Technology | Media | Telecommunications

Friday, January 30, 2009

Online is New Imperative for Gaming Industry

There are now signs that the consumer electronic (CE) sector has been negatively impacted by economic pressures, according to the latest market study by In-Stat. Shipment growth in 2009 will be slowed down across a number of CE segments -- and video game consoles is expected to be one of these markets.

In 2008, total video game console unit shipments reached approximately 48 million worldwide, up 17 percent from worldwide unit shipments in 2007. Growth occurred over this time period for a number of reasons.

Consumer demand for the Nintendo Wii was very strong and outpaced demand for both the Xbox 360 (Microsoft) and the PlayStation 3 (Sony). Also, the video game console market did not see an impact from the declining economy until late October 2008.

Even then, the market survived the remainder of the year, and experienced continued demand over the crucial holiday season. However, for 2009, the market is expected to fall almost 2 percent to 47.5 million unit shipments worldwide.

The video game console business is costly as it is, and coupled with a dismal economy, the three main vendors have turned to online gaming to generate additional revenue or to promote brand loyalty.

However, there are clear differences among the three vendor strategies.

Microsoft is trying to create a number of revenue streams through its Live service, including its subscription service, paid casual games, and additional paid content. Sony is following a model similar to that of Microsoft, except it doesn't offer a subscription service. Nintendo is limiting its revenue to paid downloads for Nintendo and partner games. Other services, including multi-player gaming, news, weather and Internet access, are free.

Since the Wii has been selling so well, it would appear that it is not Nintendo's priority to develop an online gaming strategy that makes money. However, online gaming is shaping up to be an imperative part of the gaming industry overall.

In-Stat believes that it would be in each vendor's best interest to develop and hone its online gaming approach over the next year in an effort to create new revenue streams in a dismal economy.