SERIOUS GAMES-A Sizeable Market

Eliane Alhadeff | 08/08/07 SERIOUS GAMES, SERIOUS MONEY: A SIZEABLE MARKET

Serious Games Overview Serious Games Go Mainstream
Background
Development
Market Drivers
Business Environment
Market Size
Market Dynamics by 2012
Business Models

Background
1997 - Marine Corps used Software Inc.'s "Doom" for training
2002 - U.S. Army released America's Army
free online download
More than 5 million
registered users
US government and military turned to SG for two reasons: lower costs and improved quality of user experience

Computer games cost significantly less than a large-scale simulator
Games by their nature are competitive, fast moving and entertaining
Over the last three years: experimentation has evolved into a full-blown market opportunity
Government agencies are being joined by a long line of SG users: schools (both K-12 and universities) and Fortune 500
Background (cont.)

Development
USA
Academics recognize the potential scope of SG and conferences sprang up
Since 2004, annual Serious Games Summits have been held
Games for Change Conference promotes games for the social good
Games for Health Conference covers both games for patients and games for health care providers
MSU announces the launch of a master's degree in SG design

Development
Europe
Early 2007, inaugural board meeting of the new trade body ANGILS - a non-profit-making organization based in the UK, aimed at promoting the growth of the SG market
Originally founded in 2003, has now repositioned itself as the only European-based networking trade association for SG and emerging technologies
A £3 million Serious Games Institute in Coventry, West Midlands, is currently under construction and will be fully operational by the autumn of 2007

Development
Latin America
Notice of at least one educational SG in Brazil that simulates an enterprise environment
Brazil is an untouched market with demographics consistent with SG proposition
Worldwide
Funding starting to become available from foundations, governmental agencies, non-profits and venture capitalists. Universities encouraging students to produce SG for academic credit

Market Drivers
A number of converging market and demographic factors are resulting in increased interest in using SG in areas such as education, health, ecology, public policy, science, government and corporate training
A number of corporations are taking the first steps and commissioning SG development recognizing they need to consider this approach to provide more effective learning content
There is now an emergent supply chain for Serious Games

PricewaterhouseCoopers' Media Outlook Report forecasts major growth for the video game sector worldwide
By 2011, the worldwide gaming market will be worth $48.9 billion at a compound annual growth rate of 9.1% during the five-year period. They handily exceed the 6.4% advance that PwC eyes for the overall entertainment economy during the period.
Its data include consumer spending on games, but not on hardware and accessories
Business Environment
Key growth engines will include online and wireless games, new-generation consoles, as well as in-game advertising

In the U.S., online and wireless games should see the biggest gains through 2011. Online will expand from $1.1 billion market last year to $2.7 billion in 2011, and wireless will double from $499 million to $1 billion
In-game advertising will be a key spark for U.S. gaming revenue, growing from an estimated $80 million last year to $950 million in 2011
Asia Pacific should remain the region with the highest overall spending on gaming during the period and reach $18.8 billion in 2011. Despite its leading size, its 10% average annual gains will only be exceeded by the combined region of Europe, the Middle East and Africa (EMEA), which is pegged for a 10.2% compound annual gain and set to remain at No. 2 in worldwide gaming
Business Environment (cont.)

Current Status
For 2006, PwC's preliminary estimates are for the U.S. gaming market to have expanded 10.6% to $9 billion, and it expects the first-ever jump beyond the $10 billion mark this year to about $10.4 billion.
Worldwide game spending jumped 14.3% to $31.6 billion in 2006 and should rise 18.5% to $37.5 billion this year, according to the preliminary data.
The overall gaming audience continues to expand and become somewhat more female and older than in the past thanks to casual games and games becoming an "important part of culture"
Business Environment (cont.)

My conservative estimate: the Serious Games Market would be ranging between $200 - 400 million per year
There is now an emergent supply chain for Corporate Serious Games, with a number of corporations commissioning SG development, which could easily make available additional $ 400 - 600 million per year.
The same applies to Healthcare providers (e.g., training for surgery, for emergency medical response, and for managing surgical teams), bringing the overall figure for the Serious Games market close to $ 1.5 billion in 2008
Serious Games Market Size

As Serious Games are Gaining Solid Traction in Europe and the video game industry is finding more and more business outside the entertainment sector, this figure could rise to $ 2 billion shortly
Although this is small potatoes in comparison to the total videogame market, the Serious Games segment has been showing healthy double-digit growth over the past five years, and shall accelerate rapidly as it is getting a foothold in the corporate market.
Serious Games Market Size (cont.)

