Posts Tagged ‘video game industry’

US Gamers spend $25.3 billion per year

Monday, May 10th, 2010

A recent report issued by industry analysts Newzoo indicates that the U.S. gaming consumers spend approximately $25.3 billion per year.

Culled from data pulled from the 2009 Today’s Gamers Survey, operated in conjunction with global search firm TNS, the Newzoo Games Market Report brings to light not only some staggering monetary figures, but also reveals where, exactly, this money is being spent. A total of 13,000 gamers were surveyed, and Newzoo speculates that there are approximately 183.5 million gamers in the U.S.

Almost half of all sales made in the video game industry in the United States (46 percent) can be attributed to the trading (buying/selling) of used titles, as well as online forms of payment(s) – subscriptions, virtual currencies, microtransactions, and digital distribution or downloadable content.

What this means is that the remaining 54 percent of sales are still coming from “traditional” (read:boxed) forms of games revenue generation. When viewed from Europe, these numbers are even higher with Belgium having a 59 percent “traditional” revenue making model, with up to 78 percent in France.

U.S. gamers clearly prefer consoles, as the largest percentage of the spending is on console based games – $15 billion. This includes both home and handheld gaming software. PC spending scores a paltry 2nd, with only $4.5 billion headed in it’s direction. Mobile device (i.e. smartphones) take home around $1.1 billion, MMOs, $2.12 billion, and Game Portals $2.78 billion.

Below are highlights from the Newzoo Games Market Report available for only 299 EU

GamesMarketReport_SpendingOverview

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China says ‘No Way José’ to foreign investment in online games industry

Tuesday, October 13th, 2009

It’s quite possible that the Chinese government would like to keep this one on the down low, it’s been revealed that they’ve officially cut off foreign investments in their lucrative online gaming industry. Apparently, the move is to strengthen the governments’ control and oversight of virtual worlds.

g228586_chinese-flag-640The General Administration of Press and Publication (GAPP), China’s video game industry regulator and overseer, released a paper on Saturday stating that the government will now prohibit the investment of foreign funds and interest in domestic online gaming operations. This ban is includes joint ventures, wholly owned enterprises and cooperatives.

If the phrase ‘joint venture’ and China rings a recent bell, you’ll recall that the holdup for millions of Chinese World of Warcraft players was due in part to Chinese regulators that were concerned over publisher Blizzard’s provisions of technical support to NetEase, the Chinese game developer that earlier this year won the lincense to operate the title within China. This new directive seeks to cover this issue but also stating that foreign firms will no longer be allowed to “influence Chinese gaming firms through agreements or technology support.”

With China having one of the world’s fastest growing online gaming markets, with, according to the GAPP, growth estimates projected at anywhere between 30 and 50 percent this year to a whopping 24 – 27 billion yuan ($3.5 – 4 billion), it’s easy to see why investors would want to get involved.

What’s important to keep in mind here is that the timing of this announcement couldn’t be better for the Chinese government. With the GDC: China taking place in Shanghai, China is currently playing host to some of the most important and influential decision makers in the industry. A coincidence that they chose the day prior to the official opening day of the GDC to make the announcement? Highly suspect.

Ultimately, as the decree states, foreign investment has been cut off to games and publishers that operate in the Chinese domestic market.  It’ll be interesting to see how this effects gaming powerhouses such as Shanda, which have a number of partnerships and joint ventures currently in operation.

 

Uncle Walt merges with Marvel – what does it mean for video games?

Tuesday, September 1st, 2009

Announced just prior to the trading floor bell yesterday morning, the announcement went out that two of the largest entertainment players in the industry are merging. The Walt Disney Company is offering $4 billion in stock and cash for the ownership rights of Marvel. As boards of both firms have signed off on the deal, this was clearly a non-hostile take over, and the deal is now in the hands of shareholders and federal regulators.

dismarvTo this end, Mickey, Minnie, Pluto, and Goofy just inherited over 5,000+ iconic Marvel characters as siblings. Marvel continues to crank out comic books, and license these IP’s out for multimedia usage. Some of these licensees include THQ, Sega and Activision, and perhaps most importantly, Gazillion’s upcoming Marvel Universe MMO, a 10-year licensing deal.

