New analysis and a report by Frost & Sullivan places gaming in the top spot of ‘What’s driving the Asia-Pacific Online Content Market?’ Asia is not free of the global piracy concern, but revenues for paid online content rose 25.6% in 2007 and are looking at projections of another stellar year (an expected 21%), reaching a market size of US$4.67 billion by December 2008.
The study shows that online music and video have felt the impact of piracy yet gaming remains relatively unscathed, accounting for 81.3% of revenues generated in 2007. To put that in perspective, 10.8% came from the music industry, and 7.9% is owned by video.
The study conducted by Frost and Sullivan covers the Asia Pacific Online Content Services Market – 12 Asia Pacific countries. The study places the combined earned revenues of US$3.86 billion in 2007 and estimates this to be worth US$9.2 billion by the end of 2013, at a CAGR (compound annual growth rate) of 15.6% (2007-2013).
Online gaming is projected to lead this massive growth of digital content at a CAGR of 14% and will continue to be the big player in the premium or paid content revenues in 2013 with a market share of 75.1%, US$6.9 billion.
Premium content services including news, greeting cards, research, dating and credit reports are more of a niche product and are not included in this study.
Frost and Sullivan’s industry analyst Kamlesh Kalwar said, “Today’s Internet has come a long way from being just a medium for disseminating information and is now increasingly becoming the mainstream channel for distributing and accessing ‘infotainment’ content as well.
“As the percentage of people accessing the Internet for leisure time entertainment grows rapidly, the market for both paid online content services as well as ad-revenue supported free online content services is expected to grow in tandem with this shift in the consumption of entertainment content,” he says, adding that the Internet has become a great alternative to traditional media channels for music, videos and games thus spawning a digital culture.
As expected, China and Korea are the largest consumers of premium online content. Together, they count for a massive 79% of revenues in 2007. China is the single largest gaming online gaming market with the increased penetration of entertainment applications reaching the top of the list. Gaming in China is blazing new paths, and China is expected to contribute up to 46.7% of the Asia Pacific content revenues by the end of 2013.
One of the factors driving Asia Pacific consumption of premium online content is the increased availability of broadband internet connections. “As faster Internet speeds enhance the overall online experience, users are spending more and more time online playing games and visiting social networking sites,” Kalwar says. “The growing broadband penetration has not only expanded the netizen base, but also created a conducive environment to encourage users to spend a greater amount of time online engaging in entertainment activities by enabling the convenient sharing, personalisation and sourcing of relevant content.”
He adds, “As such, premium online content services and applications like audio- and video-streaming and downloads, as well as online gaming is expected to see a surge in demand.”
Kalwar also mentions that with widespread availability of net speed, comes the unfortunate side effect of illegal downloads, piracy, and BitTorrent and other P2P networks. While piracy runs rampant in Music and Video, it remains a relatively small problem in the gaming world. The main factor combating this problem is that users need to be registered with a certain game publisher before they can play the game.
Kalwar says, “In an effort to shake-off the ghosts of piracy, stakeholders are grappling with the right business model to monetize content. For selected content, particularly online video and music streaming services, the ad-sponsored revenue model has been widely used.
“Game providers on the other hand have adopted the FTP (free-to-play) revenue model where gamers are not charged an upfront cost to play games online, and instead aim to profit through in-game advertising and virtual sale of in-game items like weapons, ammunition and such. In nascent markets, there has been a consistent attempt to increase sampling by giving the base version for free and charging for the advanced versions once the subscriber is hooked,” he adds.
Such FTP billing models, richer and wider product offerings, and the growing popularity of MMORPG (massively multiplayer online role-playing game) is expected to drive growth in the online gaming segment.
If you are interested in a virtual brochure, which provides service providers, vendors/manufacturers, end users, and other industry participants with an overview of the Asia-Pacific online content services market, then send an e-mail to Sarah Lourdes at sarah.lourdes@frost.com, with your full name, company name, title, telephone number, fax number, and e-mail address. Upon receipt of the above information, an overview will be sent to you by e-mail.
About the Asia Pacific Online Content Services Market Study:
The Asia Pacific Online Content Services Market study is part of the Communication Services Growth Partnership Service program, which also includes research in the following markets: WAN services, enterprise mobility, IPTV, user-generated content (UGC), social networking, broadband access technology, mobile content, telecom services, managed and hosted services, and network transformation case studies. All research services included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants. Analyst interviews are available to the press.
About Frost & Sullivan:
Frost & Sullivan, the Growth Partnership Company, partners with clients to accelerate their growth. The company’s TEAM Research, Growth Consulting and Growth Team Membership empower clients to create a growth-focused culture that generates, evaluates and implements effective growth strategies. Frost & Sullivan employs over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from more than 30 offices on six continents. For more information about Frost & Sullivan’s Growth Partnerships, visit http://www.frost.com.
As reported by Mike Rose from Gamasutra, one of Kersting’s key takeaway points was that “free-to-play will dominate [the gaming industry] soon.” Obviously, coming from Europe’s largest developer of free-to-play browser and client based MMO games in Europe, Kersting has a bit more insight than the average Joe. His reasoning and philosophy come down to experience. He readily acknowledges that full-priced retail (i.e. in the box) games are still the defacto choice for a number of publishers, but a number of problems including piracy, market competition and overcrowding, and the “one time earning” factor are forcing traditional sales methods and resulting revenue numbers to drop. Eyeballing both Ubisoft and EA, Kersting pointed out that both manufacturers have seen a 51 and 20 percent (respectively) drop in sales numbers.
