eMarketer.com - Online Gaming Draws Global Competition

JUNE 12, 2006
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Driven by higher PC penetration, increased broadband adoption and expanded use of video game consoles online, the "Online Game Market" report, fromDFC Intelligence, predicts that the worldwide online game market will grow from $3.4 billion in 2005 to over $13 billion in 2011.

In anticipation of this spurt, consumer subscription services, online digital distribution and an increasing acceptance of games as an advertising mechanism are also emerging as prominent trends.
In addition, DFC forecasts that digital distribution will become a large part of online connectivity. "Digital distribution and virtual item sales have started to do very well in certain Asian markets and these distribution models are expected to start having increased success on an international basis," noted DFC analyst Alexis Madrigal.
Even in North America and Europe the casual game category is already benefiting from digital distribution.
"Casual games have been the best at attracting advertisers, but they are now finding a great deal of growth from subscription and digital distribution models," said Ms. Madrigal. "Asian markets with products like Kart Rider, and Western products, like Habbo Hotel, are showing how a virtual item purchase model can work for games that have traditionally been advertising or subscription supported."
On the downside, DFC warns that even with market growth many companies are likely to struggle to become profitable. The main obstacle is fragmentation. In addition, while top online games may to do well in one market — like Korea, China or the US — they seldom expand to other markets. Furthermore, traditional video game publishers have not done well in the online game business and that has allowed for the rise of several online-only game companies that are making the marketplace more competitive for established players.
Nevertheless, blockbusters are possible. A major market can support individual games that do over $100 million a year. And, in a good sign for the future vitality of the market, World of Warcraft, from Blizzard Entertainment, is on track do over $100 million in each of several different markets — in its first year alone.
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