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Game Changer: Web, Mobile Play Knocking Out Consoles

Date Added: June 17, 2011 11:24:18 AM
Author: www.portfolio.com
Category: Mobile News Media

In the ever-shifting gaming landscape, online and mobile videogame revenues are expected to continue increasing their share of global videogame revenues, according to a recent report—and the trend does not bode well for the presence of North American game companies.

In their June report, analysts from London-based digital media investment firm Digi-Capital predict that online/mobile-game revenues will hit $44 billion and account for half of global video3game revenues by 2014. That’s more than double the $19 billion mark by online/mobile games in 2009 (32 percent global share) and is aided by what the firm calls a “fundamental shift toward online/mobile-games company investments” in the past year.

However, one market's gain is another’s loss. The shift to Web-based and portable gaming platforms eats away at the once-dominant console game market. In the Digi-Capital report, the firm notes that the market is “flat to down” and declining in profitability. Here in the United States, retail videogame software sales plummeted to $375.8 million last month (down from $466.3 million in May 2010), marking their lowest point in nearly five years, according to research firm NPD Group.

So who stands to gain if the Digi-Capital predictions are accurate? According to the report, Europe and Pacific Asia will dominant the global videogames industry in the coming years, thanks to their significant stake in online/mobile videogame sales. The firm estimates that those two regions will take 90 percent revenue shares for such games, with China (49 percent) and Japan (14 percent) leading the way.

Most North American videogame companies cannot be pleased with the forecast. Whereas North America is expected to continue accounting for roughly 40 percent of the console game revenues in 2014, according to Digi-Capital Managing Director Tim Merel, those companies will snag only 10 percent of the online/mobile-game revenues.

“We believe that North American games companies should increasingly be looking to China, Japan, South Korea, and Europe for online/mobile-games growth,” Merel said. “This can take the form of direct investment, joint ventures, and acquisitions.”

With that said, he doesn’t anticipate the industry swinging that direction. Instead, he says consolidation in the market will likely take the form of leading Asian videogame companies, which boast higher profit margins and relative valuations, purchasing North American and European companies.

sourc: http://www.portfolio.com/views/blogs/the-tech-observer/2011/06/16/video-games-continue-shifting-to-web-and-mobile-devices

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