Video games
Summary	348
North America	 354
Europe, Middle East, Africa (EMEA)	 365
Asia Pacific	 380
Latin America	 392
Fo...
348	 PwC | Global entertainment and media outlook: 2012–2016
Market size and
growth by region
The video game market in Nor...
Video games | Summary	349
Increased broadband penetration and,
with it, the growing digital distribution of
content will d...
350	 PwC | Global entertainment and media outlook: 2012–2016
Global video game market by component (US$ millions)
Componen...
Video games | Summary	351
to the Xbox Live Gold service is required
for multiplayer gaming, accessing social
networks such...
352	 PwC | Global entertainment and media outlook: 2012–2016
cannot be introduced before 2016; rather,
the PS3 will contin...
Video games | Summary	353
Zynga, the major game developer on
Facebook, is credited with introducing the
first social game,...
354	 PwC | Global entertainment and media outlook: 2012–2016
The outlook in brief
•	 Growth of the online market as well a...
Video games | North America	 355
Video game market growth by component (%)
North America 2007 2008 2009 2010 2011p 2012 20...
356	 PwC | Global entertainment and media outlook: 2012–2016
•	 Gears of War 3, which is exclusive to the Xbox 360, was th...
Video games | North America	 357
Console/handheld game market†
(US$ millions)
North America 2007 2008 2009 2010 2011p 2012...
358	 PwC | Global entertainment and media outlook: 2012–2016
•	 A major new MMOG with a similar business model—Star
Wars: ...
Video games | North America	 359
•	 An expanding microtransaction market will also fuel online
game spending in North Amer...
360	 PwC | Global entertainment and media outlook: 2012–2016
•	 Although casual games continue to dominate the market,
mor...
Video games | North America	 361
PC games
•	 The PC game market declined in 2011, returning to its
normal pattern of deter...
362	 PwC | Global entertainment and media outlook: 2012–2016
PC game market†
(US$ millions)
North America 2007 2008 2009 2...
Video games | North America	 363
•	 Sony is taking a different approach to its in-game adver-
tising by opening up its pla...
364	 PwC | Global entertainment and media outlook: 2012–2016
•	 Video game advertising is still only a small segment of
th...
Video games | EMEA	 365
The outlook in brief
•	 The console/handheld market is being hurt by the shift to
online and mobil...
366	 PwC | Global entertainment and media outlook: 2012–2016
Video game market growth by component (%)
EMEA 2007 2008 2009...
Video games | EMEA	 367
•	 Italy also has a significant video game industry, with
revenues of $1.4 billion in 2011. Italy ...
368	 PwC | Global entertainment and media outlook: 2012–2016
Video game market by country†
(US$ millions)
EMEA 2007 2008 2...
Video games | EMEA	 369
Console/handheld game market†
(US$ millions)
EMEA 2007 2008 2009 2010 2011p 2012 2013 2014 2015 20...
370	 PwC | Global entertainment and media outlook: 2012–2016
Online games
•	 The PC platform has traditionally been the on...
Video games | EMEA	 371
•	 Russia is second, at $736 million, and is expected to show
the sharpest increase in EMEA, growi...
372	 PwC | Global entertainment and media outlook: 2012–2016
Online game market†
(US$ millions)
EMEA 2007 2008 2009 2010 2...
Video games | EMEA	 373
Wireless games
•	 EMEA has a large wireless telephone subscriber base, and
high-speed wireless dat...
374	 PwC | Global entertainment and media outlook: 2012–2016
•	 Wireless game revenues in Spain were $262 million in
2011 ...
Video games | EMEA	 375
Wireless game market†
(US$ millions)
EMEA 2007 2008 2009 2010 2011p 2012 2013 2014 2015 2016
2012–...
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Global game industry outlook 2012-2016
Upcoming SlideShare
Loading in...5
×

Global game industry outlook 2012-2016

2,743

Published on

Global entertainment and media outlook 2012-2016 The ‘end of the digital beginning’

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
2,743
On Slideshare
0
From Embeds
0
Number of Embeds
2
Actions
Shares
0
Downloads
233
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Global game industry outlook 2012-2016

  1. 1. Video games Summary 348 North America 354 Europe, Middle East, Africa (EMEA) 365 Asia Pacific 380 Latin America 392 Fo r Pr ess U se o n ly
  2. 2. 348 PwC | Global entertainment and media outlook: 2012–2016 Market size and growth by region The video game market in North America, EMEA (Europe, Middle East, Africa), Asia Pacific, and Latin America will expand from $58.7 billion in 2011 to $83.0 billion in 2016, growing at a 7.2 percent compound annual rate. Asia Pacific, with three of the top four countries in the world, is the largest region, at $24.3 billion in 2011, and is projected to be the fastest-growing region during the next five years, increasing 10.3 percent on a compound annual basis to $39.7 billion in 2016. Online games and wireless games, the fastest-growing end- user components of the video game market, constitute a larger share of total spending in Asia Pacific than in other regions and consequently have a greater influence on growth. EMEA, the second-largest region in 2011, with $18.0 billion, is projected to grow by 4.8 percent compounded annually to $22.8 billion. North America is projected to increase from $15.1 billion in 2011 to $18.6 billion in 2016, growing by 4.3 percent on a compound annual basis. Latin America is projected to grow to $1.9 billion in 2016 from $1.3 billion in 2011, a 7.2 percent compound annual gain. Market size and growth by component Global console games, the largest category, at $27.5 billion in 2011, will expand at a 2.1 percent compound annual rate to $30.5 billion in 2016. PC games will con- tinue to decline, decreasing at a 1.9 percent rate compounded annually to $3.1 billion from $3.5 billion in 2011. Online games and wireless games will be the fastest-growing end-user categories, with compound annual increases of 13.3 percent and 10.1 percent, respectively. Online games will total $31.4 billion in 2016, and wireless games, $14.2 billion. As a result, online games will replace console games as the largest gaming category in 2016. Video game advertising will increase from $2.2 billion in 2011 to $3.7 billion in 2016, growing by 11.2 percent on a compound annual rate. Principal drivers The shift to online and wireless games will hurt the console game market in the near term, although new games being marketed for the current generation of consoles—the Wii, the Xbox 360, and the PlayStation 3 (PS3)—with improved motion-sensory technology, which changes the game-play experience and brings in a wider range of players, will limit declines. The Wii U is the only next-generation console that has been officially announced, though next-generation consoles from the other manufacturers are likely to be introduced over the forecast period, spurring sales of games that take advantage of the new technologies, although a dip in sales is to be expected during the generational transition period for static consoles. The latest handheld devices—the Nintendo 3DS and the PlayStation Vita, which are primarily gaming consoles—will also continue supporting the market for console/handheld games. Deteriorating retail sales of games are hurting retail stores. If this pattern causes some retailers to close, it would further exacerbate the decline in the market for console and PC games. Video games The video game market consists of consumer spending on new console games (including handheld games), personal computer games, online games, and wireless games as well as video game advertising. The category excludes spending on the hardware used for playing the games. Retail purchases of games are included in either the PC games or console games category. The online game category includes microtransactions, which are players’ purchases of accessories and additional game content that enhance the gaming experience. Oftentimes, online games are first purchased at retail and then played online. When these games are then played online for a subscription fee, the subscription fee is counted in the online game category. Summary Fo r Pr ess U se o n ly
  3. 3. Video games | Summary 349 Increased broadband penetration and, with it, the growing digital distribution of content will drive the growth of the online market. The migration of many massively multiplayer online games (MMOGs) from their subscription models to a free-to-play business model is increasing the number of players worldwide. The growth of microtransactions is providing a boom for the industry. Casual games and social network games are important components of the online market, helping expand the demographic base and stimulate spending. Some developers are shifting their attention from console games to concentrate more on online games. The growth of smartphones and tablets, such as the iPad, with improved graphic capabilities, is enabling developers to produce more-advanced wireless games and will drive demand for those games. Smartphones and tablets, aided by an intuitive-touch interface, are fast becoming the devices of choice for casual game players. At the same time, new application stores that make the purchase of games more user- friendly will increase the number of gamers willing to purchase games. The growth of advanced wireless networks, with their faster speeds, will enable wireless games to approach the quality of console games. The market for PC games will continue deteriorating as consumers turn their attention to newer technologies. Piracy of PC games, which is prevalent in certain markets, has also hampered the growth of the segment. The growth of the MMOGs, which usually require retail purchase of a PC game, continues to support the retail PC game market. Video game advertising is emerging as an additional revenue stream. The growth of social network games and free games is driving an increase in video game advertising. Global video game market by region (US$ millions) Region 2007 2008 2009 2010 2011p 2012 2013 2014 2015 2016 2012–16 CAGR North America 13,181 16,404 15,584 15,382 15,057 15,349 15,754 16,576 17,551 18,569   % Change 26.6 24.5 –5.0 –1.3 –2.1 1.9 2.6 5.2 5.9 5.8 4.3 EMEA 15,087 17,796 17,445 17,736 18,008 18,586 19,261 20,275 21,460 22,760   % Change 23.5 18.0 –2.0 1.7 1.5 3.2 3.6 5.3 5.8 6.1 4.8 Asia Pacific 15,215 18,624 20,942 23,059 24,313 26,982 29,664 32,751 36,099 39,739   % Change 28.1 22.4 12.4 10.1 5.4 11.0 9.9 10.4 10.2 10.1 10.3 Latin America 966 1,198 1,230 1,282 1,345 1,432 1,527 1,641 1,768 1,908   % Change 29.8 24.0 2.7 4.2 4.9 6.5 6.6 7.5 7.7 7.9 7.2 Total 44,449 54,022 55,201 57,459 58,723 62,349 66,206 71,243 76,878 82,976   % Change 26.1 21.5 2.2 4.1 2.2 6.2 6.2 7.6 7.9 7.9 7.2 Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Fo r Pr ess U se o n ly
