The global game industry will generate $60 billion in revenue for 2011, and is growing at 10% annually according to a new research report by industry analyst Colin Sebastian for RW Baird. That growth rate should see overall industry revenue hit $80 billion by 2014, but the some areas of the business will remain flat or even decline, while other areas will be growing at an annual rate of 15% to 20%.
The growth areas that Sebastian sees are in online and mobile games, “driven primarily by downloadable content (DLC) and mobile games” and social games to a lesser extent. These areas will be growing annually at a rate of 15% or more for the next several years, Sebastian believes.
Unfortunately, other areas of the game business won't be faring as well. He sees packaged software sales staying flat this year, with the growth in Xbox 360 and PS3 sales being offset by the decline in Wii and handheld game sales. This quarter will see strong sales with many big titles coming out, but that positive sales picture will only be enough to pull the sales out of the loss category for the year.
The good news for the game business is that it's the only media business with a strong positive growth forecast for the next several years. Newspapers, magazines, music, TV and other media businesses are struggling with the transition to a digital distribution model, but the high level of innovation in the game industry has kept the overall picture positive. That's not to say there are no problems; Sebastian sees “many video game companies will continue to struggle through this transition.”
Sebastian sees the mobile market as bringing in $2 billion in revenue this year, with growth continuing due to rapid adoption of smartphones and tablets. He cites studies showing that games are the leading applications on smartphones, and consumers consumers have been very willing to pay for games or for in-app purchases with “freemium” hgames, which now represent the majority of revenues for...
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