So what does this merger mean for the heavily licensing dependant video game industry? While Disney has been ramping up in-house game development, according to an investors call, Disney’s CEO Bob Iger doesn’t see the need to take over all future Marvel based game development. “On the video game front, (Marvel) have some smart licensing agreements with some of the best video game manufacturers in the business. While we have been steadily moving in the direction of video game integration, we don’t rule out the blend of licensing and self-produced and distributed video games.”

This statement in itself demonstrates that Disney has just added another notch in their “we’re sitting pretty in the video game industry” belt, but it’s Iger’s caveat to this statement that closes the deal, “As these licensing deals expire we have the luxury of considering what’s best for the company and the products.” In other words, once the agreements are up, Disney can do whatever they want/makes the most financial sense. These deals, however, are quite a ways off. Marvel’s deal with Activision, which includes the Wolverine and Marvel Ultimate Alliance games expires in 2017. As mentioned above, 2019 will see the end of Gazillion Entertainment’s deal with Marvel. Marvel’s signed papers with Sega includes a games deal based on the Marvel movies, and was described only as “multi-year”. Likewise, THQ’s Marvel deal includes video games based on the Super Hero Squad franchise.

If Disney’s Club Penguin is to be used as any sort of yardstick, it’s fair to say that a Marvel based virtual world must certainly be on the big Mouse’s mind. Officially, and obviously too soon to start making any type of announcements, Disney hasn’t pointed to any original creations involving their new character acquisitions. However, according to the New York Times, the company does see immediate leveraging opportunities through the Marvel name; Characters such as Spider Man, X-men, Iron Man, and Captain America will be added to Disney theme parks as soon as feasible. Likewise, consumer products, i.e. toys, merchandising, etc., will be significantly factored into Disney’s international business plans.

 

Nexon delivers a quality experience – reaps the financial rewards

Wednesday, August 19th, 2009

Hot on the heels of the Tencent.com news of posting record profits, Nexon America announced yesterday that they’ve also set a few records of their own. Looking at July ’08 vs. ’09 saw a 35 percent increase in revenues.

Leading the revenue surge was Nexon’s now 6 year old (Korean) and 4 year old (North America) free-to-play genre defining Maple Story. This past July saw a record number of more than 70,000 max concurrent users online. Nexon America counts over 6 million registered users, only a small fraction of Maple Story’s 92 million total worldwide players.

To put this into perspective, the NPD Group recently reported a 29 percent drop in video game industry revenues in July ’09, when compared to the year before. So where’s the disconnect? Obviously, the current global economic situation has forced consumers into tightening the belt, and holding off on new hardware and software purchases. When looking at the current situation and instigating the “Some things will have to go,” mentality, surely that gaming subscription might be one of the first things to go. Et viola, enter stage right the appeal of free-to-play gaming.

“The economy has been tough on great deal of the games industry, but we fought hard to retain our customers and to bring in as many new players as possible,” said Min Kim, Nexon America’s vice president of marketing. “We’re heavily investing on all fronts – in our games, our publishing platform, aggressive marketing efforts as well as customer service. The best news for Nexon America is that our success isn’t just reflected in registered users, but in actual, dramatic revenue growth.”

During the month of July, Nexon put the pedal to the metal with marketing efforts including a massive internet wide campaign for their fantasy MMOG, Mabinogi. The company also ran major television and feature film preview advertising campaigns for Maple Story. If that wasn’t enough, Nexon’s popular FPS Combat Arms currently has a major campaign underway.

Coinciding with these advertising blitzes, Nexon delivered major content updates to Mabinogi, MapleStory and Combat Arms, obviously not disappointing newcomers, and keeping long time players interested.

“We are serious about making Nexon the top brand in online gaming, and we are not backing on down our efforts to deliver more content to our customers or aggressively work to attract new players,” said Kim. “We pioneered the free-to-play business model when we brought MapleStory to North America in 2005. With the slew of new games we have planned and the BlockParty initiative, which will bring players together like never before, we will continue to be the leader in this market for years to come.”

So while this question hasn’t really been at the forefront of the battle for a while, I think with Nexon’s numbers, can we officially call this “but can it be profitable?” debate to rest? I think so.