  4. 4. 350 PwC | Global entertainment and media outlook: 2012–2016 Global video game market by component (US$ millions) Component 2007 2008 2009 2010 2011p 2012 2013 2014 2015 2016 2012–16 CAGR Console games 26,964 32,006 30,106 28,946 27,493 27,106 26,861 27,703 28,899 30,477   % Change 28.4 18.7 –5.9 –3.9 –5.0 –1.4 –0.9 3.1 4.3 5.5 2.1 Online games 7,897 10,829 12,921 15,019 16,796 19,475 22,225 25,071 28,176 31,394   % Change 37.4 37.1 19.3 16.2 11.8 16.0 14.1 12.8 12.4 11.4 13.3 Wireless games 4,176 5,729 6,748 7,815 8,789 9,901 11,008 12,114 13,194 14,249   % Change 25.1 37.2 17.8 15.8 12.5 12.7 11.2 10.0 8.9 8.0 10.1 PC games 4,346 4,055 3,798 3,777 3,462 3,375 3,312 3,252 3,195 3,141   % Change –3.1 –6.7 –6.3 –0.6 –8.3 –2.5 –1.9 –1.8 –1.8 –1.7 –1.9 Total end-user spending 43,383 52,619 53,573 55,557 56,540 59,857 63,406 68,140 73,464 79,261   % Change 25.5 21.3 1.8 3.7 1.8 5.9 5.9 7.5 7.8 7.9 7.0 Advertising 1,066 1,403 1,628 1,902 2,183 2,492 2,800 3,103 3,414 3,715   % Change 55.2 31.6 16.0 16.8 14.8 14.2 12.4 10.8 10.0 8.8 11.2 Total 44,449 54,022 55,201 57,459 58,723 62,349 66,206 71,243 76,878 82,976   % Change 26.1 21.5 2.2 4.1 2.2 6.2 6.2 7.6 7.9 7.9 7.2 Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Background on the global console/handheld hardware market Consoles The current generation of consoles— consisting of the Xbox 360 from Microsoft, the Wii from Nintendo, and the PlayStation 3 from Sony—began to be introduced in 2005. The consoles were available by 2007 in all regions except Latin America and became available in Latin America in 2009. Microsoft Xbox 360 The Xbox 360 was the first of the current generation of consoles to be introduced when Microsoft launched the device prior to the holiday season in November 2005 in North America, Europe, and Japan. The Microsoft Xbox 360 has sold over 66 million units worldwide as of the end of 2011 compared with about 50 million by the end of 2010. In North America, the Xbox 360 has a wide lead over the PS3, while in EMEA, the PS3 has a slight lead. By contrast, in Japan, the Xbox 360, which appeals primarily to Western gamers, has not performed well. In November 2010, Microsoft introduced Kinect, which eliminates the need for a controller by using a specially designed camera that enables games to detect a player’s motions and replicate them on- screen. Eighteen million Kinects were shipped worldwide through the end of 2011 compared with 8 million a year earlier. In December 2011, Xbox released voice- activated search powered by Kinect and Bing. In December 2011, the Xbox Live dashboard was redesigned, giving offerings like Last. fm and the Zune video rental service more prominent positioning to encourage the perception that the 360 is an entertainment device that also plays games. In fact, games represent only 60 percent of activity on the Xbox 360. Use of the console to watch videos has skyrocketed with the inclusion of Netflix. In February 2012, Kinect for Windows was introduced worldwide, enabling the device to be used with PCs. The Windows version works with a variety of applications, enabling other companies to integrate it into their programs. Microsoft is working with many companies such as Toyota, American Express, and Mattel on new applications that use the device. One of Microsoft’s strengths is Xbox Live, a multiplayer gaming network, social network, and media suite. The Xbox Live Free, which has limited capabilities, such as voice chat and some downloadable content, is available at no cost. A paid subscription Fo r Pr ess U se o n ly
  5. 5. Video games | Summary 351 to the Xbox Live Gold service is required for multiplayer gaming, accessing social networks such as Facebook and Twitter, and accessing content such as ESPN3. Worldwide, Microsoft has 40 million subscribers to its online services. There are rumors about the next Xbox console that many have called the Xbox 720. This device, which has not been announced officially, is expected to integrate with the Windows Phone. It is expected that the device will include a much faster processor and Blu-ray technology. The device is not likely to be released before the end of 2013. Nintendo Wii The Wii, which was launched in November 2006, is marketed mainly as a game machine, as opposed to the Sony and Microsoft machines, which are being promoted as media centers for home entertainment. Nintendo has expanded the universe of game players to include younger children, older adults, and women. Wii is the most popular console worldwide, having sold over 95 million units due to its wider appeal. The most popular titles for the Wii are published by Nintendo. Nintendo does not have as much support from third-party publishers as do Microsoft and Sony, though a number of publishers, such as Electronic Arts, Ubisoft, and Capcom, continue to release exclusive titles for the Wii. The Wii, which originally sold for $250, saw in 2009 its first price reduction when the price lowered to $200 in the US and included a bundle containing a copy of Wii Sports. In May 2011, the company introduced its second price cut, lowering the price to $150 and bundling it with Mario Kart Wii instead. The lower console price helped boost device sales. Sales of some of the popular Wii games also spurred console sales. For example, more than a million copies of Legend of Zelda: Skyward Sword were sold between its November 2011 debut and the end of the year, helping spur console sales. Similarly, despite launching in 2010, Just Dance 2 continues to sell well and was named the biggest third-party Wii game of all time, with 14 million units sold worldwide. The Wii sold over 4 million units in the US in 2011. The Wii is the only one of the major consoles that does not display in high-definition format. Nintendo introduced the Wii MotionPlus accessory in 2009, enhancing the Wii’s controller’s motion detection capabilities, but Sony and Microsoft responded with their own motion-based peripherals in 2010: Move and Kinect. The Wii is not as technologically advanced as its competitors. As a result, Nintendo was the first of the three major manufacturers to introduce its next-generation console, the Wii U, at the Electronic Entertainment Expo in June 2011 in Los Angeles. The new console, which is expected to be launched in major markets worldwide in time for the holidays in 2012, will display 1080p graphics and feature a 6.2-inch touch-screen controller that interacts with the TV and also functions as a monitor for continuous use when the TV is turned off. More details of the device are expected to be introduced at this year’s expo and are rumored to include the ability to act as an e-reader capable of displaying books, magazines, and strategy guides for the company’s games. There will be an app store designed for the device that will include apps for the TV screen, with others designed for the controller itself. The device is expected to work with multiple sticklike Wii controllers to enable multiplayer gaming. The app store and the e-reader will provide new revenue streams for the company. The Wii U is expected to be only slightly technologically superior to its current competitors. PlayStation 3 The PS3 was launched in November 2006 in the United States, Japan, Hong Kong, Taiwan, Mexico, and Canada, and in March 2007 in EMEA, Australia, and Singapore, with subsequent launches, including launches in the rest of Latin America in 2009. Global sales total around 63 million units worldwide. As with the Xbox 360, Sony has introduced a number of different PS3 models since its introduction, with the latest 160-gigabyte (GB) version replacing the 120-GB version. In August 2011, Sony lowered the price of the 160-GB and 320- GB versions in the US to $249 and $299, respectively, with similar price reductions around the world. The price reductions helped spur sales of the consoles in the latter part of 2011. Sales of the PS3 have grown each year since its launch. During its 2010 fiscal year, Sony sold 14.3 million PlayStation 3s worldwide and should hit 15 million by the end of its 2011 fiscal year in March 2012. The PS3 is being marketed as the most advanced home entertainment center, with a Blu-ray player and DVR capabilities as well as an outstanding gaming console. The PS3 online environment is free to users and lets game developers control their own environ- ments. Additionally, other online content such as movies can be downloaded. In 2010, Sony introduced PlayStation Network Plus, an optional paid upgrade that provides free games, discounts, and other content. In February 2012, Sony announced that the PlayStation Network is being rebranded as the Sony Entertainment Network. In October 2010, Sony introduced the Move, its new motion controller that is similar to the Wii controller in that it is waved and can be used in lieu of a sword, a baseball bat, or many other devices. Unlike the Wii Remote, the Move also makes use of the PlayStation Eye camera to track the wand’s position with greater fidelity and enable added game- play features such as augmented reality. In the US, the Move comes bundled with a copy of Sports Champions or EyePet and the PlayStation Eye camera. Sony shipped more than 4 million units worldwide in the first month. Sports Champions, which is similar to Wii Sports, is a collection of sports that show off the controller’s capabilities. Sony has said there would be no announcement at the 2012 Electronic Entertainment Expo regarding a new PlayStation console. The company said its current console will have a life span of 10 years. That doesn’t mean a new console Fo r Pr ess U se o n ly
  6. 6. 352 PwC | Global entertainment and media outlook: 2012–2016 cannot be introduced before 2016; rather, the PS3 will continue to sell for 10 years. Similarly, the PlayStation 2 continues to be supported and is still selling well, with games like Madden NFL 12 and NBA 2K12 among the top games for the PS2 in some territories. Many of Sony’s first-party games have long shelf lives because they are not annual titles like certain other hit games such as the major sports titles. Handheld devices Combined with interest in the current generation of consoles, the market for portable game consoles continues to show strength. The Nintendo DS (dual screen) is the leading portable device on a worldwide basis because of its simplicity, which has broadened its appeal beyond hard-core gamers. The DS has two screens, providing players with two views of the action, touch- screen capabilities, wireless connectivity, and a built-in microphone, which are innovative features in handheld game consoles. The DS has broadened the market, attract- ing women and older players with its Touch! Generations brand of games, which includes a number of games in the Nintendogs and Brain Training franchises, both of which are exclusive to the Nintendo DS. There are a number of different DS models on the market, including the DSi and the DSi Excel. Nintendo introduced 3DS, the most anti- cipated new gaming device of the year, in February 2011 in Japan, and in the American and European markets in March 2011. The device enables users to play games in stereoscopic 3-D without the need for special glasses. Some of the games that were available at launch were Capcom’s Super Street Fighter IV: 3D Edition and Nintendo’s Pilotwings Resort and Nintendogs + Cats. Additionally, since the new device has backward compatibility, all games that played on prior DS models also work. Studios are planning to bring 3-D movies to the device. Initial sales of the 3DS were disappointing as the result of a limited number of titles, an incomplete online environment at the time of launch, and poor battery life. At the end of July 2011, Nintendo announced a worldwide 3DS price cut that reduced prices in Japan from ¥25,000 ($314) to ¥15,000 ($188) and in the US from $250 to $180, with comparable decreases worldwide, and supplied free games to gamers who purchased the device at full price. Sales of the device jumped worldwide. The launch of Mario Kart 7 and Super Mario 3D Land was quite successful, as they were the first two 3DS titles to