White
Paper Preview : The Gaming Industry
by
Wendy Hall
Larta Staff Writer
February
17, 2003
As
the rest of the economy continued to endure an ongoing
downturn, 2002 saw computer and video game software
sales reach $6.9 billion, an 8% increase from the
previous year. As more console titles are scheduled
to roll out in 2003, the interactive entertainment
industry is expected to continue its almost decade-long
upswing.
The
Playing Field
Before
Playstations began invading living rooms in the mid
1990s, interactive entertainment frontiers were being
pushed via improved graphics and more complex architectures
within the realm of the personal computer (PC). Subsequently,
games were only bought and sold to the then relatively
small demographic of PC owners. When hardware creators
began selling console devices that were designed to
exclusively run games, which were also 
significantly
less expensive than a computer, gaming went from an
amenity of the PC to one of the fasting growing industries
in technology and entertainment. The advent of more
powerful PC systems and multiple console gaming options
helped the computer and video game audience surge
and expand well beyond its initial limited demographic
of mostly young males between the ages of 13 and 18.
The console has now become the centerpiece of the
gaming industry (2002 U.S. sales of console games
totaled $5.5 billion while computer games accounted
for $1.4 billion in sales*). Now the interactive entertainment
industry is in the process of driving another evolution.
Both Sony and Microsoft are ambitiously attempting
to market the PS2 (Playstation 2) and XBox systems
as all-in-one home networking/Internet/entertainment
devices. How much that will stick remains to be seen
and largely depends upon the success/extent of the
adoption of broadband. Yet, the unique entertainment
experience that gaming offers, and the technology
within gaming which is constantly pushing new boundaries
of possibility for the user, will continue to attract
gaming consumers.
|
Computer
and Video Game Usage by Age
(Source: CSFB, Hart Research)
61%
over 18
39% under 18
|
"I
think people appreciate that they're getting much
more challenging game play, better graphics, sharper
sound--everything. So the interest in buying more
games is healthy for both new and more experienced
gamers," says Wedbush Securities interactive
entertainment industry analyst Michael Pachter. "As
with all other forms of entertainment, the more rewarding
the experience, the more willing people are to part
with their money."
Online
gaming: Untapped or unreal?
The
debut of these long-touted console systems in 2001-2002
expanded the platform wars to the Web with the launch
of online gaming ventures--subscription-based services
that enables users to play against each other over
the Internet.
"Really
what we're focused on with the XBox is online gaming,"
Chief XBox officer Robbie Bach told CNN during the
2001 Electronic Entertainment Expo (before the debut
of the console). "People are really excited about
the opportunity to play against other people over
the Internet, and XBox is the only console designed
to do that. It enables you to do some very exciting
things."
Although
the industry is hoping to create a new sector in interactive
entertainment by luring gamers online, there is some
debate about whether the market for online gaming
is rich and untapped, or simply non-existent. There
are still only a few online titles, and because creating
online games for millions of users to play simultaneously
requires a huge investment, the rate at which online
games become available is sure to be slow. Some feel
that consumers will look to online gaming for the
opportunity to communicate directly and creatively
with other like-minded individuals, and that in a
few years, as more titles are available, the businesses
could be lucrative because of that. Meanwhile, others
feel more skeptical that the amount of users who are
interested in making their gaming experience a social
one will support such high-cost ventures.
"The reason you play a videogame is so you don't
have to engage with other people," says Pachter.
"Although there are some real geeks whose only
chance at interaction is through videogames, there
aren't that many of them. I think down the line, online
makes sense because you can deliver the product online.
But they're dreaming about making a lot of money now."
Coming
soon from Larta: The
Gaming Industry
This next white paper from Larta will present an overview
of the multi-billion dollar video game industry, which
has positioned itself as the second most lucrative
form of entertainment behind box office sales. With
the recent launch of highly-anticipated console devices,
and with software and hardware sales in an upward
trend despite the soft economy, the business landscape
of gaming will become even more competitive and complex.
This paper will present current economic data, interviews
with industry leaders, and analysis of what issues
are shaping the direction of interactive entertainment.