Result of a market survey with all key stake-holders across the supply chain, include the revelation that the majority of corporations, learning suppliers and established SG suppliers foresee ‘learning games’ not only being adopted but becoming mainstream by 2012
Also a resounding 100% of corporations surveyed see the value of using game-based learning within their organizations
Market Dynamics for SG used in Corporate Learning in Europe by 2012

Attitudes are changing and understanding is deepening on the subject
These include: a changing staff profile - the MTV generation is being replaced by the ‘digital native’ generation – and a need for simulating more complex systems
Market Dynamics for SG used in Corporate Learning in Europe by 2012 (cont.)

SG have been doing extremely well with the hype building
At the early stages of the SG movement, they were made available to users free of charge or distributed within the client organization: no sales revenue stream for the developer
SG are now successfully being developed and deployed all over the world and for a variety of applications
MMO, single player, mobile, PC, hand-held or even console, SG deliver by utilizing leading-edge technology, design and skills to address intractable issues that defense agencies, engineering organizations, and first responders have...
Serious Games Go Mainstream

...whilst corporations and schools are finding them invaluable as learning content … and NGOs and marketing organizations find that their message are conveyed in a more productive – and enjoyable way
In the commercial arena, SG is going mainstream. More and more companies are announcing a significant increase in their annual revenue derived from the SG contribution, whilst some of them report they made more in revenue from its serious side than from its entertainment side
Serious Games Go Mainstream (cont.)

The SG market will not be as easily formed as the commercial games market was
The market is much more B2B oriented, where the majority of projects are "work-for-hire" or single-use efforts like those seen in traditional business software industries. Unlike B2C, organizations are slower moving when adopting new paradigms
Nevertheless, SG developers see a lot of room for growth in their marketplace
Business Models For SG Segment Moving Beyond Work-For-Hire

SG used to lack the budgets of entertainment games and were made for a fraction of the cost and time of games for the entertainment market, with budgets in the range of $400,000-$1 million being typical, and a development time of perhaps a year
However, budgets for certain applications seem to be increasing. We’re now seeing some SG being budgeted in the $10 million range, and above
Growing budgets may translate into a growing demand for private equity funding, mostly because the predominant model in SG so far has been "work-for-hire", which do not leverage on economies of scale
Business Models For SG Segment Moving Beyond Work-For-Hire (cont.)

Early adopters have been focusing heavily on advances in design, pedagogy, and technology and sparingly on business development models
As the field grows, however, it experiences a wider variety in business development models, moving away from the work-for-hire one
Potentially, every education program, every curriculum, could be reshaped by the use of SG
Shaping SG from a movement into a viable and growing market, requires new business models that accommodate new ways of doing business, and raising capital, distributing, and selling product
Business Models For SG Segment (cont.)

Original Sources
Gaming Our Way to Our Better Future
Serious Games Market Size
April 01, 2004
Ben Sawyer
Emergent Use of Interactive Games
For Solving Problems is Serious Effort
2004
Ben Sawyer
Animation World Magazine
Serious Games, Take Two
December 16, 2005
Games for Learning: Serious Entertainment
April 26, 2006
The Serious Games Fund Raising Fandango
Serious Games Source
January 10, 2007
Serious Games Summit DC 2006

Original Sources
Essential Facts About Games and Court Rulings
Top 10 Industry Facts
January, 2007
Entertainment Software Association
Corporate Learning Games in Europe
Market Challenges & Opportunities
for Serious Games Used in Learning to 2012
February, 2007
APPLY Group – Market Research Division
Western World MMOG Market: 2006 Review and Forecasts to 2011
March, 2007
Screen Digest
8th Annual Edition of PwC’s Global Entertainment and Media Outlook
PricewaterhouseCoopers
June, 2007

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SERIOUS GAMES-A Sizeable Market

by Eliane Alhadeff on Aug 09, 2007

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SERIOUS GAMES-A Sizeable Market — Presentation Transcript