 

As gaming business models evolve so do the legal practices associated with them

Tuesday, June 9th, 2009

As we all saw, E3 looks to have gotten it’s mojo back, and I can confidently say that the industry as a whole looks to be in a state of good health.  Of course, E3 is a trade show, where the industry gathers together to path each other on the back, and drool over all the new goodies in store, but combine this with the recent NPD Report indicating that nearly 2 out of every 3 Americans had played a video game in the past six months, and we’re really on to something here.

gavel1And while the focus has been mainly on games, game developers, publishers, etc., I’d like to take a step back and look at an industry that’s also reaping the rewards of a new found enthusiasm in the gaming: Legal.

A key driving factor to increased legal involvement in the gaming industry stems from the still evolving, but rapidly accelerated business model (read: microtransactions) that game makers rely on.  In the past, the path was simple, developers develop, and then hand the titles over to the publishers to push out into the market.  A great majority of developers’ legal fees when towards contracts with publishers, and that was the end of the road.  With the advent of social media, digital downloads, and increased involvement from developers themselves, comes an increased desire and need for legal council.

Patrick Sweeney, a lawyer specializing in the interactive media and entertainment firm, Nixon Peabody says, “There are more developers looking to step up to the plate with self-funded or partially funded games that they are able to monetize on better terms than the traditional model.”

Likewise, Mark Skaist, a 17 year vet of the video game industry, and partner at Stradling Yocca Carlson & Rauth comments, “Now that developers are doing things themselves, they have me working on rights clearance and other distribution related issues.”

Taking a look at Sony’s recent skyrocket, Free Realms, here we have a prime example of the increased need for experienced legal counsel.  Boasting an impressive 1 million registered users in just 17 days, it’s quite clear that Sony needed to have all their bases firmly covered before wading into the new business model waters.

Sony turned to the firm of Latham & Watkins partner Roxanne Christ to take them through these rigorous waters.  Christ and the firm are the folks responsible for establishing the rules that deal with players’ digital wallets, and end-user agreements, as well as relationships with external development studios.  “The shift to micro-transactions as a revenue model for the game raised legal issues that needed to be addressed,” says Christ.

The market, as well as the increased need for expert legal council hasn’t gone unnoticed by the legal industry.  Last year, the LA based firm Sheppard Mullin established a video game industry practice specifically tailored to address video game companies, developers, and publishers on issues of patent, entertainment, labor, and tax issues.  Amongst Mullin’s list of clients, one can find industry giants Sony Online Entertainment as well as Activision, which the firm represented in a patent infringement claim.

In 2007, the aforementioned Nixon Peabody acquired the firm of Offner & Anderson, a four attorney video game industry specialty shop.  Co-founder David Anderson says that his firms clients outgrew their exclusively corporate capabilities.  “We got to the point where we could better sever our clients at a bigger firm where were could provide them access to litigation and other practices,” Anderson says.

As the state of play continues to evolve, and more and new firms spring up, as well as the old stalwarts begin to take a look at alternative business models, my prediction is that we’ll also see an increase in legal firms that take a special interest in guiding and supporting these groups in charting relatively new waters.

 

Niko Partners project Chinese online game market to reach $8.9 billion by 2013

Wednesday, May 6th, 2009

Niko Partners, a leading research firm focused on providing market intelligence about the Chinese video game industry, recently released data from it’s most recent study, citing $2.75 billion in revenue from online games in China in 2008.  The study collected data from over 70,000 points in 10 Chinese cities over the course of March 2009.  The figure is generated from this data and includes new online game market segments, strong sales of (illegal) game consoles, and 23 million PCs in China’s 170,000 internet cafes.  Based on this data, Niko Partners projects that the online game market will continue to flourish with a massive 26.4% compounded annual growth rate over the next five years, with revenues to top out close to $9 billion in 2013.

report_cover“Average spending per Chinese gamer is rising to the point where a 26% increase in gamers resulted in 61% more revenue for online games in 2008,” said Lisa Cosmas Hanson, managing partner of Niko Partners. “Niko’s conclusion is that China’s online market has plenty of room for growth in the next five years, and much of that growth will come from beyond the major metropolises where the number of Internet cafés, home PC penetration and Internet usage are all on the rise.”

