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Report: Wii Holds 47 Percent Of Global Console Revenue

Report: Wii Holds 47 Percent Of Global Console Revenue

April 5, 2010 | By Kris Graft

April 5, 2010 | By Kris Graft
More: Console/PC

A recently-released investment report from Ibis Capital highlighted the growing costs of game development, the risks of being independent today, and that the Wii holds 47 percent of global console revenue.

The report estimated average development costs for Xbox 360 and PlayStation 3 games at $15-$30 million per title. With games that cost that much, game companies need to sell between 500,000 and 1 million units to break even, excluding overhead. Marketing costs can amount to as much or more than the cost of actual game development, the report said.

That's compared to Xbox, PS2 and GameCube games that cost around $3-$5 million to make on average, Ibis said, while Wii games cost $5-$7 million.

Total video game sales were $77 billion in 2009, Ibis said, which compares favorably with $85 billion in global film revenue last year. Online, mobile and new consoles will drive growth in the years to come, the report said.

Rising Independent Risks

Rising costs mean that publishers are wanting to mitigate risks as much as possible, and publishers are now looking more carefully at the third-party, independently-developed games that they choose to fund.

With fewer advances distributed to independent developers, there's greater competition for funding and greater risk of not landing the next publishing deal, Ibis' report said: "Hit driven, high risk market has lead to many independents struggling to adapt and survive."

Wii "Domination" And The End Of Consoles?

The report said that the Wii "dominates" the current console generation in terms of revenue share. Ibis said the Wii captures 47 percent of global platform revenue, followed by Xbox 360 with 35 percent and PlayStation 3 with 18 percent. 2009 console revenues were over $30 billion.

Ibis forecast $40 billion of global console-related revenue by 2013, driven by growth in North American and European markets and new "eighth-generation" platforms expected to arrive 2013-2014. Asian console growth is expected to be limited by piracy and MMO and casual games.

Beyond the next generation of consoles, Ibis speculated that digital distribution could eradicate disc-based consoles as we know them. "Digital downloadable content and game delivery reduce likelihood of a ninth generation console cycle, creating potentially significant long term issues for Sony, Microsoft, Nintendo and GameStop," said the report.

"Untapped Potential" In Non-Fantasy MMOs

The online sector is one that is burgeoning thanks to social games on Facebook. Ibis noted the potential of high profitability with online casual games such as FarmVille and Pet Society, games that require just hundreds of thousands of dollars of investment before launch as opposed to millions and millions of dollars. The report said casual online game revenue worldwide was $2.25 billion in 2007, and $3 billion in 2009.

In addition, Ibis forecast 30 million MMO players by 2012, doubling the estimated 15 million today. Ibis called the MMO sector "high risk" due to tough competition and the high cost of creating an MMO.

The report added, "There seems to be a significant untapped potential for MMOs in other game genres [outside of fantasy], suggesting a "Blue Ocean Strategy" approach to opening new genres (as with Nintendo Wii in the console market)."

The full report is viewable here.

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