Global Video Games Industry and trends

Global Video Games Industry and trends

Video gaming, though in the virtual world is a serious business and the customers are no more confined to any specific age group. It’s a global phenomenon and is catching up pretty fast and has turned itself into a multi-billion dollar business. Businesses are perhaps making more money with computer games than the virtual reality projects. Computer games usually use additional means of providing interactive methods of disseminating information to the player. In early days of cartridge consoles, they were called TV games.

Gartner research estimates that the global video game industry- software, hardware and online gaming, will grow from USD 74 billion in 2011 to USD 112 billion in 2015, dwarfing cinema’s total revenue of USD 31.8 billion in 2010. Gartner predicts that online gaming spending will overtake hardware spending by 2015. This forecast includes revenue from dedicated console hardware and software which is both physical and online, dedicated portable hardware and software, PC games and games for mobile devises such as mobile phones, tablets, music players and other devices that can play games as a secondary feature. This might definitely be great news to companies into gaming market such as Microsoft, Disney, Playdom, Big Fish Games, Sony, Electronic Arts, Activision Blizzard, Zynga, Gameloft and even Nintendo with its Wii U.

In this value chain, console manufacturers and software publishers both reintegrate by the time they reach the distributor. The console manufacturers side of the industry is entirely producer driven and heavily dependent on the technology. New technology evolution drives new uses and enhancements on products like Apple iPad which in turn further creates a demand.

The software side of the industry is initially driven for the same reason console manufacturers are i.e. new game production driven by technology that can provide good user experience (HD, broadband etc.). After the baseline capabilities are defined in games, successive products become more buyer driven. For example with Halo trilogy from Microsoft, Halo 1 was purely producer driven and envisaged by Microsoft Game Studios and developed to fit the existing technology. Halo 2 was then formed to fit the existing technology however, it was in larger parts an improvement of Halo 1.

Current Trends

A study by Neilson research reveals that streaming and video-on-demand represent a larger weekly share of usage on Microsoft Xbox 360, Sony PlayStation3 and Nitendo Wii compared to last year,2011. Streaming now represents a reported 14% of Xbox 360 time, 15% of PS3 time and 33% of Wii time. Growth of this is fueled by the availability of services like Netflix, Hulu, MLB Network and ESPN3. The time spent on game consoles is continuously on the rise. While the rise of streaming is evident across all three consoles, each maintains distinct usage characteristics. A share comparison shows, Xbox 360 is most notable for online gaming (34% of the usage), PlayStation 3 is most notable for DVD / Blu-Ray viewing (about 22% of usage) and the Wii is most notable for offline gaming (approx 55% of the usage).

*Share of console time among users aged 13 years+

The video game industry has transformed from one dominated by major consoles to one focused on social and mobile game. However, nowadays consumers are increasingly less willing to spend upwards of $50 for a console game when they can purchase the same games on their mobile devices for under $5. This has resulted in revenues of mobile gaming to skyrocket from $5 billion to $16 billion by 2016 as per forecasts by ABI Research.


Road Ahead…

The traditional video gaming industry is not standardized yet, preferring to restrict to a specific platform and to sell expensive games. Growth of mobile games and network games are now disrupting the traditional market, binding consumers to mobile operating systems.

Lack of interoperability will not help users, as electricity bills rise and homes become cluttered with set-top boxes, satellite receivers and gaming consoles, consumers are hoping for one-box-fits all solution. This would inturn integrate audio and video streaming, gaming and other entertainment features, user interface and finally secure payment mechanisms.

 Market realities:

  • All gaming related policies and standardisation work must include mobile and social networking gaming
  • Cloud computing is another feature companies are moving towards along with three dimensional (3D) viewing, to incorporate a variety of audiovisual technologies into single 3D viewing
  •  Such steps will bring together service providers and content providers, including developers of games, to attempt to standardize communication protocols, toolboxes, middleware and security framework. Sony Corp Entertainment shut down its systems and servers after detecting an unauthorized activity in the PlayStation Network and Sony’s online gaming services. The personal data including credit card information, of about 100 million customers was exposed. During this outage that lasted about a month, gamers were unable to download new content or compete online. Sony estimates that it lost USD 171 million in revenue. In the following two months, Nintendo and Sega had to admit and apologize for similar security breaches.

The emergence of the mobile game market has had a significant impact on traditional video game sales across the world. According to a report by the NDP Group, an independent market research firm, the video game hardware / software and accessories market has  declined by $1.1 billion (25 per cent) in March as compared to a year earlier. The video game giant, Nintendo, recently reported their first annual loss in over 3 decades. The company in March ending 31st 2012, saw losses of over $530 million on $8 billion in revenue.

The explosion of smartphones and tablets running on Apple iOS and Google Android is opening up the games to the masses. In addition, game publishers like Zynga, recently registered for a $1 billion IPO, is coaching older and female-centric audiences to games like Cityville and FarmVille.


Major Players of the Industry

The software would be the key drivers for the sale of games in the coming years. Big titles like Gear’s of War 3 from Microsoft, Call of Duty: Modern Warfare 3 from Activation and Battlefield 3 from Electronic Arts will drive software sales to more than $44.7 billion. Gartner believes that console games will continue to dominate the overall gaming market in the next five years, as it absorbs almost two-thirds of consumers gaming budgets.

Some major players include Microsoft, Disney, Playdom, Big Fish Games, Sony, Electronic Arts, Activision Blizzard, Zynga, Gameloft and even Nintendo with its Wii U. Microsoft, Nintendo, Sega and Sony gaming consoles, some of them handheld, have captivated children and intrigued their parents. Over the years these products have added networking and graphic capabilities to enhance the gaming experience along with the user interface of the games with ever increasing graphic imaging and animation. Each brand has created its own gaming ecosystem to retain customers and walled gardens of hardware, games and online gaming communities that make it impossible for consumers to use third-party equipment consoles. 

Stay in touch with the latest trends in this dynamic and evolving industry with publications and subscriptions of Market Research Reports, for historic data, forecasts, industry guides, in-depth analysis and much more. 

Market Research Reports also deals with publications of various other industries and categories ranging from Consumer & Retail, Hardware and Software to Computer & Technology. 


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