The 2009 Annual Review and Five-Year Forecast Report on China’s Video Game Industry, available from Niko Partners is a comprehensive survey and review of the 2008 – 2013 PC online, PC offline, casual games, social networking games, console, handheld games and hardware market.  It provides the most current and largest market intelligence of the Chinese gaming market including gamers, internet cafes, regulations, online game operators, games, hardware, distribution, retail, outsourced development, and vital info on trends in the supply and demand chain.

Highlights include:

  • Massively Multiplayer Online Games (MMOGs) accounted for 77% of 2008 online games revenue, with advanced casual and casual games making up the balance of 23%.
  • Webgames and games on social networking sites expanded the casual game segment, offering more games to new and casual gamers as well as to hardcore gamers who play MMORPGs.
  • Sales of next-generation game consoles continue to climb, though entirely via illegal imports as there has been a ban on consoles since 2000.
  • By 2012 the number of online gamers should reach 119 million, a 17.7% CAGR.

The report is now available from Niko Partners, and includes:

  • Annual Review & Five-Year Forecast Report
  • Chinese Gamers Study in 4 City Tiers
  • Six-Month Update Report
  • 10 hours of consulting time
  • On-site presentation about China’s market
 

2008 survey reveals average game developer salary – $79,000

Friday, May 1st, 2009

Chances are if you’re living under a rock or in a cave, you haven’t really noticed or felt the effects of the current global economic recession.  For the rest of us out here trying to make a go at it day after day have felt and seen it, but, if you’re working in the games development industry, things may not be quite as bad as those working in, oh, I don’t know…finance perhaps?  And while the full impact of the recession is difficult to put a finger on, recent survey data released by Game Developer Magazine indicates that not only is the demand strong for game developers, but flourishing as well.

game-developer-research-logoAs noted in our previous coverage of Game Developer studies, the gaming industry as a whole seems to be doing remarkably well in these uncertain economic times.  Early last month, their study showed that game development outsourcing (to firms such as ours) is on the rise, and last Halloween we covered their release of a 13% increase in North American gaming jobs over the course of 2007.  This recent news from Game Developer doesn’t disappoint, as they found in their 8th annual Game Developer Salary Survey that the average American game industry salary in 2008 landed just $1,000 short of $80,000/year.  This figure reflects a 7% increase from 2007’s figure of roughly $74,000.

However, this information must be taken with a grain of salt, as the recession is notably reducing the number of available positions.  Given this quandary, as less jobs become available, more experienced game developers find themselves in a position to ask for higher salaries.  Selected highlights from the industries only major publically released analysis of salaries in the video game industry:

  • Programming: programmers are the highest paid talent next to high-end businesspeople, with an average annual salary of $85,024. Experience pays in this role, as those with greater than six years of experience earned 26% more than the average annual salary.
  • Art & Animation: artists – averaging a $69,532 salary, nonetheless, 28% of art directors reported lower salaries than the previous year. But these more experienced, higher status artists also tend to earn at least 35% more than those with less experience and lower title.
  • Game Design: Averaging $67,379, design positions sprouted an average $3,730 over last year. As with many roles, region makes a difference, given that West Coast designers make on average $8,283 or 12% more than the rest of the game designers in the country.
  • Production: of all the game development disciplines, production – with a salary average overall of $82,905 – is the most welcoming to women, with 21% of the workforce made up of females – more than twice the industry average. The discipline as a whole saw a strong $4,189 bump from last year.
  • Quality Assurance: testers with less than three years experience make up the largest percentage of this segment – 46%. Quality assurance is the lowest paid of the game development disciplines, averaging $39,571 – almost flat to 2007 – and the majority of Q/A people – 87% – are lesser experienced. The number of female Q/A testers jumped from 6% in 2007 to 14% in 2008.
  • Audio: sound designers as a group earned 6% more than they did in 2007, up $4,758 on average over last year to $78,167. 74% of audio developers reported that their salaries increased over 2007. Interestingly, 48% of those in the game audio industry have been working there for 6 years or more – more than the 40% for game design, and equal to the 48% for production.
  • Business & Marketing: the business field as a whole remains the highest compensated group in game development – with an average salary of $102,143 – and also receives the highest amount of additional compensation. However, salaries vary significantly between individual job titles in this section, with experienced VPs and executive managers making the most of any individual section in the entire survey – at $131,085 on average and reporting at least 6 years experience.

