DFC Intelligence Forecasts Worldwide Video Game Market to Reach $81 Billion by 2016

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The latest video game forecast from DFC Intelligence expects the market to grow to $81 billion by 2016 with sales from online games passing physical software delivery in 2013.

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"We expect a slow, steady decline for physical game sales, with a steady increase for online delivery of games and new business models such as subscriptions and virtual item sales" David Cole, DFC Intelligence

A new report from DFC Intelligence forecasts that the global market for video games is expected to grow from $66 billion in 2010 to $81 billion in 2016. This forecast includes revenue from dedicated console hardware and software (both physical and online), dedicated portable hardware and software, PC games and games for mobile devices such as mobile phones, tablets, music players and other devices that can play games as a secondary feature. According to the report, the largest growth area is for online delivery of games.

"On a global basis it looks like retail delivery of physical software peaked in 2008. We expect a slow, steady decline for physical game sales, with a steady increase for online delivery of games and new business models such as subscriptions and virtual item sales," said David Cole, an analyst with DFC Intelligence. The report predicts that, starting in 2013, online delivery of games and online business models will surpass sales of physical retail software.

The other big issue facing the game industry is the performance of dedicated video game console systems. The report forecasts strong sales for the Nintendo Wii U expected to launch in late 2012. There are also forecasts for new systems from Sony and Microsoft that have not been announced but are expected to launch within the next five years. However, this uncertainty over new game systems remains one of the biggest unknowns for the game industry.

"Systems like the Xbox 360 and PlayStation 3 are having their best sales ever five or six years into their lifecycle. Unfortunately this means Microsoft and Sony are in no hurry to launch new systems that would generate substantial consumer excitement and spending," says Cole. DFC forecast that the Nintendo Wii U will have strong sales, but will not reach the level of success of the first Wii system. "The dedicated console business is still the major driver of industry growth, but we feel overall it has peaked with the current console systems."

DFC Intelligence forecasts that the greatest growth area for the game industry is PC games and games for other mobile devices such as smart phones and tablets. The good news is that these areas by and large expand the audience and do not take away from the existing business. "Games on Facebook and products like the iPad help expand the audience and the way products are delivered. The console business is firmly established and suffers mainly from the reluctance of hardware manufacturers to commit to expensive new products," claims Cole.
The PlayStation 3 and Xbox 360 are starting to make good on their claims of having a lifespan of up to ten years. The DFC report estimates that the Nintendo Wii is the only system that has peaked in terms of usage. Both the Xbox 360 and PlayStation 3 are expected to grow their user base over the next few years.

Cole concludes by stating, "Overall the game industry is becoming more diversified and global as it continues to grow. This makes the industry challenging because it is hard to know where to place one's bets. At the same time, there are many niches of opportunity that didn’t exist in the past."

Some other highlights from the report:

  •     Total Worldwide Retail Sales: The traditional worldwide interactive entertainment market reached a high of $58 billion in 2008. Over the next few years, there is expected to be a steady decline at retail, reaching a low of $43 billion in 2016.
  •     Online Sales: Total worldwide sales of online games are expected to increase from $19.3 billion in 2010 to $37.9 billion by 2016. This includes revenue from PC online games, console online games and mobile online games including mobile phones and tablets.
  •     Total Worldwide Sales: The growth in the industry is from online delivery of games. When online distribution and online subscription and advertising revenue is added the market goes from a $66.6 billion in 2010 to a record $81 billion in 2016.

The new report Worldwide Market Forecasts for the Video Game and Interactive Entertainment Industry includes a detailed summary of aggregate overall worldwide forecasts by platform (console, PC portable), distribution (retail or online) and region including a detailed breakout for individual console systems.

DFC Intelligence (http://www.dfcint.com) is a strategic market research and consulting firm focused on interactive entertainment and the emerging video game, online game, interactive entertainment and portable game markets. Since 1995 DFC has published in-depth strategic market reports and subscription-based research services. DFC research is used by more than300 leading companies in over 30 countries worldwide.

DFC Intelligence


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