Research Roundup: Game Forecasts Get Very Bullish

Electronic Gaming Business, June 30, 2004

If adults do latch onto the PS and DS, however, the great potential upside for publishers is that portable gaming is second only to consoles in extracting revenue from each user. According to Jupiter's figures, handheld owners have nine game titles and spend $72 on games over 6 months, compared to 11 titles and $146 spent among console owners.

Wedbush Morgan's Pachter thinks that while Sony will likely sell out its projected initial worldwide shipment of 3 million PSPs in 2005, the company's longer-range play is to make the handheld a multimedia device that will extract royalties from the music and film industries. The big winner probably will be Nintendo. "We expect the DS to be a phenomenal success," he says, "and anticipate that Nintendo's 3.5 million unit forecast for this fiscal year will be easily exceeded." With its backward compatibility with GBA games, a reasonable price point (perhaps $129 to $179), and the company's lock on the core audience for handhelds, Pachter expects many GBA owners to upgrade to the new platform. "We do not expect any serious competition for the GBA/GBA SP/DS in the foreseeable future."

We're All Online Now

There is no stopping broadband now, as almost all tech analysts predict deep penetration of high speed access in virtually all world regions over the next five years. As a result, PwC says that among U.S. gaming's hottest sectors, the Internet and wireless will experience the most dramatic growth, moving from combined revenues of $562 million in 2003 to $6.2 billion in 2008. Just about everyone is hedging their bets on whether and when connected consoles will be a real economic opportunity for this industry, however, with much of the forecasting involving PC based Web games, downloadables and MMOGs. While familiar hard core MMOGs in the U.S. and Europe will grow from a $455 million business this year to $818 million in 2007, says ScreenDigest (www.screendigest.com), it will be trumped by massive growth in casual gaming online. Ranging from pay-to-play to game subscription and downloadables, casual gaming will reach $1.2 billion by 2007 and account for 56% of the market.

ScreenDigest analyst Nick Gibson is especially bullish on the pay-to-play model where casual gamers pay incremental fees to wager on brief tournaments or to play for prizes. Much of the new growth in casual gaming will be international. "While the early stage growth was driven by North American usage, it is the rest of the world and Europe in particular that is expected to provide the fastest geographic areas for growth over the next three years," says Gibson in the report.

While ScreenDigest assumes that deeper broadband penetration worldwide will nearly double the market for MMOGs, we at EGB continue to believe that this genre remains a niche play that has not succeeded in getting out of its RPG-centric audiences. SD believes that ultimately MMOG players will subscribe to more than one game at a time, but we think the level of involvement necessary for these games prohibits this. Unless game developers can successfully produce new genres in this space, MMOGs will be played one at a time by a narrow slice of gamers, so that new titles will cannibalize one another as much as they will grow the market.