In 2007, online console revenue is at 2.5% of total global video game market revenue, including console and handheld hardware and software revenue. By 2011, revenue from connected consoles will represent 18.6% of total market revenue. Although subscription revenue for premium online services and games will grow from $476 million in 2007 to over $2.4 billion in 2011, its share of online console revenue will decline from 48.5% in 2007 (already down from a high of 86.5% in 2006) to 23.2% by 2011. Downloadable content (DLC) consisting of games and game-related items, which at $35 million in 2006 represented a 13.5% market share of online console revenue, will become connected consoles' primary revenue source in 2007, growing from $493 million in 2007 to $7.2 billion in 2011. In 2011, game-centric DLC will make up 68.6% of online revenue. Advertising revenue from sponsored services, in-game ads, and product placement in connected consoles will reach $12 million in 2007, posting the first significant online console ad spend. Advertising revenue will grow to $858 million in 2011, with an 8.2% market share of online revenue.
Computer and video games have become very popular. In particular the interest in playing fun free online games over the internet is increasing strongly. Despite the growing popularity of YouTube, MySpace, and Facebook, gaming remains the king of online entertainment, driven largely by casual gaming activities.
Sites like Yahoo Games and EA's Pogo.com offer users access to a wealth of advertisement supported free online games, where sponsors have options for branding opportunities, and display and banner ad placements. Online games on the consoles could become a $10.5 billion business by 2011 from $981 million in 2007, according to market researcher IDC.
Video game growth will be strongest in the Asia Pacific region, its largest market, with a 10% annual growth rate through 2011, but will increase in the Europe/Middle East/Africa region (10.2%), the U.S. (6.7%), Canada (9.4%), and Latin America (8.2%) as well. Certain trends hold steady across most regions: For instance, driven by increased penetration of broadband access, online gaming is surging. In the U.S. and Europe/Middle East/Africa, online gaming represents the fastest-growing consumer segment (19.3% and 24.6%, respectively); in Asia Pacific and Canada, online growth came in second only to wireless (at 16.1% and 13.9%, respectively). Other trends are more regional. The in-game advertising market is expected to increase 64% in the U.S. And in China it is expected to rise at a compound annual rate of 14.3% to $2 billion in 2011, most all of that growth will come in online games.
Spurred by the new generation of consoles and handhelds, and by increased penetration of broadband and wireless technologies, the video game industry is ripe with opportunity. "Growth in platforms allows you to hit new demographics," says Stefanie Kane, a partner with PwC's entertainment and media practice, noting that handheld game devices have brought more women into the market, and that the entrance of cable and on-demand TV channels will further widen the base. "There is a lot of unlocked potential."
You might think the face of one of the hottest areas in gaming right now is a young male in his 20s who owns the latest supercharged gaming system from Microsoft or Sony - or both.
But you'd be wrong.
Instead, the epitome of the new-era gamer is a woman in her late 30s or early 40s who plays on an average PC.
Yes, the video game industry seems to have been turned on its head.
For years, the dominant themes have been faster game machines, increasingly realistic graphics, more immersive play, as well as the old standbys - blood, guts and blowin' stuff up.
But that picture has begun to look increasingly outdated. While young men dominate the gaming industry as a whole, casual games are one of the fastest-growing parts of the industry and attracting a whole new demographic.
You can find signs of the revolution everywhere. One of the fastest-growing parts of the game industry is centred on so-called casual
fun free online games, PC-based titles that users can generally start playing in minutes and usually don't require the mastery of some combination of multiple buttons to enjoy.
The upheaval has spread to the console market, as sales of Nintendo's Wii console and DS handheld, both of which stress fun-to-play games over powerful processors or realistic graphics, are far outstripping their supercharged competitors from Microsoft and Sony.
Revenue streams enabled by active online consoles in this cycle show the strongest growth in the sector and will not only determine the future success of the console vendors but also be crucial to the success of many third-party publishers.
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