ITV and On-Line Gaming Set to Net $6.5 Billion in 2005 - interactive television - Brief Article

Information Superhighways Newsletter, July, 2001

The market for on-line games and interactive TV (iTV) games in Europe and the US will grow tremendously over the next few years according to two new reports recently released by Datamonitor. The reports, Online Games & Gambling, 4th Edition and iTV Games and Gambling reveal that in 2001, the combined on-line and iTV games industry in Europe and the US will be worth $174 million, growing to $5.6 billion, a compound annual growth rate of 138 percent.

According to Datamonitor, the number of on-line gainers in Europe and the US will grow from over 13 million in 2001 to more than 111 million in 2005.

The emergence of console on-line gaming, greater broadband access, and a greater variety of games will be the key drivers of growth. More importantly, because of the failure to generate revenues from on-line advertising, the on-line gaming industry will have to charge users to play. By 2005, subscriptions and pay-per-play will represent almost 90 percent of the revenues of the market.

By 2004, more people will be playing on-line via consoles than via personal computers (PCs). By 2004 two-thirds of on-line garners will be console-based. The massive growth will be driven by competition among the console manufacturers seeking to outdo each other, as well as an even greater number of console garners offering on-line content. Console manufacturers have unprecedented control over the market and the potential for generating revenues is immense. However, console manufacturers still have to divulge precise strategies as to the shape of their online gaming services.

"Returning to a pay-for-play model will mean big changes for the industry," said Peter Tyson, games analyst at Datamonitor PLC. "Companies need to rethink their PC-based on-line gaming business plans right now and at the same time ready themselves for the console on-line gaming market."

The iTV industry is still in its infancy, but will develop rapidly in the next two years. According to Datamonitor, games will fuel this growth. Datamonitor predicts that by 2006, iTV gaming in Europe and the US will generate revenues of almost $2.7 billion. Europe will be the largest market for iTV games with revenues of $1.5 billion due to its initial lead in this market. However, the US will grow from a position of generating no revenues in 2001 to being the largest single market for iTV games in 2006.

One of the biggest sources of appeal for iTV games will be the ability for TV watchers to participate in contests linked to the popular shows or series they regularly watch. These enhanced TV games will generate revenues through sponsoring or by charging users a nominal fee to enter these contests in the hope of winning prizes or more original rewards, such as participating in live shows.

"The television has traditionally been the center of entertainment in the home and this will help the rapid uptake of iTV applications. Interactive TV will overtake the PC as the platform of choice for casual gaming and it will be imperative that games industry players focus their strategy on the television audience," according to Jacob Hayler, games analyst at Datamonitor PLC.