The video game industry is expected to continue growing at a rapid pace for several years to come, with game-related spending reaching $112 billion by 2015, according to a report by Gartner.
But as with many “global” forecasts, the data can obscure or hide as much as illuminate, as trends can be quite different in regional markets Also, precisely what is included or excluded in a forecast is important.
The first important caveat is that the forecast of $112 billion includes software and hardware sales, a distinction that is likely to be highly important for most industry participants. The reason is simply that competitors tend to operate either in the console market or in the application market.
The other caveat is that portable and tethered console markets are distinct, while smart phones and tablets are becoming important new “console” categories. Yet another caveat is that revenue sources are changing. Where most application revenue in the past has come from game sales, that is now shifting in large part to advertising and other revenue sources.
A separate report from DFC Intelligence forecasts that the global market for video games was expected to grow from $66 billion in 2010 to $81 billion in 2016. That forecast likewise includes revenue from dedicated console hardware and software (both physical and online), dedicated portable hardware and software, PC games and games for mobile devices such as mobile phones, tablets, music players and other devices that can play games as a secondary feature. According to the report, the largest growth area is for online delivery of games. Online delivery growing
Gartner (News - Alert) said spending on video game hardware and games in 2011 was expected to exceed $74 billion, up from $67 billion on games in 2010. Gaming revenue
Smartphone game revenue has eclipsed portable game revenue in the US for the first time says mobile application research company Flurry Analytics.
"With most of 2011 data in, it's clear that smart phone apps, in particular, continue to cannibalize the already beleaguered portable (Nintendo DS and Sony PSP) category," said Flurry VP of Marketing Peter Farago.
And looked at one way, the video game industry faces challenges, on both the application and hardware fronts. Nintendo and Sony used to rule the lucrative portable gaming industry with $200 portable devices like the Nintendo DS and Sony PSP. Back then their customers would happily shell out up to $40 for an individual game. Mobile gaming revenue
But these days, $40 for a game, especially for portable gaming consoles, is increasingly an undesirable price point.
Leading the change are Apple iOS and Android (News - Alert) devices, whose free and inexpensive games, distributed across a massive installed base of powerful and networked tablet and mobile phone form factors, “have already disrupted billions of dollars of game revenue," said Farago.
In the United States, iOS and Android-powered devices command 58 percent of the $3.3 billion in portable game revenue. The market share was vastly different just two years ago when the Nintendo DS accounted for 70 percent of the $2.7 billion portable game revenue and iOS and Android accounted for less than 20 percent.
Gartner agrees that the fastest growth is likely to come in mobile gaming. Gartner predicts that the sales and use of hand-held gaming consoles, including those made by Sony or Nintendo, and would slow as young gamers opted for smartphones or tablets instead of dedicated gaming devices.
Mobile gaming will grow “from 15 percent in 2010 to 20 percent in 2015,” according to Gartner.
At the same time, pay models for online games are starting to fracture, according to the report, creating a number of new online-style transactions that don’t exist with physical sales of games made for traditional consoles.
Subscription fees are giving way to “freemium” models, in which the game is provided for free to gamers but is monetized through advertising,” said Brian Blau, a research director at Gartner.
There are also “in-game micro-transactions, such as the sale of value-added services or virtual-good purchases.”
Gary Kim (News - Alert) is a contributing editor for TMCnet. To read more of Gary’s articles, please visit his columnist page.
Edited by Rich Steeves