Analyst: Online Game Market to Reach $13 Billion by 2011

According to a new report from DFC Intelligence the worldwide online game market is forecasted to grow from $3.4 billion in 2005 to over $13 billion in 2011. This increase is being driven by the increase in broadband households, higher PC penetration and more connected console video game systems. This is leading to a growing number of consumer subscription services, the emergence of online digital distribution and increasing acceptance of games as an advertising mechanism. During this time period North America is expected to challenge current market leader Asia as the leading region for online games.

Despite the strong growth, the leading online game category is expected to remain high-end massively multiplayer online games (MMOGs) that appeal to a fairly small portion of the total user base. "MMOGs have a sophisticated online business model that drives a great deal of revenue for the top products," says DFC analyst David Cole. Other popular game genres like sports, racing and action still derive most of their revenue from retail sales with online game play as a free value add. According to Cole this is gradually changing as more of these products go online.

One of the issues is that the PC has been the dominant platform for online games while some of the most popular game genres are for the dedicated video game console systems. As console systems go online in increasing numbers they are expected to be a key driver of growth. Unlike past video game systems, the new console systems from Microsoft, Nintendo and Sony all will have a major focus on online connectivity right from the start. The Xbox Live online game service is a central part of the Microsoft Xbox 360, the Sony PlayStation 3 is expected to have an increased focus on online games and the Nintendo Wii will feature the online enabled Virtual Console concept that will allow for some significant online digital distribution.

The report forecasts that digital distribution will become a very big part of online connectivity. This is more of a retail model more about paying for, not necessarily playing, games online. Furthermore, it can work with the existing retail structure via such mechanisms as consumers buying retail cards that allow for online digital distribution. "Digital distribution and virtual item sales have started to do very well in certain Asian markets and these distribution models are expected to start having increased success on an international basis," says DFC analyst Alexis Madrigal.

In North America and Europe the casual game category is already benefiting from digital distribution. "Casual games have been the best at attracting advertisers, but they are now finding a great deal of growth from subscription and digital distribution models. Asian markets with products like Kart Rider, and Western products, like Habbo Hotel, are showing how a virtual item purchase model can work for games that have traditionally been advertising or subscription supported," says Madrigal.

On the downside, even with market growth many companies are likely to struggle to become profitable. A big problem is that the market is becoming more fragmented among different companies, types of products and markets. The top online games have tended to do very well in one market like Korea, China, or the U.S., but have generally struggled in trying to expand to other markets. Furthermore, traditional video game publishers have not done well in the online game business and this has allowed for the rise of several online-only game companies that are making the marketplace more competitive for established players.

Nevertheless, major markets like South Korea, China, Japan and the U.S. are all now able to support individual games that do over $100 million a year in just one country. The first big international success in online games, World of Warcraft, from Vivendi Universal's Blizzard Entertainment, will do over $100 million in each of several different markets in its first year alone.

The new report, The Online Game Market, is over 750 pages and contains company profiles, trend analysis, case studies of individual products and complete forecasts to 2011 broken down by region, game genre, consumer type, platform and business model. DFC Intelligence (www.dfcint.com) is a market research firm focused on video games, PC games, online games and interactive entertainment. They offer free monthly research briefs to anyone signing up at http://www.dfcint.com/mailing_signup.html.

greenlynxx6585d ago

This is great news! Hopefully as this part of the video game market grows companies will try to eliminate some of the technical hurdles out there like lag problems. This will also help to increase more and better penetration of broadband.

I personally love online play and MS's unified online experience was one of the driving forces behind my purchase of the 360. I only hope that reports like this one will spur the other two johnny come lately's to improve their online components.

Gamer136585d ago

When playing online it feels alot more realistic than playing off line.

REDMOND BOYZZ6585d ago

What does that mean?????????.

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coolbeans20d ago

Pretty good list. Botany Manor would be the newest addition that encapsulates that title.

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OptimusDK23d ago

There are different games. Some have gamplay at it highest priority, some have the story, some have the replay value and choices... There are a lot of different game experiences.

It is laughable that just now graphics does not have anything to do with that experiene. We have had many games of that type over time. This is just the one that have come closest to feel like playing an actual movie. Just look the the Digital foundry walkthrough it is a masterpiece in that perspective and hence wrth trying. But yes do not do it for the gameplay - but that was never the goal of this experience.