reach a million units sold in the US and they were the two top-selling titles in Japan in 2011. As a result, the 3DS became the top-selling device in the world in 2011. The 3DS sold more than 4 million devices in the US and Japan in 2011, outpacing the Wii in its first nine months of sales. Sales are expected to remain strong in 2012 with the release of several major titles, including Kid Icarus: Uprising, Luigi’s Mansion 2, Professor Layton and the Mask of Miracle, and Metal Gear Solid: Snake Eater 3D. The other major game console in the sophisticated portable market is the Sony PSP (PlayStation Portable), a handheld game device equipped with a 4.3-inch LCD screen that plays music and movies on a proprietary minidisc called the universal media disc, which can hold 1.8 GB of data. The PSP was originally launched in Japan in December 2004 and in other major markets in 2005. Since then, a number of different models were introduced, including a budget model called the PSP-E1000, which was launched in 2011. Sony introduced the PSP Vita, the newest in its line of handheld devices, in Japan in December 2011 and launched it worldwide in February 2012. The Vita is a touch- interface motion-sensitive handheld device that is a successor to the PSP. The Vita has high-definition capabilities and improved graphics, providing a gaming experience approaching that of the PS3. It has a five- inch OLED (organic-light-emitting-diode) screen running four times the resolution of the PSP. It also has front and rear touch pads and cameras. In the US, the Wi-Fi version sells for $249, and the third-generation (3G) version sells for $299. Some of the titles that were available on launch day were Sony’s Uncharted: Golden Abyss, Square Enix’s Army Corps of Hell, and Electronic Arts Sports’ FIFA Soccer. The Vita has a memory card for physical software as well as the ability to download games and apps via the PlayStation Network. Sales of the Vita trailed off in Japan after the first week. It remains to be seen how well the device will sell worldwide. Sony Ericsson introduced the Xperia PLAY in 2011. It is an Android-based smartphone that is part of the PlayStation Certified pro- gram, meaning that it can play PlayStation suite games. The market for dedicated handheld devices is facing growing competition from the rapidly increasing capabilities of smartphones and tablets. Though in aggregate the dedicated devices have advantages, such as the quality of the games being superior to those on a smartphone and having a controller-type feel to them, a shrinking number of people are willing to pay the relatively high prices for the games when they can purchase much cheaper games for their smartphones. In general, the overall gaming experience is being enhanced by the linking of different gaming platforms. For example, Xbox Live allows PC gamers to interact with Xbox gamers. Additionally, technology advances are enabling smartphones to act as controllers for some of the consoles. Social gaming Social gaming on sites like Facebook, Myspace, and Google+ is growing expo- nentially. Social games are free, widely available, load in a few seconds, and require only a few minutes at a time to play. They use a business model called freemium, whereby the games are provided free, with the developers gaining revenues through microtransactions as well as advertising. The games grow virally because users can invite all of their contacts to join them in playing the game. Fo r Pr ess U se o n ly
  7. 7. Video games | Summary 353 Zynga, the major game developer on Facebook, is credited with introducing the first social game, Zynga Poker, in July 2007. Zynga’s Farmville, which was launched on Facebook in June 2009, was the fastest- growing game of all time, with more than 84 million monthly users at its peak. Since then, CityVille, another game from Zynga, which launched in December 2010, hit 88.4 million players within a month of its release and has since reached more than 100 million visitors. It was the first time that Zynga launched a game worldwide simultaneously that is localized for specific regions. In November 2010, Zynga acquired Newtoy Inc., developer of Words With Friends, a very popular game online as well as on mobile devices. Since then, Zynga has developed other games in the With Friends series, including Hanging With Friends and Scramble With Friends. Cloud computing In June 2010, OnLive introduced a gaming-on-demand service based on cloud computing in the US. At its launch, OnLive had 10 games in its inventory and now has more than 200 games available. Instead of offering games for purchase online and letting them download to a computer, the on-demand service maintains the processing of the games on its servers and enables users to play the games via cloud computing. This levels the playing field for all players regardless of the computer they’re playing on, and as a result, gamers using computers with low-end processing capabilities experience the games in the same way as those using high-end machines, because the actual game processing is taking place on the OnLive servers and not on the gamers’ hardware. Games are treated as a service, with the business model being either a subscription or a rental that targets nontraditional demographics, a growing trend in the market. The service will not replace a high- end PC or console for core gamers, but it will add more casual gamers to the market. The service is being supported by major publishers like Take Two, Electronic Arts (EA), THQ, and Ubisoft to reach people who do not normally buy games. Other advantages of the service are that it will cut down on piracy because the games are never actually downloaded and it enables the game developers to more easily update their games. By contrast, game download services like Valve’s Steam and EA’s Origin provide digital distribution of a game but require gamers to have powerful computers and significant hard disk drive capacity to save the games as well as the time to download them. These two companies are the major digital distribution platforms, though Valve’s Steam is still much more established. Cloud- computing models will contribute to overall growth in online games. OnLive introduced an all-you-can-play flat-fee subscription service called PlayPack plan, which allows unlimited access to the majority of its older games. It is similar to the Netflix streaming service for movies. OnLive was initially available for PCs and Macs. In December 2010, OnLive introduced a game system that includes a MicroConsole TV adapter, a free game, and a wireless controller that can be connected to a TV via Ethernet or Wi-Fi. In this way, games can be played on a television without the need for an expensive game console system. OnLive expanded to the UK in September 2011. In December 2011, OnLive introduced an app for Apple and Android phones, enabling them to run full versions of games. The app works with Wi-Fi-enabled phones and those that use fourth generation (4G). The games cost more than mobile games but are more advanced than typical mobile games. Since the games are based in the cloud, gamers can begin playing on a PC, switch to a mobile device, and then switch back to the PC. Gaikai launched a similar cloud-based game service in February 2011. Currently, EA, Capcom, and Ubisoft have signed agreements to supply many of their titles, and Gaikai is negotiating with other publishers to join the service. Players can try the games for free on any connected device and then purchase the games, which are streamed to a PC or tablet. OnLive is available on all Internet-connected smart TVs running the Google TV platform; Gaikai comes installed on a number of new LG TVs. In the near term, cloud-based services con- tinue to face competition from companies that are already established in the digital distribution of games, such as Direct2Drive and Shockwave. They are trying to sell their products to a market whose consumers are already equipped with the required technology. Additionally, since the pricing is not that much different from the current pricing of the download companies, there’s little incentive to switch to cloud gaming. Since multiplayer gaming is becoming a more important segment of the market, these companies must develop strategies that minimize the latency of playing games on a remote server. The business model for the cloud gaming companies has a better chance for success in the future, when consumers are faced with the choice of buying the next generation of new consoles or playing games from the cloud. Cloud computing will have an impact on many segments of the market, including having a negative effect on the retail sales of console games and PC games while having a positive effect on the subscription-based online game segment. Since cloud users save game data and history in the cloud, this will make the service stickier. Cloud services also will have a positive impact on advertising because ads can be easily updated in the cloud. Fo r Pr ess U se o n ly
  8. 8. 354 PwC | Global entertainment and media outlook: 2012–2016 The outlook in brief • Growth of the online market as well as the migration of some players to cheaper games on mobile devices will cut into the console/handheld game market. • The growing number of people playing games on social networks and the increased number of microtransactions are driving the online game market. • Smartphones and tablets, which are becoming the preferred devices for casual gamers, are boosting the wireless game market. • The physical PC game market will continue to deteriorate as digital distribution of games increases and gamers seek alternative platforms. • Advertising will grow as more advertisers realize the gaming industry’s potential to reach specific audiences. Overview • The overall video game market is projected to grow by 4.3 percent compounded annually to $18.6 billion in 2016 from $15.1 billion in 2011. • Consumer spending on games will grow at a 3.6 percent compound annual rate to $16.6 billion from $13.9 billion in 2011, while advertising will increase from $1.2 billion in 2011 to $2.0 billion, an 11.2 percent increase com- pounded annually. • Console/handheld games will continue to be the domi- nant segment of the market, though growing at only a 1.9 percent compound annual rate to $10.6 billion in 2016 from $9.7 billion in 2011. • Online games are expected to increase from $2.6 billion in 2011 to $3.9 billion in 2016, growing by 9.0 percent on a compound annual basis. • Wireless games will increase by 7.1 percent on a compound annual basis from $1.1 billion in 2011 to $1.6 billion in 2016. • The PC game market will decrease to $434 million in 2016 from $534 million in 2011, a 4.1 percent compound annual decline. Video game market by component† (US$ millions) North America 2007 2008 2009 2010 2011p 2012 2013 2014 2015 2016 Console/handheld games 9,445 11,988 10,863 10,237 9,672 9,474 9,339 9,666 10,105 10,625 Online games 1,747 1,993 2,136 2,319 2,559 2,842 3,150 3,419 3,693 3,932 Wireless games 462 861 937 1,024 1,115 1,203 1,287 1,370 1,474 1,574 PC games 935 788 751 767 534 502 485 468 451 434 Total end-user spending 12,589 15,630 14,687 14,347 13,880 14,021 14,261 14,923 15,723 16,565 Advertising 592 774 897 1,035 1,177 1,328 1,493 1,653 1,828 2,004 Total 13,181 16,404 15,584 15,382 15,057 15,349 15,754 16,576 17,551 18,569 †At average 2011 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates North America Download a PDF version of each segment. Visit the online Outlook at www.pwc.com/outlook Fo r Pr ess U se o n ly
