broadband demand.
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