The full report is available from Game Developer Research and covers mush more details US regional and growth data, including year over year results from 2004 – 2008.  The full report also spotlights data accrued from Canada and Europe.

 

Nielsen study finds gaming up, prime time television consumption down

Thursday, April 9th, 2009

As tougher economic times bear down on the global market, and wallets get tighter, consumer spending and consumption habits are bound to change, appropriately reflecting market conditions.  But according to a new Nielsen study, the healthy growth of the video game industry is bucking all the trends and setting out on it’s own path.

The recently published ‘State of the Video Gamer’ report looked at gaming on consoles, PC, and mobile gaming happening in the United States during Q4 of 2008.  The Nielsen study found that gaming, traditionally a realm reserved for younger males, have grown in popularity with females, older players, and diversified groups.  The report also revealed that this new consumers’ play time is cutting into prime time television consumption.

“Gaming, once the domain of kids and a small group of core fans, is now more mainstream than ever.  As the number of platforms continues to expand, we would expect that more people will be drawn to the entertainment video games can offer.  Along with this, the evolution of gaming consoles into multimedia devices has changed consumption habits of traditional media such as TV, movie and Internet content,” said Bradley Raczka, Marketing Manager for Nielsen Games.

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Key findings from the study include:

  • The PlayStation 2, while still leading all other consoles in total minutes of usage, continues to have the highest downward trending rate of usage.  Trending data suggests by the end of 2009, the PlayStation 2 will no longer be the most used console in the United States.
  • Females 25 years and older make up the largest block of PC game players, accounting for 46.2 percent of all players and 54.6 percent of all game play minutes in December 2008.
  • More sophisticated consoles such as the PlayStation 3 and Xbox 360 attract the more engaged console users, who are less likely to be watching television in Prime Time than users of other consoles.

The Nielsen data was mined from a sample of more the 17,000 US television households and 185,000 US tracked PC’s.

While the Nielsen study is certainly not all encompassing, it does deliver a hefty blow to an already ailing television industry.  With the rise of console complexity and interactivity, this study clearly indicates more and more households are tuning off the tube, and turning on the titles.

So what does this all mean?

The Nielsen study only confirms and strengthens a similar study currently being conducted by NeoEdge and Frank Magid Associates – that in-game advertising is more effective than television advertising.  Depending on which sources you look at, spending on in-game advertising is expected to balloon to somewhere between $732 million to $1.8 billion by 2010.  Which then raises the question – why is IGA Worldwide in trouble and looking for more money, or a buyer?  With more and more info hitting the streets regarding the potential of in-game advertising, I’d expect in-game advertising specialists like IGA Worldwide, Massive, and Double Fusion to be working at maximum capacity.

Download the Nielsen ‘State of the Video Gamer’ report here (PDF).

 

Think Services census reveals 13 percent increase in North American gaming jobs

Friday, October 31st, 2008

Think Services Game Group’s Game Developer Research has recently published its Game Developer Census 2008 report with some interesting numbers.  Surveying all companies working in the video game development and publishing in North America, the survey uncovered a 12 percent year on year increase of US employees.  This years number clocks gaming industry jobs at a rockin’ 44,400 – up from 39,700 in 2007.  If the 12 percent in the US wasn’t enough to make you sit up and take notice, take a look to our neighbors to the north: Canadian video game jobs leaped a healthy 17 percent; up to 9500 from 8100.  Combined the North American gaming industry increased 13 percent, from 47,800 to 53,900.  Now that’s alotta jobs, and outstanding industry growth.

While a portion of this increase comes from increased staffing numbers related to next-gen games, the driving factor has been continued development and investment in MMOs and Virtual Worlds.  VC’s have obviously put their reservations on the shelf, as continued growth in the free-to-play game worlds has spurred increased investments.

Breaking it down in geographic terms, while Governor Schwarzenegger’s statewide economy might not be rocking the Kasbah, 21,200 game developers couldn’t be happier in the Golden State.  Washington State ranks a healthy #2 with over 4,700 employees, and the longhorns of Texas calling 3,330 video game industry professionals state residents.  In total, seven states (California, Washington, Texas, New York, Massachusetts, Illinois, and Florida) have over 1,000 game professionals as inhabitants.  North Carolina and Maryland are just below the 1,000 threshold.

