Pay for Play Will Increase Online Gaming Revenue

The market for online gaming through PCs, consoles and iTV in the United States and Europe will be worth $174 million in 2001, and will grow to $5.6 billion in 2005, according to a pair of studies by Datamonitor.

The number of online gamers in Europe and the United States will grow from more than 13 million in 2001 to more than 111 million in 2005. The emergence of console online gaming, greater broadband access and a greater variety of games will be the key drivers of growth, according to Datamonitor. More importantly, because of the failure to generate revenues from online advertising, the online gaming industry will have to charge users to play. By 2005, subscriptions and pay per play will represent almost 90 percent of the revenues of the market.

By 2004, more people will be playing online via consoles than via PCs. And by 2005, Datamonitor predicts two-thirds of online gamers will be console based. The massive growth will be driven by competition among the console manufacturers seeking to top each other’s offerings, as well as an even greater number of console games offering online content. Although console manufacturers have unprecedented control over the market and the potential for generating revenues is immense, Datamonitor found that console manufacturers still have to divulge precise strategies as to the shape of their online gaming services.

“Returning to a pay-for-play model will mean big changes for the industry,” said Peter Tyson, games analyst at Datamonitor. “Companies need to rethink their PC-based online gaming business plans right now and at the same time ready themselves for the console online gaming market.”

Datamonitor also predicts that online games will fuel growth in the iTV industry. By 2006, Datamonitor predicts iTV gaming in Europe and the United States will generate revenues of almost $2.7 billion. Europe will be the largest market for iTV games with revenues of $1.5 billion due to its initial lead in this market. The United States will grow from generating no revenues in 2001 to being the largest single market for iTV games by 2006.

ITV games will generate a great deal of appeal by allowing television watchers to participate in contests linked to the popular shows or series they regularly watch. Enhanced television games will generate revenues through sponsoring or by charging users a nominal fee to enter these contests in the hope of winning prizes or more original rewards such as participating in live shows.

“The television has traditionally been the center of entertainment in the home and this will help the rapid uptake of iTV applications,” said Jacob Hayler, Datamonitor’s iTV games analyst. “Interactive TV will overtake the PC as the platform of choice for casual gaming and it will be imperative that games industry players focus their strategy on the television audience.”

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