  9. 9. Video games | North America 355 Video game market growth by component (%) North America 2007 2008 2009 2010 2011p 2012 2013 2014 2015 2016 2012–16 CAGR Console/handheld games 35.0 26.9 –9.4 –5.8 –5.5 –2.0 –1.4 3.5 4.5 5.1 1.9 Online games 23.3 14.1 7.2 8.6 10.3 11.1 10.8 8.5 8.0 6.5 9.0 Wireless games –18.9 86.4 8.8 9.3 8.9 7.9 7.0 6.4 7.6 6.8 7.1 PC games –13.3 –15.7 –4.7 2.1 –30.4 –6.0 –3.4 –3.5 –3.6 –3.8 –4.1 Total end-user spending 25.1 24.2 –6.0 –2.3 –3.3 1.0 1.7 4.6 5.4 5.4 3.6 Advertising 67.2 30.7 15.9 15.4 13.7 12.8 12.4 10.7 10.6 9.6 11.2 Total 26.6 24.5 –5.0 –1.3 –2.1 1.9 2.6 5.2 5.9 5.8 4.3 Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates • The video game market in the United States is expected to grow from $13.3 billion in 2011 to $16.4 billion in 2016, a 4.1 percent compound annual increase. • The Canadian video game market will increase by 5.3 percent on a compound annual basis, reaching $2.2 billion in 2016 from $1.7 billion in 2011. Video game market by country† (US$ millions) North America 2007 2008 2009 2010 2011p 2012 2013 2014 2015 2016 2012–16 CAGR United States 11,823 14,720 13,885 13,700 13,344 13,572 13,902 14,618 15,469 16,352 4.1 Canada 1,358 1,684 1,699 1,682 1,713 1,777 1,852 1,958 2,082 2,217 5.3 Total 13,181 16,404 15,584 15,382 15,057 15,349 15,754 16,576 17,551 18,569 4.3 †At average 2011 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Console/handheld game market • The console/handheld game market experienced its third straight year of declines, decreasing by 5.5 percent following a 5.8 percent decline in 2010. In particular, sales in December were much weaker than in December of the prior year. The declines are attributable to the aging of the current generation of consoles as well as the migration of gamers to other platforms. • Activision Blizzard’s Call of Duty: Modern Warfare 3 was the top-selling game in 2011. It became the biggest entertainment launch in history, hitting $400 million in the US and the UK on its first day of sales. The record had previously belonged to the prior installment in the franchise—Call of Duty: Black Ops—which grossed $360 million on its first day in 2010. Call of Duty: Modern Warfare 3 went on to gross $1 billion in its first 16 days after its November 8 launch, one day quicker than Avatar, the James Cameron movie, which was the highest- grossing film of all time. Call of Duty: Modern Warfare 3 is available on all three consoles and on the PC. The Call of Duty franchise includes five of the top-selling games of all time in the US. • Just Dance 3, which is available for all three of the major consoles, was the second-best-selling game in 2011, while its predecessor, Just Dance 2, the eighth-best-selling game in 2011, is a Wii exclusive. Fo r Pr ess U se o n ly
  10. 10. 356 PwC | Global entertainment and media outlook: 2012–2016 • Gears of War 3, which is exclusive to the Xbox 360, was the only other exclusive game among the top 10 in 2011. Two other top games—Madden NFL 12 and Call of Duty: Black Ops—are available for all three consoles. Call of Duty: Black Ops is also available on the DS—among the top 10, the only title available for that device. • Skylanders: Spyro’s Adventure was a hit kids’ game that gained extra revenues through the sale of figures that could be transported and played with multiple consoles, thereby enabling children to take them to their friends’ houses and play with them regardless of the console they were using. • Super Mario 3D Land and Mario Kart 7 were the fastest- selling portable games in 2011 and the first 3DS titles to top 1 million in unit sales. • A number of highly anticipated games are scheduled for launch in 2012, including BioShock Infinite, the follow-up to the outstanding 2007 first-person shooter BioShock; Grand Theft Auto V, the latest in the hit series; and Mass Effect 3, the third of the sci-fi trilogy that started in 2007. All of these games will be available on the PS3 and the Xbox 360. The Last Guardian will be one of the exclusive PS3 titles to debut in 2012, while Halo 4 will likely be a major exclusive title for the Xbox 360. • Sony launched Uncharted: Golden Abyss for the PS Vita in February 2012. Resident Evil: Revelations is the most- anticipated game for the 3DS. It plays just like the console version, allowing fans of Resident Evil 4 to have an equivalent experience on a portable device. • Although it has not been announced officially, Activision is anticipated to continue its pattern of launching major titles at the end of the year to take advantage of holiday sales, with the introduction of Call of Duty: Black Ops 2 as the next installment of the hit series. • Canada passed the UK to become the third-largest developer of video games in the world, surpassed only by the US and Japan. Canada is the home of a number of top video game developers, including Ubisoft in Montreal, which developed Tom Clancy’s Splinter Cell series of games; BioWare in Alberta; and Electronics Arts in Burnaby, British Colombia, which developed FIFA Soccer, one of the most popular games in the world. Around 20 percent of the top-selling games in North America are developed in Canada. • Two factors that are helping make Canada a major game-developing center are (1) the large pool of talent as a result of many colleges with game development departments and (2) government policies that support the industry through tax credits and incentives. Provincial governments in Canada are revamping their tax credit systems to attract game developers. Ubisoft, for example, is making a significant investment in Ontario because of an attractive tax package. These incentives make it cheaper and easier to develop games in Canada than in the United States and Europe. The Canada Media Fund, which traditionally supported television production, now requires funded projects to have interactive components. This is driving all content creators to develop video games or interactive Web sites. • The console/handheld game market declined in 2011 by 5.5 percent, reflecting the aging of the current generation of consoles. The launch of Mario Kart 7 and Super Mario 3D for the 3DS buoyed the market for handheld games. There is a migration to more-casual and mobile gaming, which is hurting the console game market. We anticipate modest declines in 2012 and 2013 followed by a turnaround in 2014, when it is expected that all three next-generation consoles will be on the market. Until then, new games developed to take advantage of the motion controllers of the PS3 and Xbox 360 as well as new games for the 3DS, PSP Vita, and Wii U should have a positive effect on the market, minimizing the decline. Even with the new consoles, due to competition from digital platforms we do not expect the console/handheld game market to show the large increases of the past. • The console/handheld game market in the United States is expected to grow by 1.9 percent on a compound annual basis from $8.8 billion in 2011 to $9.7 billion in 2016. • A similar pattern is expected for the Canadian console/ handheld game market, with revenues increasing 1.9 per- cent on a compound annual basis from $842 million in 2011 to $925 million in 2016. • Overall spending in North America will increase from $9.7 billion in 2011 to $10.6 billion in 2016, a 1.9 percent compound annual increase. Fo r Pr ess U se o n ly
  11. 11. Video games | North America 357 Console/handheld game market† (US$ millions) North America 2007 2008 2009 2010 2011p 2012 2013 2014 2015 2016 2012–16 CAGR United States 8,714 10,997 9,900 9,350 8,830 8,650 8,525 8,825 9,225 9,700 1.9 Canada 731 991 963 887 842 824 814 841 880 925 1.9 Total 9,445 11,988 10,863 10,237 9,672 9,474 9,339 9,666 10,105 10,625 1.9 †At average 2011 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Online games • The PC platform was traditionally the only means to play games online and is still the dominant platform, far surpassing the Xbox 360, which is in second place. Consoles are becoming more-important platforms because each of the consoles in the current generation of consoles supports online gaming. Their online marketplaces— Xbox Live, PlayStation Network (newly rebranded as Sony Entertainment Network), and Nintendo Wii Shop—enable gamers to purchase games, and they allow competition against other players anywhere via the Internet. • Sony’s PlayStation Network, which launched in 2006, is a free environment that provides online gaming as well as a means of downloading video and game content. • Sony’s PlayStation Plus subscription service for the PS3 went live in 2010 at a cost of $50 annually. Under the plan, users get free access to a selection of games that are normally available for sale from the PlayStation Network. • Similarly, Microsoft has two online services: First, the Xbox Live Silver, recently renamed Xbox Live Free, provides users with free access so they can download a limited number of game demos and movie trailers. Second is a gold membership, which costs $60 annually and which is required for online gaming or access to other services like Facebook. The company has said it has 40 million registered users worldwide. • Valve’s Steam service is the dominant company in the market for legally downloading games to the PC. In late 2011, the company achieved a record 5 million concurrent users. Steam has over 1,800 games available to download to its 40 million registered users worldwide. In June 2011, Steam introduced free-to-play games, including Sega’s Spiral Knights and Perfect World’s Forsaken Worlds and has expanded its library to around 20 games, with more to be added in 2012. • In June 2011, Electronic Arts launched Origin, formerly the EA Store, as a competitor to Steam. Origin is a digital distribution system that enables users to purchase games on the Internet and download them to their PCs or mobile devices. Additionally, Origin has a number of other features, including (1) the saving of games in the cloud, thereby enabling them to be played on different devices, and (2) social features such as networking with friends. Origin currently offers more than 100 titles in its portfolio of games from a number of different publishers, far fewer than the Steam platform, which has around 1,500 titles. • The Mac App Store launched in January 2011 with over a thousand programs and has made software (including games) available in a familiar marketplace for iOS users. There are now around 9,000 apps in the store, with games representing the largest category. Many popular games are in the store, including Angry Birds and Plants vs. Zombies. That should help grow the market for Mac games, because in the past, retail game stores rarely stocked them—in favor of games for the PC and consoles instead. • Massively multiplayer online games are played by thousands of people simultaneously around the world. MMOGs are virtual worlds inhabited by supernatural beings, such as aliens or wizards that continue evolving. Most MMOGs are played on PCs, with additional content being delivered over broadband connections. World of Warcraft (WoW), which was launched in November 2004, is by far the most popular MMOG. The game, which had 12 million subscribers at its peak, has seen its subscriber count decline to around 10 million. After buying the game, subscribers pay a monthly subscription fee of $15 to continue playing online. World of Warcraft: Mists of Pandaria, the latest expansion pack for WoW, is scheduled to launch in 2012 and is expected to buoy demand for the game. Fo r Pr ess U se o n ly
