Online games market set for five-year growth

6 Aug 2004

Online games will represent almost a US$10bn market within five years, a new report has forecast. According to DFC Intelligence of San Diego, which issued the findings, worldwide revenue in the sector will hit US$9.8bn in 2009, growing 410pc from last year’s total of €1.9bn.

The largest single market for online games is expected to be the Asia-Pacific region; Korea and Taiwan are already established markets, with Japan and China predicted to be the fastest growing countries. By 2009, the region is expected to account for US$4.2bn in revenue, close to half of the total worldwide market.

Broadband is driving growth in the sector, said David Cole of DFC, lead author of the report. “At the end of 2003 an estimated 81 million households worldwide had broadband. By 2009 we forecast that number reaching 228 million,” he said. “It has been proven that the availability of broadband significantly increases online game usage.” DFC has forecast that 376 million people worldwide will be playing online games by 2009.

DFC’s report also threw light on unusual demographic patterns among consumers. Although adult males were unsurprisingly represented in large number, casual gamers account for a growing amount of the overall group. Groups such as Yahoo! Games, MSN Games at the and Pogo also reported that for some of their services, more than 50pc were adult women, not a traditionally strong gameplaying demographic.

Children also represent a growing market, catered for by subscription-based products such as Disney’s Toontown, as well as advertising/sponsor supported services like Neopets which claims more than 20 million users.

Services such as Microsoft’s Xbox live broadband games offering, which recently passed the one million user mark, has shown that the console owners market is beginning to adopt the online gaming model.

Despite the growth potential, online games are still an immature business, Cole claimed. “Many services are free and dependent on often elusive advertising support. Online game companies are still grappling with business models. On the positive side, it has become clear that there are many potential viable business models, with advertising just one part of the mix.

“Free sites have the ability to upgrade consumers via tiered subscription packages, game downloads, on-demand distribution, virtual property sales, mini-transactions, pay-per-play games of skill and other revenue generating models. The number of potential consumers for online games is so much higher then with the traditional packaged goods business that less revenue per consumer is needed to make online games a really substantial industry,” he said.

By Gordon Smith