Interesting to note; the census did NOT include game tools companies (who’s your favorite microtransaction payment method firm?), game contracting/services companies, external PR, marketing, legal, and other business services and liaison or licensing divisions at larger media companies.  Game Developer Research estimates this number to be in the 18,000 range in North America.

“We’re delighted to present our second Census report, showing a notable increase in the amount of professionals employed in the game industry. With industry revenues at an all-time high, we believe that we’ll continue to see a vibrant market for those employed in the art and science of gaming,” said Simon Carless, publisher of Game Developer Magazine and director of Game Developer Research.

To view a sample data set, or purchase the entire 170 page Game Developer Census 2008 report, visit Think Services at gamedevresearch.com.

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NPD reports that industry growth slows: Madden still drives it into the end zone

Friday, September 12th, 2008

According to NPD’s August numbers, the North American video game market only grew 9% year-over-year (August ’07-August ’08), indicating a slowed growth from previous months.  Software sales were however strong with EA’s Madden NFL 09 leading the pack; Nintendo pulling some equally strong numbers.
While 9% isn’t a massive growth rate when talking about widget sales, a 9% growth rate in the video game industry is still a commanding figure: $1.08 billion ’08, and a paultry $994.76 million in August ’07.  Hardware however, only clocked in at a 3% growth rate; $384.59 million ’07 – $394.53 million ’08.

NPD analyst Anita Frazier points out that this is the first time in 27 months the industry has seen only single-digit percentage growth.

Like the July numbers, software sales managed to beat the average improvement, rising 13% year-over-year from $489.06 million to $550.67 million.

The Nintendo DS and Wii took the top two spots respectively in the hardware sales slots, while Xbox 360 leapfrogged over the PS3, the PSP managed to beat both.

The cold hard facts:

August Hardware Per-unit Sales figures

  1. Nintendo DS – 518.3K
  2. Wii – 453.0K
  3. PlayStation Portable – 253.0K
  4. Xbox 360 – 195.2K
  5. PlayStation 3 – 185.4K
  6. Playstation 2 – 144.1K

While August wasn’t a great month for strong hardware growth Frazier comments, “The PSP and PS3 systems achieved the greatest percentage gain of all now-gen systems. The sales acceleration of these systems, combined with the recent Xbox 360 price cuts should fuel future growth of this category.”

I’m quite sure the folks in Richmond are quite happy about this.  Microsoft recently lowered the price of the entry-level Xbox 360 Arcade, which comes without a hard drive, to $199.

August Software Units Sold Figures

  1. Madden NFL 09 (Xbox 360, EA Tiburon/EA) – 1.0M
  2. Madden NFL 09 (PS3, EA Tiburon/EA) – 643K
  3. Madden NFL 09 (PS2, EA Tiburon/EA) – 424.5K
  4. Wii Fit (Wii, Nintendo EAD/Nintendo) – 394.9K
  5. Mario Kart Wii (Wii, Nintendo EAD/Nintendo) – 328.7K
  6. Wii Play (Wii, Nintendo EAD/Nintendo) – 200.2K
  7. Soulcalibur IV (Xbox 360, Project Soul/Namco Bandai) – 174K
  8. Too Human (Xbox 360, Silicon Knights/Microsoft) – 168.2K
  9. Madden NFL 09 All-Play (Wii, EA Tiburon/EA) – 115.8K
  10. Guitar Hero: On Tour (NDS, Vicarious Visions/Activision) – 111.2K

With the days growing shorter and cooler, combined with the media blitz concerning all things football, it’s shouldn’t really come as a shock that Madden is dominating the charts.  Regarding the slow growth over the month of August, sure, it IS the first time the sector has seen a single digit for the past 27 months, but I’m not quite sure it’s time to panic.  While there were 453k Wii sales, the DS clocked in at 518.3k, clearly indicating that gamers were on the go during the month.  As retailers begin to gear up for the coming holiday season, I wouldn’t be surprised to see a report coming out of Port Jefferson extolling the rise in gaming consoles and software sales in the coming months.

And the PS2…are they really still making games for an outdated platform?

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