  12. 12. 358 PwC | Global entertainment and media outlook: 2012–2016 • A major new MMOG with a similar business model—Star Wars: The Old Republic, was developed by EA’s BioWare and launched on December 20, 2011, reaching 1 million subscribers by the end of the month. Players who bought the game are entitled to 30 days of free online service before they have to pay the $15 monthly fee. It remains to be seen how successful the game will be and if the subscription model still has staying power. • By contrast, many other MMOGs—such as EverQuest II, Age of Conan, and DC Universe Online—have switched from the traditional business model to a free-to-play model, with microtransactions generating the revenues for the publisher. After the switch, the number of players for these games increased dramatically, as did the number of microtransactions. Not all MMOGs that switch from the subscription model become successful as free games, as evidenced by the demise of LEGO Universe in January 2012, which failed to achieve enough revenues after switching. • Another major MMOG title is the free-to-play League of Legends, published by Riot Games, which has 30 million registered players worldwide. • A number of new MMOGs are scheduled to launch in 2012, including Guild Wars 2, developed by ArenaNet; Sony’s Planetside 2; and BioWare’s Warhammer Online: Wrath of Heroes. None of these will use the traditional subscription business model but instead will be free to play, with microtransactions providing the revenue stream. • Electronic Arts introduced a line of free-to-play online games, including Battlefield Heroes and Need for Speed World, that have reached 25 million players worldwide. • Microtransactions enable gamers to buy items that give them an advantage in the game or enhance the gaming experience. Combined with the free-to-play business model, microtransactions let gamers control the amount they spend on games rather than paying a monthly subscription fee. • Many game developers are adding downloadable digital content for their games so as to enhance the gaming experience and as an additional source of revenues. Activision launched Call of Duty Elite, an online service, on the same day it launched Call of Duty: Modern Warfare 3. The online service, which has more than 7 million subscribers, provides access to additional downloadable content. • Games on social networks, such as Facebook, have grown exponentially. Zynga, the major game developer on Facebook, has had a number of major games. Its CityVille game became the biggest Facebook game of all time, reaching 100 million users and surpassing the record held by FarmVille, another Zynga game. The games are free to play and generate revenues from microtransactions and advertising. These games are also played by women and by people in older age-groups, thereby opening up opportunities for advertisers and other commercial partners. Most of the social games are played on PCs and, to a lesser extent, on smartphones and tablets. Words With Friends, originally developed by Newtoy Inc., which is now part of Zynga, has proved very popular on mobile devices. Zynga continues to develop new games in the series, including Scramble With Friends. • The major game developers are beginning to realize the potential of social games. Electronic Arts, which acquired Playfish in November 2009 and PopCap in July 2011, recently released a number of social games on Facebook, including Sims Social, which reached 30 million users in its first month. Similarly, Disney entered the social game market by acquiring second-leading social game developer Playdom. • Casual games—such as puzzles, cards, and arcade games that do not require extended periods of time to learn and to play—have attracted a wider demographic audience, including women and older adults. In fact, the majority of online gamers in the United States are women. A number of online sites—such as Yahoo! Games, MSN’s Zone, and Electronic Arts’ Pogo.com—provide some free games, with most of their revenues coming from advertising. Some of the popular casual games are Bejeweled, Tetris, Solitaire, and Luxor. The games can be played online or downloaded. There are a number of different business models, including free, advertising-supported games; pay per game; and subscription-based games. • The online game market in North America grew by 10.6 percent in 2011. Growth has been driven by an increase in broadband subscribers, by transition to the current generation of consoles, and by the growth of social games. There are more subscription services entering the market as well as more companies providing digital distribution. The online game market will grow from $2.6 billion in 2011 to $3.9 billion in 2016, increasing at a 9.0 percent compound annual rate. Fo r Pr ess U se o n ly
  13. 13. Video games | North America 359 • An expanding microtransaction market will also fuel online game spending in North America during the next five years. The online game market in the United States is expected to increase from $2.1 billion in 2011 to $3.2 billion in 2016— a 9.0 percent compound annual growth rate—while the Canadian online game market will increase at a slightly slower, 8.7 percent compound annual rate to $728 million in 2016 from $480 million in 2011. Online game market† (US$ millions) North America 2007 2008 2009 2010 2011p 2012 2013 2014 2015 2016 2012–16 CAGR United States 1,399 1,605 1,722 1,879 2,079 2,316 2,574 2,797 3,020 3,204 9.0 Canada 348 388 414 440 480 526 576 622 673 728 8.7 Total 1,747 1,993 2,136 2,319 2,559 2,842 3,150 3,419 3,693 3,932 9.0 †At average 2011 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Wireless games • Wireless games are games played on mobile phones and other wireless devices. Almost all new wireless phones are now Internet enabled, facilitating the ability to download games. The increasing sophistication of the new handsets will make for a more enjoyable gaming experience. As people upgrade their existing handsets for newer models, the number of game-capable handsets will increase dramatically. • Historically, mobile games were simplistic due to the graphic limitation of the handsets. As a result, the most popular mobile games were single-player board games, word games, and puzzles, although that trend is changing as AAA titles are being released for these devices. These casual games help widen the demographics of wireless game players. In fact, more than half of wireless gamers are women who enjoy playing casual games such as Tetris and Bejeweled, two of the most-often-downloaded wireless games. • Originally, many handsets were embedded with games as a differentiator to drive sales of individual phones. Those games provided enjoyment for the users but did not provide any additional revenue for the operators. With the expansion of Internet-connected phones, operators saw the potential for additional revenues by users’ down- loading of games at a modest fee. However, the carriers’ download platforms were often not consumer friendly. • Apple’s introduction of the iPhone and the App Store revolutionized the wireless game market. The App Store improves the buying experience dramatically over carriers’ decks, has better descriptions, and offers free trials. The number of games on the App Store increased from around 5,000 in October 2008 to over 75,000 by the end of 2011. And a number of other online services such as the Android Market have been established that compete with the carriers’ decks to provide content. • The sophistication of games for the iPhone and iPod Touch has caused many gamers to substitute these devices for their DS and PSP handheld devices. • In 2010, Apple introduced the iPad, a tablet computer that runs all of the iPhone applications, including the games. With its enhanced graphic capabilities and its large touch screen, the iPad is becoming the platform of choice for many gamers. The introduction of the iPad 2, with the advanced A5 processor chip, which renders graphics much faster than the previous model did, further establishes the iPad 2 as a device on which to play games like Infinity Blade 2 and Real Racing 2, which have graphics that rival those of console games. The newest version, the iPad 3, with a higher-resolution screen, was introduced in 2012. • The Android mobile device market has skyrocketed because of lower prices relative to the iPhones. These phones provide another platform for gamers. Fo r Pr ess U se o n ly
  14. 14. 360 PwC | Global entertainment and media outlook: 2012–2016 • Although casual games continue to dominate the market, more-advanced games that take advantage of the sophistication of the newer smartphones are also being developed. Even wireless versions of MMOGs are being developed for gamers on the go. These games will become more prevalent as the number of technically advanced handsets proliferates. • There are a growing number of mobile games, both because of the rising penetration by smartphones and because the games are significantly cheaper than console games. Mobile gaming provides an enjoyable experience for short periods of time, as when waiting for a bus or train. • The business model for mobile games is moving from the pay to download to the freemium model whereby the games are downloaded for free, with microtransactions and advertising providing the necessary revenues. In fact, it’s estimated that in-game purchases will outpace download fees in the near future. Angry Birds was a hugely successful game as a paid download but has now garnered more fans as a free download. • Social network games are finding their way to mobile phones, with microtransactions and advertising providing the requisite revenue streams. • In December 2011, Microsoft introduced an Xbox Live app for Windows phones and Apple devices that enables users to track and compare their achievements and send messages to Xbox Live friends. Microsoft is also developing apps that will enable users to play Xbox Live games on their devices. • Electronic Arts Mobile, the world’s leading mobile game developer, is headquartered in California, with a major studio in Canada, and is best known for turning big-name titles like Monopoly, Scrabble, and Tetris into mobile games. Electronic Arts’ major position resulted from its purchase of Jamdat in 2006. Jamdat had been the largest mobile game developer in the world. EA Mobile continues acquiring smaller studios to enhance its position as the industry leader. In 2010, it acquired Chillingo, a leading publisher of iOS games, including the iOS version of Angry Birds. In 2011, EA acquired Australian game developer Firemint, developer of Flight Control, Real Racing, and SpyMouse. In 2011, EA launched a mobile version of its popular Facebook social game Sims FreePlay for Apple devices. • Zynga, the online game developer famous for its games on Facebook such as CityVille, is developing a series of games for mobile devices to expand its user base. It recently introduced its Scramble With Friends word game to join Words With Friends and Hanging With Friends in the wireless segment. • The wireless game market is expected to continue growing as the penetration by smartphones and tablets expands. More people will be playing games, including casual games, social games, and more-advanced multiplayer games. The market will also grow as more gamers get accustomed to making microtransactions in order to enhance their gaming experience. • The wireless game market in North America rose 8.9 per- cent in 2011. During the next five years, the market will expand at a 7.1 percent compound annual rate from $1.1 billion in 2011 to $1.6 billion in 2016. • The wireless game market in the United States is expected to grow by a 7.1 percent compound annual rate, reaching $1.4 billion in 2016, up from $990 million in 2011, while the Canadian market will increase from $125 million in 2011 to $181 million in 2016, a 7.7 percent annual growth rate. Wireless game market† (US$ millions) North America 2007 2008 2009 2010 2011p 2012 2013 2014 2015 2016 2012–16 CAGR United States 384 767 833 911 990 1,066 1,138 1,211 1,304 1,393 7.1 Canada 78 94 104 113 125 137 149 159 170 181 7.7 Total 462 861 937 1,024 1,115 1,203 1,287 1,370 1,474 1,574 7.1 †At average 2011 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Fo r Pr ess U se o n ly
