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Analyst: Online Games Now $11B Of $44B Worldwide Game Market
Analyst: Online Games Now $11B Of $44B Worldwide Game Market
June 8, 2009 | By Staff

June 8, 2009 | By Staff
More: Console/PC

Analyst Colin Sebastian is estimating that online game revenue has now reached $11 billion as part of a $44 billion worldwide video game market, with 2009 as the "year the pace of change accelerated."

With titles such as World Of Warcraft now bringing around $1 billion in revenue yearly to Activision Blizzard, it's easy to see why one of Sebastian's takeaways from E3, in a new analyst note, was: "Internet moving from sideshow to part of the main event."

The Lazard Capital Markets analyst particularly commented of this shift:

"With roughly one billion Internet users worldwide, the gravitational pull of the Internet is driving publishers to integrate online content and services more explicitly within and on top of traditional games.

As consumers have already demonstrated a willingness to pay to access interactive entertainment, we believe that video games are an important part of the migration of content “into the cloud.”

In fact, video games account for the largest portion of paid online content, well ahead of other forms of content, such as movies/video and newsprint.

We estimate that online video games will generate more than $11 billion in revenues this year, up from $3 billion in 2005, and account for roughly 25% of industry game sales worldwide. In this respect, we continue to believe that the Internet is emerging as an important growth driver and content platform, weaving together communication, information, commerce and entertainment.

In addition, 2009 may be remembered as the year in which the pace of change in media consumption accelerated, while 2010 and 2011 may bring improved monetization and mass market adoption of web-based applications and digital content, in particularinteractive entertainment."

Elsewhere in his E3 analysis, financial analyst Sebastian also looks at what increased Internet-based operation could mean for the major publicly traded video game companies, explaining:

"For video game publishers, the Internet platform not only provides room for additional revenue streams and higher ARPU, but also greater operating leverage and economies of scale.

On one hand, the Internet offers enormous efficiency, evening the playing field in content production and distribution, and offering unlimited shelf space.

[A pictured comparison of profit margins between] U.S. and Chinese game companies [with online-only Chinese firms at much higher profit margins] partially illustrates the difference in margin profile of online, packaged goods and hybrid models.

Over time, we believe that better “Internet economics” should provide software publishers with higher growth multiples."

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Phil Ledru
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I believe that over time, game makers will often use "shared environments" in terms of virtual world. Sharing common virtual spaces, such as most developpers don't create new 3D engines but instead use existing ones, is an efficient way to provide better quality at fewer costs. I think Second Life or PlayStation Home are the very basics of that new trend.

Of course, games with a heavy background can't really share a common space. This isn't for RPGs. But most arcade games, action games, any game in which a typical match lasts a few minutes, would really profit of a shared environment.

I can't go into details obviously, but let's take an example with EA Sports. Most of their franchises rely on the same software, and with increased physics, it seems most sports simulations now come down to plain real physical modelization.

Say I create a character in the EA Sports permanent world (picture yourself in a PlayStation Home but with lots of sports fields). My toon has specs (strength, stamina, etc), all corresponding to abilities in several sports. I go an play a FIFA just by taking my toon to the football field. Then hop for a few basketball matches somewhere else. By 8pm, I rejoin my "guild" and we go for the league match of the day, baseball championship over a month or so.

Now I've done all this with a single character, able to evolve (basic RPG thing) so I love my toon. Everything is continuous, I don't need to reset the console to change the game.

From this example, I'm pretty sure you can all see the benefits of such a "shared world", common ground for several games, several IPs.

Perhaps my character could also play poker after that.

Perhaps I can watch a real-life sport inside the world, since ESPN has "screens" ingame. Nice to sit in a virtual bar for an hour with fans all over the world.

I'm even sure you can put stores in there, real-life, just like Second Life does. After all, any franchise is happy to "be there": a Man United store just in front of the stadium with real items to buy makes the world deeper, more realistic.

Let real-life trends and fashion shape the virtual environment, live.

This calls for a totally new business model, a lot more interaction between IPs, between publishers of all kinds of media (just imagine the virtual world of music games, perhaps even connected to this sport world since my godzfootballer could play guitar, too...). I believe it is one step further into the online experience that kicked off with internet.


These are simple realistic-world examples. One could imagine other universes (from fantasy to sci-fi), perhaps compatible physics so one can "transfer" a character from a world to another.

There are countless possibilities. I've seen those shared, coherent worlds in my dreams about 10 years ago. And when I read an article like that, I'm confident we're getting closer.

Justin Abraham
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I like the fact that PKR Poker uses a 3d engine for online poker. I just wish others would start catching on!