Revenue from online games eclipse music and video
While the limelight continues to shine on Web video and digital music downloads, gaming is the quiet powerhouse of the online entertainment business. According to Strategy Analytics revenue from online games like World of Warcraft and electronically distributed games was a $3.8 billion dollar market in 2006, larger than music and video in terms of income. The proliferation of broadband worldwide and the explosion in connected gaming consoles like Xbox 360 and Playstation 3 will see that market grow at an annual rate of over 25% to $11.7 billion in 2011.
Ultimately, more than a third of video game revenue will come from online downloads and subscription fees, the company says. As evidence of this trend, take Activision’s announcement today that its music add-on pack for Guitar Hero II on Xbox 360 has been downloaded 650,000 times in five months. A single three-song pack from My Chemical Romance issued in mid-August was downloaded 50,000 times in the first week alone. I know my daughter is one of those downloaders. Once players get drawn into a game they purchase (or Dad purchases) at retail, the urge for add-ons is natural. The connected consoles now give users an easy path to digital purchasing, and they come with built in micropayment systems the PC envrionment always lacked.
The opportunity for donwloadable game content and multi-player gaming is not restricted to the game companies themselves. Advertisers and entertainment marketers have the opportunity to leverage the tremendous energy and devotion surrounding the games platform. In-game advertising gets all the press coverage because it is a sexy technology that inserts dynamic ads into a game. But the larger opportunity is for brands to underwrite rather than inject themselves into game play. Sponsored downloads and game add-ons will be one of the hot ad models in this emerging universe of online gaming.