GamerRN23d ago

It's because it's on Xbox. When Xbox has amazing graphics, they don't matter. When PlayStation does, it's a game changer!

Lightning7723d ago

Pretty much my thoughts. They were technical marvel's on PS and still are. The moment Xbox puts out a graphically intense game is doesn't matter suddenly.

4 years ago this month would the UE5 tech demo debut with the girl flying (tech demo said it was only possible on PS5 because of the SSD. Glad to finally see it in its glory.

fr0sty23d ago

FFS, gaming journalism has really gone downhill. At least hire people with a basic grasp of grammar... "Me neither" means the exact opposite of what the "author" is trying to say. That's like saying "I could care less"... lol.

S2Killinit23d ago

Maybe because the gameplay being dull allowed it to have the amazing graphics and people are not as impressed by graphics alone anymore? I mean there is a lot of sites saying the story and the gameplay are lackluster. So what are we supposed to enjoy then? Cgi graphics are beautiful but since they arent interactive, they dont impress me as much as they used to. Thats an extreme example, but you get my drift.

Terry_B22d ago

When Playstation (Sony) does it..its usually a great game and not a cinematic experience..or at least something new at the time..like Until Dawn back in 2015.

1Victor22d ago

@gamer:” It's because it's on Xbox. When Xbox has amazing graphics, they don't matter. When PlayStation does, it's a game changer!”

The game looks as good as any other PlayStation game in my eyes why can’t you and the other hardcore Xbox be happy about it and drag PlayStation into every conversation and force PlayStation hardcore to look into the game and find flaw that most games have in one way or another.
@light: “ 4 years ago this month would the UE5 tech demo debut with the girl flying (tech demo said it was only possible on PS5 because of the SSD. ”
Yes at that time it was only possible on PlayStation SSD how ignorant of you to think that after 4 years the technology wouldn’t evolved and move to a industry standard 🤦🏿I wish your mentality wasn’t so naive and narrow to post stuff like that 😩 in a year or 2 a new game will come out that might look better, it’s the nature of the industry.

Now that the distraction is gone I feel that is a good thing that the graphics in games are starting to hit the rooftop and hopefully the developers will put more thoughts into story and gameplay mechanics than just the next shiny oily skin of old.

Reaper22_22d ago

So true. Not surprised by all the negativity. It's a really good game and looks better than any game I've ever seen. GOTY nominee for sure. Like I said before, sony screwed up big time by not purchasing Ninja Theory.

Asplundh22d ago

Pretty much. It's like how the Switch and Steam controller using haptic feedback in their controllers wasn't a big deal but then Sony did it and it was then a "game changer".

fr0sty22d ago

The game runs at as low as 21fps... That isn't much to brag about no matter how good it looks.

+ Show (5) more repliesLast reply 22d ago
MajorLazer22d ago (Edited 22d ago )

We've had graphical gamechangers before, such as Crysis but those games still had gameplay to compliment it. Hellblade pretty much has none, and only achieved such graphics through being incredibly linear and having very small, closed off environments where very little is happening.

Vx_22d ago (Edited 22d ago )

GFX does not mean anything if the game is boring. It is simple like that and these major companies need to understand this simple concept.

Games are like your lady, she may be beautiful to look at for a while but then it gets boring if her character isn't interesting and fun to be with.

23d ago Replies(7)
Kneetos23d ago

Mario kart 8 ( ͡° ͜ʖ ͡°)

Sonic188123d ago

Horizon forbidden West has great graphics and great gameplay

GamerRN23d ago

Yeah but graphics don't matter, remember?

anast22d ago

@RN

I've been pretty consistent in saying that we need both.

GamerRN21d ago

So until dawn, too human, or whatever those series of games were... Graphic masterpieces it garbage with no gameplay?

VincentVanBro23d ago

I agree and I actually think Forbidden West looks better than Hellblade 2. I easily prefer looking at it at least.

Sonic188122d ago

It does look better in my opinion as well. I don't know why it looks better but there's something about the Decima engine or that guerrilla games is using tricks that we don't know of

Abear2122d ago

Can you fly a mount under water in Hellblade 2? I think not! One of the best moments this Gen