  15. 15. Video games | North America 361 PC games • The PC game market declined in 2011, returning to its normal pattern of deterioration. This follows a one-year aberration, when the sale of boxed PC games increased for the first time in recent years as revenues got boosted by large sales of World of Warcraft: Cataclysm and StarCraft II. With just a few exceptions, the retail market for PC games has been in decline for a number of years because the rise of the consoles has shifted the market away from the PC. It must be noted that this section deals only with retail sales of PC games and does not include digital distribution of PC games, subscriptions to online games, or microtransactions that take place in online games. Those revenue streams are growing in importance and are included in the online game category. • Retail sales of PC games have been deteriorating for a number of reasons: Developers are producing fewer PC games because of the fear of piracy. Consumers have been migrating from PC games to those played on the current generation of consoles. Retailers do not make the same effort to market PC games, often relegating them to the backs of their stores. And the move to digital distribution of games makes downloading them directly to the PC an easier alternative to purchasing games at retail. • Despite recent sales declines, PC games do have a solid fan base. PCs give gamers a superior method to play certain game genres such as strategy games and MMOGs, because a keyboard and mouse provide better means of interacting with the games than a console controller does. PC games also provide superior graphics. The most-advanced games are often PC based because the open platform, with no certification necessary, as is required with console games, facilitates more-efficient development of games. • PCs are offering better graphics than the aging consoles are. The high-end graphics processing unit (GPU) from NVIDIA is selling well as hard-core gamers upgrade their computers to play games like Battlefield 3 and Elder Scrolls V: Skyrim. • The growth of MMOGs is aiding the retail PC game market because most MMOGs require retail purchase of the game, after which the gamer can play the game online. • World of Warcraft: Cataclysm, the third expansion pack for the MMOG, sold 3.3 million copies worldwide on its first day of availability—December 7, 2010—making it the fastest-selling PC game of all time. It beat the previous record holder, World of Warcraft: Wrath of the Lich King, the second expansion pack, which sold 2.8 million copies the first day. Despite losing subscribers recently, World of Warcraft is still quite popular around the world, and expectations are that the next expansion pack, World of Warcraft: Mists of Pandaria, scheduled to debut in 2012, will help spur PC game sales. • Star Wars: The Old Republic, a major new MMOG, launched in late December 2011, quickly rose up the sales charts to become one of the most popular PC games of the year. Another new major MMOG was League of Legends. • Steam is the major player in the PC game download market, with around 70 percent of the market. Direct2Drive, EA.com, Blizzard.com, and Big Fish Games are among the other download services. PC game downloads are not included in PC gaming spending and effectively compete with PC games. • In addition to World of Warcraft, the other major franchise that continues to support PC game sales comprises the various Sims games. Sims 3, launched in June 2009, continues to be a major-selling PC game franchise. The Sims 3 Showtime expansion pack was released in 2012. • The new PC games expected in 2012 include Guild Wars 2 and StarCraft II: Heart of the Swarm. • We expect the number of games sold to show modest decreases throughout the forecast period but not be offset by modest price increases. North American spending on PC games will decline from $534 million in 2011 to $434 million in 2016, decreasing at a compound annual rate of 4.1 percent. • The US PC game market will decline by 4.2 percent compounded annually from $470 million in 2011 to $380 million in 2016, while the Canadian market will decline from $64 million to $54 million, a 3.3 percent compound annual rate. Filter advertising and consumer spending data across segments. Visit the online Outlook at www.pwc.com/outlook Fo r Pr ess U se o n ly
  16. 16. 362 PwC | Global entertainment and media outlook: 2012–2016 PC game market† (US$ millions) North America 2007 2008 2009 2010 2011p 2012 2013 2014 2015 2016 2012–16 CAGR United States 826 701 680 700 470 440 425 410 395 380 –4.2 Canada 109 87 71 67 64 62 60 58 56 54 –3.3 Total 935 788 751 767 534 502 485 468 451 434 –4.1 †At average 2011 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Advertising • Advertisers are turning to video games to reach specific demographic groups that are becoming more elusive. The prime example is males 18 to 34 years of age, who are spending relatively less time watching television and more time with interactive games. The video game platform provides a unique level of engagement that is missing in other advertising media. People are less likely to be multitasking when they play games as compared with when they are watching television. • Initially, all ads were static, such as billboards that appeared in the backgrounds of sporting events or pro- duct placements in which a character is shown with a branded product. Such ads were placed in the games at the time the games were developed, and they could not be changed. The ads often appeared in sports games and other contemporary environments where they added a measure of authenticity to the games. • With the advent of online gaming, a more-advanced type of advertising became possible. Advertisers can now place ads that can be changed dynamically through the Internet. For example, a billboard promoting a movie can be updated as new films get released. In this way, the advertising will always be fresh. Additionally, advertising can be targeted geographically, with different messages hitting different geographic areas. The messages can be programmed for delivery at specific times of day. Since online games are attached to the Internet, it’s also possible to track both the number of times a gamer is exposed to ads and the amount of time that ads appear on the screen. And the placement of the ads can vary by the user’s experience. For example, if a player does not spend enough time on the ad, it can be made to reappear later in the game. • Advergaming is the practice of using a video game to promote a product or a service. Such video games are often played for free on corporate Web sites. Many broad- cast and cable networks promote their programs through the use of advergames. Some of the popular advergames are Ace Assault II and LEGO Harry Potter, both of them sponsored by LEGO; Mobile 1 Track Challenge, sponsored by ExxonMobil; and Kart Fighter, sponsored by Red Bull. The US Army designed a game called America’s Army to promote recruitment. • Advertisers can reward gamers for looking at ads by providing gamers with additional game content for free. This procedure is often used in social and mobile games. In this way, the ads do not interfere with the game but, rather, are means for gamers to receive additional content that they would normally pay for. • A major growth area is advertising that appears around games on social networks. For example, Facebook often places ads in the borders around social games. • In 2006, Microsoft entered the game advertising market by acquiring Massive Inc., a pioneer in the in-game advertising industry. Massive had deals with Electronic Arts, THQ, and Activision to insert ads in a number of their games. Advertisers that wanted to place ads in Xbox 360 games had to go through Massive. In October 2010, Microsoft announced it was closing down its Massive subsidiary and would deploy its technology into its first- party ad business. Xbox Live thus became Microsoft’s sole advertising platform. • Microsoft had been placing ads in its Xbox 360 games for several years, while Sony began permitting in-game advertising in the middle of 2008. Nintendo still does not permit in-game advertising in any of its games. Fo r Pr ess U se o n ly
  17. 17. Video games | North America 363 • Sony is taking a different approach to its in-game adver- tising by opening up its platform to allow independent ad companies to broker deals with third-party game publishers. IGA Worldwide and Double Fusion, two companies that also developed the technology to insert dynamic ads in games, have partnered with Sony to place dynamic ads in PS3 games. IGA signed exclusive deals with Activision and Electronic Arts to deliver in-game ads for the PS3, while Double Fusion signed deals to insert dynamic ads on the PS3 for NBA 2K12 and NHL 2K12. • The dynamic in-game advertising segment of the market has not grown as quickly as expected, as evidenced by the closings of Microsoft’s Massive subsidiary and the downsizing of employees at IGA Worldwide, a leader in this market segment. Instead of in-game advertising in major gaming titles, advertisers are focusing more on casual and mobile games. • Double Fusion, a leading independent in-game advertising network, acquired the assets of rival NeoEdge Networks in December 2011, which focused on in-game ads in social and mobile games. These ads are often placed when a round of play ends rather than within the game itself. Double Fusion—whose clients include McDonald’s, Dr. Pepper, State Farm Insurance, and Toyota and which has placed ads in games developed by Ubisoft and THQ, among others—is thus likely to concentrate more on social and mobile games. • Greystripe, the world’s leading independent mobile advertising network, is bringing ad-funded games to the iOS and Android platforms. Previously, Greystripe concentrated its efforts on making games available to consumers directly on its own Web site Gamejump.com. Angry Birds, which was a huge hit as a paid download on the App Store, has gained even more fans as an ad- supported game on the Android platform. • Display ads, advergames, and advertising on Web-based game portals are the major advertising segments. • Advertising is appropriate only in sports games and other games set in contemporary times where it enhances the gaming experience by making the environment more realistic, because it would be hard to imagine a baseball stadium without billboards. In those cases, gamers respond favorably to the ads, and studies have shown that they have favorable perceptions of the advertised products and are more likely to buy them. By contrast, ads would not be appropriate in games set in medieval times or fantasy worlds, and Blizzard has said ads would never appear in World of Warcraft games. Similarly, studies found that ads are less effective in violent games because such games require a higher level of concentration, drawing players’ attention, and players are averse to ads that draw their attention away from the actual game playing. Ads in violent games must therefore be less obtrusive so gamers can absorb them without distraction; otherwise, the ads could have a negative impact. • Product placement is an effective means of advertising in video games. Having a character interact with a product, such as drinking Red Bull to stay alert, drives the message home. • Microsoft introduced a new suite of advertising tools in 2011 called NUads (natural user-interface ads) for its motion-sensing Kinect devices. NUads enable gamers to use voice and motion commands to access additional product information and maps of local establishments selling the products. By simply saying “Xbox more,” a gamer can get an e-mail with more information about the advertised product. Fo r Pr ess U se o n ly
