Technology | Media | Telecommunications

Monday, February 17, 2014

Video Game Software Revenue to Reach $24B by 2017

Demand for casual user online video games has grown significantly over the last few years, particularly on mobile devices -- such as smartphones and media tablets. Regardless, personal computer gaming is still in vogue with its loyal traditional fan-base.

A recent digital gaming software and services forecast from International Data Corporation (IDC) concludes that PC and Mac gamer spending and direct banner/video advertising outlays -- across all digital channels -- will grow to over $24 billion worldwide by 2017.

The forecast also found that global digital PC/Mac game revenue will rise about 4 percent per year between 2012 and 2017.

North American digital PC/Mac gaming revenue, however, is forecast to slip at the margins over the forecast period.

This market share slide is mainly the result of the cannibalization of casual-leaning, browser-centric games -- typified by Zynga's Farmville 2 -- by smartphones and tablets.

The market share shift is also compounded by a steady drop in hardcore gaming subscription revenue -- as an example, Blizzard Entertainment's World of Warcraft.

Largely driven by rising living standards in Brazil, Russia, India, and China, plus the inability of game consoles to establish much of a beachhead in key developing economies, digital PC/Mac gaming revenue outside North America should expand by more than 5 percent per year through 2017.

"Other than the casino genre, it's been tough sledding for most casual-leaning PC game genres in the past year," said Lewis Ward, research director, gaming at IDC.

IDC belives that most of the growth is coming from hardcore-oriented freemium titles -- such as Tencent's and Riot Games' League of Legends, Valve's Team Fortress 2 and Dota 2, Wargaming.net's World of Tanks -- and a handful of Chinese MMORPGs.

The forecast also notes that Valve's Steam service has a significant opportunity to expand into North American and Western European living rooms in the next few years -- based on the company's Steam Machines initiative.

According to the IDC assessment, demand for prepaid digital games should remain stable if not rise at the margins through 2017 partly because key developers, publishers, and platform providers will ramp up their offerings on HDTVs.

The difference between what PCs, consoles, microconsoles, and perhaps even smart TVs will be able to deliver three years from now will be mostly semantic.

The platforms that outperform will have great games, a wise mix of business models, an ability to strain key customer insights out of a sea of big data, and offer great a social experience.