Dematerialized distribution and revenues related to online practices (item selling…)

By the end of 2011, 49.2% of the video game software industry’s revenues should come from dematerialized distribution (cell phones, connected computers, home consoles, and laptops) or from online paid practices (item selling, subscriptions, commissions on foreign exchange transactions, virtual real estate transactions). IDATE estimates that by 2015, home consoles will generate EUR 9.5 billion in revenues through this channel, or 50.7% of revenues from the sale of games on these platforms.

Towards a new generation of home consoles

The console segment is set to enter a new cycle as early as 2012, with the launch of Nintendo’s new machine, the Wii U. Faced with this recent announcement, its two competitors may revise their marketing plans for their new console. Microsoft has been hinting until now that its next platform could arrive in 2015. Sony has a habit of stretching the operation of its console as long as possible. This strategy paid off when Sony was the leader in this segment. The functionalities of the next home consoles could partially integrate the cloud. Its uses are beginning to emerge and should be confirmed in the next two years on connected TV through Cloud Gaming or Game on Demand offers.

Beyond that, gamers are expecting something new in terms of gaming experience. The Wii U takes this into account by offering a controller in the form of a tablet. But will that be enough? Competitors will no doubt want to learn from the success of the Wii and anticipate the expectations of players who are always looking for new emotions. In addition, consoles continue to host other content (music, video, Web browsing, TV) that are more likely to interest the rest of the family. In any case, home consoles – mainly from Sony and Microsoft – are assuming their ambitions in the digital home and are helping to conquer it alongside set-top boxes, IPTV boxes, multimedia hard drives, video recorders and connected TVs.

Convergence between smartphones and handheld consoles to take effect at the end of 2011

Cell phone manufacturers have been very successful in transforming their terminals into game consoles. Console manufacturers will be able to equip their consoles with the telecommunication functionalities of telephones. In this respect, Sony Computer Entertainment is the first to take the plunge. The Japanese company will offer a Wifi and 3G version of its next Playstation Vita handheld console. The dematerialization of distribution will thus take off on portable consoles in 2012. The dematerialized turnover on handheld consoles could increase from 202.2 million EUR in 2011 to 540.8 million EUR in 2012.

Tablets: a take-off phase expected in 2011-2012

The recent segment of touch tablets is very promising in the video game industry. In fact, gaming applications are strongly represented in the iPad catalog of Apple’s App Store. It is expected that gaming will also play a leading role in the distribution of tablets from other manufacturers. It is also expected that the relationship between smartphones and tablets is such that we cannot imagine the development of one without the other. Despite the success, relatively little is published about the volume of video game business generated by this new market segment. Yudu Publishing Pro’s report dated February 2011 reporting data produced by Nielsen states that 62% of the paid iPad applications downloaded from iTunes are games. This makes it the number one category of downloaded pay apps.

Facebook, the latest gaming platform to date!

Facebook has become a unique gaming platform. Admittedly, the social network does not support the comparison with a home console in terms of graphics and technology. But it has been able to perfectly adapt its content to its audience and monetize it with edifying efficiency. Zynga’s success is a clear illustration of this new Eldorado. However, this still recent segment suffers from the effects of the virality that made its success. If a good audience is measured in millions of active players per month, we still have little hindsight on the sustainability of the operation of a game on social networks. Given the potentially explosive growth of an application in a very short period of time, the audience fluctuations it is subject to and sometimes a decrease in the number of players, it is difficult to predict the future of the application.

brutal, the prevailing feeling is that this exploitation is strongly subject to the versatility of the players, and their taste for the ephemeral. Be that as it may, today social network gaming has become a new market segment in its own right, with its specific rules and constraints, its development and publishing players, its new entrants, its business models, its gameplay… This phenomenon shows just how much video games know how to take advantage of a technological environment to make it an economically profitable leisure universe.