  18. 18. 364 PwC | Global entertainment and media outlook: 2012–2016 • Video game advertising is still only a small segment of the video game market, with North American revenues estimated at $1.2 billion in 2011. Game publishers are using advertising revenues to supplement revenues from game sales, which are decreasing in the retail market. We expect this market to expand, fueled by the growth of social and mobile games. By 2016, video game advertising will total $2.0 billion, growing by 11.2 percent at a compound annual rate. • The United States is the largest market in the world for video game advertising, with revenues of $975 million in 2011 that will grow to $1.7 billion in 2016. The Canadian market, being closely associated with that of the United States, is a relatively strong market for advertising, with revenues of $202 million in 2011 that will grow to $329 million in 2016. Video game advertising market† (US$ millions) North America 2007 2008 2009 2010 2011p 2012 2013 2014 2015 2016 2012–16 CAGR United States 500 650 750 860 975 1,100 1,240 1,375 1,525 1,675 11.4 Canada 92 124 147 175 202 228 253 278 303 329 10.2 Total 592 774 897 1,035 1,177 1,328 1,493 1,653 1,828 2,004 11.2 †At average 2011 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Fo r Pr ess U se o n ly
  19. 19. Video games | EMEA 365 The outlook in brief • The console/handheld market is being hurt by the shift to online and mobile gaming. • The online game market is being driven by increased broadband penetration, the growth of social online gaming, and increased digital distribution of content. • The wireless market is being driven by the explosion of smartphones and tablets that enable an enhanced gaming experience. • Retail PC game sales will continue to deteriorate as digital distribution expands, which is also hurting retail stores. • Video game advertising is being driven by the increase in free social network games. Overview • The overall video game market is anticipated to increase from $18.0 billion in 2011 to $22.8 billion in 2016, growing at a compound annual rate of 4.8 percent. • Consumer spending on video games will grow by 4.6 percent on a compound annual basis from $17.4 billion in 2011 to $21.8 billion in 2016. • Video game advertising is expected to grow by 10.2 percent on a compound annual basis from $613 million in 2011 to $994 million in 2016. • Console/handheld games will continue to be the largest segment of the market, increasing by 1.9 percent com- pounded annually from $9.5 billion in 2011 to $10.5 billion in 2016. • Online games, driven by both casual games and MMOGs, will increase by 11.3 percent compounded annually to $6.8 billion in 2016 from $4.0 billion in 2011. • Wireless games will increase to $2.4 billion by 2016, up from $1.6 billion in 2011, an 8.4 percent compound annual increase. • PC game sales will dip from $2.2 billion to $2.1 billion, a 1.7 percent compound annual decrease. Video game market by component† (US$ millions) EMEA 2007 2008 2009 2010 2011p 2012 2013 2014 2015 2016 Console/handheld games 9,212 11,180 10,328 9,883 9,534 9,374 9,252 9,520 9,914 10,453 Online games 1,976 2,510 3,021 3,569 4,002 4,550 5,140 5,689 6,274 6,832 Wireless games 948 1,197 1,342 1,467 1,614 1,764 1,927 2,084 2,252 2,421 PC games 2,653 2,520 2,312 2,298 2,245 2,197 2,162 2,127 2,090 2,060 Total end-user spending 14,789 17,407 17,003 17,217 17,395 17,885 18,481 19,420 20,530 21,766 Advertising 298 389 442 519 613 701 780 855 930 994 Total 15,087 17,796 17,445 17,736 18,008 18,586 19,261 20,275 21,460 22,760 †At average 2011 exchange rates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Europe, Middle East, Africa (EMEA) Access data and digital functionality across your organization. Visit the online Outlook at www.pwc.com/outlook Fo r Pr ess U se o n ly
  20. 20. 366 PwC | Global entertainment and media outlook: 2012–2016 Video game market growth by component (%) EMEA 2007 2008 2009 2010 2011p 2012 2013 2014 2015 2016 2012–16 CAGR Console/handheld games 29.4 21.4 –7.6 –4.3 –3.5 –1.7 –1.3 2.9 4.1 5.4 1.9 Online games 31.3 27.0 20.4 18.1 12.1 13.7 13.0 10.7 10.3 8.9 11.3 Wireless games 26.9 26.3 12.1 9.3 10.0 9.3 9.2 8.1 8.1 7.5 8.4 PC games 0.4 –5.0 –8.3 –0.6 –2.3 –2.1 –1.6 –1.6 –1.7 –1.4 –1.7 Total end-user spending 23.1 17.7 –2.3 1.3 1.0 2.8 3.3 5.1 5.7 6.0 4.6 Advertising 46.1 30.5 13.6 17.4 18.1 14.4 11.3 9.6 8.8 6.9 10.2 Total 23.5 18.0 –2.0 1.7 1.5 3.2 3.6 5.3 5.8 6.1 4.8 Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates • At $3.8 billion in 2011, the United Kingdom is the largest video game market in EMEA. The United Kingdom is an important game-developing center that includes development of such major games as Batman: Arkham City, Little Big Planet, and the Grand Theft Auto series. The UK also has specialist expertise, such as a strong visual effects industry, which is important in the final production of games. In the United Kingdom, the industry is concerned that other countries—especially France, Canada, and Singapore—are luring game developers away by providing tax incentives, and therefore the UK’s video game industry has asked the government for similar incentives. In March 2010, the British government announced plans to include in its annual budget certain tax breaks for the gaming industry. However, later in the year, after the elections, the new government changed course and did not include the tax breaks. It appears that game publishers are moving some of their development studios to Canada, which provides more-beneficial tax incentives and now claims to have surpassed the UK as the third-largest game development market. From 2008 to 2010, the British game industry’s workforce declined by 9 percent, while that of Canada increased by one-third. The UK game market decreased 1.5 percent in 2011, its third consecutive decline—after many years of significant growth—because of the migration of players to other platforms. The UK is expected to maintain its dominance in EMEA, growing 4.4 percent on a compound annual basis to $4.7 billion in 2016. • France, the second-largest video game market in EMEA, at $3.4 billion in 2011, is the home of Vivendi (majority owner of Activision Blizzard) and Ubisoft Entertainment, two of the top five video game publishers in the world. Additionally, France has two of the primary producers of mobile games: Gameloft and Zenops. The French govern- ment provides significant tax benefits for the development of games—same as it does for the film industry—and many international game developers have established studios in France. The video game market in France is expected to grow 3.6 percent on a compound annual basis to $4.0 billion in 2016. • Germany has the third-largest video game market in EMEA, at $2.8 billion in 2011. Germany’s game market is unique in comparison to the other major markets in that its PC game market is relatively strong compared with the console game market because of the relatively low levels of penetration by console hardware. Germany has strict laws regarding violence in video games. In fact, Germany has its own voluntary industry board called the USK, which reviews and rates games, while most other European countries follow the Pan-European Game Information ratings system. Germany has about 10,000 people working in the game industry at large international publishers such as Sony, Ubisoft, and Electronic Arts as well as at local companies like Bigfoot and Gameforge. Germany is at the forefront of the development of free-to-play online games, the fastest- growing segment of the online market. The German market will expand to $3.3 billion in 2016, a 3.5 percent compound annual increase. Fo r Pr ess U se o n ly
  21. 21. Video games | EMEA 367 • Italy also has a significant video game industry, with revenues of $1.4 billion in 2011. Italy has a number of small game developers, many of which are subsidiaries of larger, foreign companies. The games developed locally are often football (soccer) related. The local market has been hampered by piracy, and the government has promised to try to combat the problem because Italy has the highest rate of pirated games in Europe. Italian spending on video games is expected to grow to $1.9 billion in 2016, increasing at a 6.2 percent com- pound annual rate. • Spain has the fifth-largest video game market in EMEA, at $1.2 billion in 2011. By 2016, the Spanish video game market will total $1.5 billion, a 4.6 percent compound annual increase. • Russia is by far the largest market in Central and Eastern Europe, with revenues of $1.4 billion in 2011. Additionally, Russia is projected to exhibit the highest growth rate of any country in EMEA, increasing at an annual rate of 11.0 percent compounded annually through 2016 to reach $2.3 billion. Similar to Germany, the PC game is relatively strong in Russia. In fact, outside Germany, Russia is Steam’s largest-growing territory in EMEA. Free-to-play MMOGs are very popular in Russia. Console/handheld game market • The console/handheld game market decreased by 3.5 percent to $9.5 billion in 2011, due partially to the aging of the current generation of consoles. • The market is expected to exhibit modest declines in 2012 and 2013 before returning to positive growth in 2014, as many new games will be developed for the next generation of consoles, which are expected to hit the market in the latter part of the forecast period. We do not expect the high growth rates that occurred when the current generation of consoles debuted, because there is increased competition from other gaming platforms. • Call of Duty: Modern Warfare 3 was the most popular title in Europe in 2011, as it was in the US and worldwide. The game broke several worldwide records, including reaching the billion-dollar level in 16 days, one day faster than Avatar, the James Cameron movie that became the biggest-grossing film of all time. • The UK is the biggest market in the region, with revenues totaling $2.2 billion in 2011. Console/handheld game sales declined 6.9 percent in 2011 following larger declines in 2009 and 2010. The UK is the home of a number of major game developers, including Rockstar North, Rocksteady Studios, Media Molecule, Lionhead Studios, Codemasters, FreeStyleGames (a subsidiary of Activision Blizzard), and Blitz Games Studios. • Activision Blizzard’s Call of Duty: Modern Warfare 3 was the top-selling game in the UK in 2011, grossing a record- breaking £83 million ($133 million) in its first week. It was the third year in a row that a Call of Duty title was the top-selling game in the UK. Some of the other best-selling titles across all platforms in the UK in 2011 were FIFA 12 and Battlefield 3. Those three titles were among the top sellers on both the PS3 and the Xbox 360. By contrast, the top sellers on the Wii were Zumba Fitness, Just Dance 3, and Just Dance 2. Revenues in the UK are expected to reach $2.3 billion in 2016, a 1.4 percent compound annual growth rate from 2011. • France is the second major market in the region, with revenues of $2.0 billion in 2011 that are expected to increase to $2.1 billion in 2016, a 1.3 percent increase compounded annually. • Germany is the third-largest market, with revenues of $1.6 billion. Germany has a strict ratings system that limits sales of violent games and holds down the console market. The console market in Germany is relatively small compared with the country’s PC market, owing to a lower penetration by consoles. Germany is the only major market where more people play games on PCs rather than on stationary consoles. The market is expected to grow to $1.8 billion in 2016, a 2.3 percent compound annual increase from 2011. Fo r Pr ess U se o n ly