The era of ubiquitous games

The word ubiquity means “everywhere” in Latin. We often speak of ubiquity for music. In a digital environment, a piece of music is indeed easily reproducible and can be transmitted to all possible platforms without its integrity being compromised, without the user’s experience being greatly altered and provided that DRM (Digital Right Management) systems allow it. In video games, it is a matter of accessing the same gaming experience on different platforms and through a single player account. For a long time, ubiquity in video games has been nothing more than the sum total of attempts prevented by the domination of proprietary technical solutions, by the multiplicity of non-interoperable terminals and by the absence of effective gameplay.

But the idea of offering a ubiquitous gaming experience was completely justified in terms of usage. You start playing a game on one platform, a console; you continue playing on another, a smartphone. Gameplay can be substitutable or complementary depending on the specificities of the platform hosting the game. Until a few months ago, experiments were not very successful. Online and its generalization on most consumer terminals are changing the rules. In addition, we have seen the deployment of software platforms such as social networks, on many terminals, thanks to the generalization of the connection.

And finally, social networks have become vectors of interoperability and ubiquity. Today, most fixed and mobile platforms host games, and most of these platforms are connected or connectable and interoperable. These terminals can communicate with each other in a technological environment that is increasingly close or at best interoperable. As a result, the industry is ready for ubiquity. As game developers easily grasp the technological options available to them, they will grasp and are already grasping, the possibilities offered by the interoperability of game platforms and terminals. But in this year 2011, this still-emerging trend is beginning to form a significant wave of innovation for the years to come.

The emergence of gaming on connected TV

Displays are multiplying: cinema, home cinema, 3D TV, HDTV, computers, cell phones, smartphones, touch tablets… Video games are perfectly adapted to this plurality. It is always among the first applications to be deployed on new terminals. It takes full advantage of the new functionalities of the machines to duplicate and transpose existing gameplay, but also to imagine new gameplay. What’s more, it is able to offer the right business models, unlike other content industries that have always been constrained in the digital world. In this respect, the video game is an eternal pioneer. It will continue to make full use of today’s devices. We are just at the beginning of smartphone gaming. And we expect the next significant growth on the tablet, some are talking about an explosion.

But the next big challenge for the video game industry will be connected TV. Video games will demonstrate their ability to take hold of this terminal, which will exploit the Internet connection in the same way that IPTV does today. Connected TV, by exploiting cloud computing to bring streamed video games into homes, will make home consoles unnecessary. The network will remain essential, as will fiber optics, CDN, and SaaS (Software as a Service) solution providers. The core element of this new segment remains, as always in this industry, the seamless gaming experience. Of course, it will be necessary to move away from the old remote controls and adopt other accessories for interaction, interactivity, and immersion. Pointers, sensors, touch interfaces, cameras, motion capture will be able to accompany the development of entertainment content on the connected TV.

With the deployment of the first commercial offers of streamed games on connected TV, players who until then had been operating in related markets will face each other. There is starting to be a lot of excitement around this market segment. Google, which failed with its first Google TV, should be interested in building an app store for connected TV. Upstream, Apple, which we have been waiting for a few years now in this segment, will also propose an ecosystem around software and games on connected TV.

It will probably be joined by consortiums such as Youview (founded by BBC, ITV, Channel 4, BT, etc.), HBBTV (European Broadcasting Union, France Televisions, Institut für Rundfunktechnik, OpenTV, Philips Electronics, Samsung, SES ASTRA, Sony Corporation, TF1), which are currently designing the next navigation interfaces for connected TV. Downstream, there is also a lot of excitement. Many companies are working on the implementation of cloud-based game delivery platforms targeting the computer, smartphone, touch tablet, connected TV, set-top box. Onlive, Playcast Media, Otoy, Gaikai, GameStop, G Cluster, Transgaming, Spoon, Darkworks, Gamestring, iSwifter are among the companies that communicate the most. The year 2012 will undoubtedly be a year that will mark the start of this new segment.


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