  22. 22. 368 PwC | Global entertainment and media outlook: 2012–2016 Video game market by country† (US$ millions) EMEA 2007 2008 2009 2010 2011p 2012 2013 2014 2015 2016 2012–16 CAGR Western Europe                     Austria 63 75 77 81 81 84 87 92 97 103 4.9 Belgium 302 380 360 355 346 340 335 346 359 377 1.7 Denmark 173 202 196 199 201 206 212 221 230 240 3.6 Finland 130 145 167 182 182 179 182 188 198 206 2.5 France 2,869 3,412 3,386 3,416 3,352 3,395 3,455 3,602 3,793 3,999 3.6 Germany 2,280 2,631 2,592 2,659 2,757 2,803 2,847 2,959 3,110 3,281 3.5 Greece 45 54 55 60 60 65 65 67 73 75 4.6 Ireland 387 470 462 482 488 503 522 549 580 612 4.6 Italy 1,112 1,326 1,291 1,371 1,428 1,497 1,580 1,686 1,801 1,926 6.2 Netherlands 658 789 801 801 809 831 850 888 929 982 4.0 Norway 184 217 193 190 190 195 201 211 220 233 4.2 Portugal 39 49 47 51 56 58 62 64 67 67 3.7 Spain 1,304 1,445 1,304 1,212 1,223 1,247 1,288 1,363 1,442 1,529 4.6 Sweden 325 384 353 367 377 389 403 421 446 476 4.8 Switzerland 363 441 451 482 500 521 543 571 607 643 5.2 United Kingdom 3,580 4,304 3,974 3,812 3,755 3,844 3,973 4,171 4,399 4,659 4.4 Western Europe total 13,814 16,324 15,709 15,720 15,805 16,157 16,605 17,399 18,351 19,408 4.2 Central and Eastern Europe                    Czech Republic 82 84 98 112 122 131 141 151 162 174 7.4 Hungary 20 22 23 25 25 27 29 30 32 33 5.7 Poland 255 323 334 350 363 375 389 403 419 437 3.8 Romania 11 16 22 23 25 26 28 29 28 29 3.0 Russia 685 759 967 1,207 1,357 1,544 1,728 1,905 2,092 2,285 11.0 Turkey 39 47 49 50 55 58 63 65 68 71 5.2 Central and Eastern Europe total 1,092 1,251 1,493 1,767 1,947 2,161 2,378 2,583 2,801 3,029 9.2 Middle East/Africa                     Israel 59 72 73 76 80 85 89 94 99 103 5.2 Middle East/North Africa (MENA)‡ NA NA NA NA NA NA NA NA NA NA — South Africa 122 149 170 173 176 183 189 199 209 220 4.6 Middle East/ Africa total 181 221 243 249 256 268 278 293 308 323 4.8 EMEA total 15,087 17,796 17,445 17,736 18,008 18,586 19,261 20,275 21,460 22,760 4.8 †At average 2011 exchange rates. ‡Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Fo r Pr ess U se o n ly
  23. 23. Video games | EMEA 369 Console/handheld game market† (US$ millions) EMEA 2007 2008 2009 2010 2011p 2012 2013 2014 2015 2016 2012–16 CAGR Western Europe                     Austria 35 40 36 36 33 32 31 32 33 35 1.2 Belgium 225 299 280 271 259 249 242 250 260 273 1.1 Denmark 112 133 121 118 115 113 111 114 118 123 1.4 Finland 83 97 121 129 125 121 118 121 125 131 0.9 France 1,881 2,295 2,191 2,156 2,017 1,962 1,913 1,962 2,045 2,149 1.3 Germany 1,258 1,572 1,600 1,550 1,590 1,579 1,565 1,614 1,683 1,781 2.3 Greece 22 28 26 26 24 24 22 22 24 25 0.8 Ireland 227 278 250 250 237 228 223 230 239 252 1.2 Italy 687 857 807 843 842 835 828 856 897 953 2.5 Netherlands 316 409 381 344 316 306 298 306 320 337 1.3 Norway 120 143 119 110 104 102 101 103 106 111 1.3 Portugal 21 25 22 22 21 21 21 22 22 22 0.9 Spain 885 957 783 680 647 627 612 626 643 675 0.9 Sweden 217 252 241 242 240 237 235 240 251 264 1.9 Switzerland 194 236 230 232 228 223 219 223 230 241 1.1 United Kingdom 2,524 3,055 2,600 2,326 2,165 2,109 2,077 2,133 2,213 2,326 1.4 Western Europe total 8,807 10,676 9,808 9,335 8,963 8,768 8,616 8,854 9,209 9,698 1.6 Central and Eastern Europe                    Czech Republic 37 40 46 54 58 61 64 67 71 75 5.3 Hungary 10 12 11 12 12 13 13 13 14 14 3.1 Poland 118 149 163 177 188 198 209 220 233 248 5.7 Romania 4 7 8 9 10 10 11 12 12 13 5.4 Russia 109 136 123 129 138 159 175 186 201 222 10.0 Turkey 22 26 24 25 26 27 29 30 31 33 4.9 Central and Eastern Europe total 300 370 375 406 432 468 501 528 562 605 7.0 Middle East/Africa                     Israel 33 39 36 35 34 34 33 34 35 37 1.7 Middle East/North Africa (MENA)‡ NA NA NA NA NA NA NA NA NA NA — South Africa 72 95 109 107 105 104 102 104 108 113 1.5 Middle East/ Africa total 105 134 145 142 139 138 135 138 143 150 1.5 EMEA total 9,212 11,180 10,328 9,883 9,534 9,374 9,252 9,520 9,914 10,453 1.9 †At average 2011 exchange rates. ‡Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Fo r Pr ess U se o n ly
  24. 24. 370 PwC | Global entertainment and media outlook: 2012–2016 Online games • The PC platform has traditionally been the only means of playing games online and is still the dominant platform for online games, far surpassing the Xbox 360, which is in second place. The major console manufacturers— Sony, Microsoft, and Nintendo—have introduced online marketplaces (PlayStation Network, Xbox Live, and Nintendo Wii Shop) that enable gamers to purchase games and other content and that facilitate competition against other players anywhere in the world via the Internet. • Digital distribution of content is emerging as an important segment of the market. In addition to full games, players can also download additional game content to enhance their playing experience. • The online game market is composed of several segments. Massively multiplayer online games are usually role-playing games that take place in fantasy or medieval worlds and can be played over long periods of time. After purchasing copies of the game at retail stores, players often pay monthly fees to participate, sometimes making additional purchases to buy online equipment and accessories. The microtransactions associated with MMOGs are major drivers of online gaming revenue growth. Currently, these games are played primarily on PCs. World of Warcraft is the leading MMOG in EMEA and is expected to maintain its lead with its new expansion pack—World of Warcraft: Mists of Pandaria—scheduled for release in 2012. • As in many other regions, the free-to-play business model is taking hold in EMEA, with microtransactions supplying the requisite revenues. Many popular MMOGs, including EverQuest II, recently switched to the free-to-play model and have experienced growth in number of users and spending. • Rapid growth in social gaming is also driving spending on microtransactions. Many social games are free, but gamers buy virtual goods to give them an edge or otherwise improve the gaming experience. • Another segment of the online market consists of casual gamers who go to a Web site and play strategy games or puzzle games—often at no charge—with advertising supplying the requisite revenues. Casual game sites like RealGames.com, King.com, and PopCap.com reach two- thirds of European gaming households. These casual game sites expand the demographics of gamers. For example, in France the majority of gamers using online game portals are women. In Germany, GMX.net is a major game portal for casual games. In general, game portals are usually language specific. • OnLive and Gaikai are two cloud-based gaming services that let players play traditional disk-based PC games on entry-level computers, because the processing takes place on the companies’ servers. With cloud gaming, there’s no need to download the games or own the physical media. OnLive has also developed a low-cost console, enabling games to be played on a television. In September 2011, OnLive expanded to the UK, making it the first overseas expansion since launching the service in the US in June 2010. Gaikai has partnered with Eurogamer, a leading consumer game site, to become its first media affiliate in Europe, enabling gamers to stream Gaikai-powered games across Europe in local languages. • The increased penetration of broadband households is a major driver of online games because the faster speeds make for a more enjoyable experience. The number of broadband subscribers in EMEA surpassed the 100-million mark in 2006, grew to over 170 million in 2011, and is expected to exceed 240 million by 2016, providing a strong impetus for the online market. • Online game revenues rose by 12.1 percent in 2011 to $4.0 billion. We expect online games during the next five years to increase by 11.3 percent compounded annually to $6.8 billion in 2016. • The UK, the largest market in EMEA, at $802 million in 2011, will increase at a compound annual rate of 10.1 percent to $1.3 billion in 2016. World of Warcraft is the most popular MMOG in the UK, as it is in most other countries in Europe. Fo r Pr ess U se o n ly
  25. 25. Video games | EMEA 371 • Russia is second, at $736 million, and is expected to show the sharpest increase in EMEA, growing by 16.1 percent compounded annually to $1.6 billion in 2016. The down- loading of PC games is quite popular in Russia, as is the downloading of free-to-play MMOGs. In Russia, Facebook does not have a dominant position; instead, local social networks, such as VKontakte, are very important. • France is next, with revenues of $554 million in 2011, which will grow by 10.3 percent annually to reach $904 million in 2016. In January 2012, Bouygues Telecom and Playcast Media partnered to launch a new cloud gaming service called Bbox games. Bouygues is the first French telecom company to bring high-profile game franchises directly to gamers’ TVs with an easy-to-use interface. Playcast is currently providing a similar service in Portugal and Spain. • Germany is the home of Bigpoint and Gameforge, two rising players in the hybrid free-to-play/pay online market, a segment led on a worldwide basis by Zynga. Online revenues are projected to grow to $675 million in 2016, increasing by 10.1 percent on a compound annual basis from $417 million in 2011. • Italy had the fifth-largest online game market, at $364 mil- lion in 2011, and is expected to show the largest increase of any country in Western Europe, growing at a compound annual rate of 13.4 percent to reach $682 million in 2016, making it the third-largest market in that year. The large increase is due to strong growth in numbers of broadband subscribers (the highest gain in Western Europe) combined with higher penetration of online gamers. • The Netherlands has one of the most active online markets in Europe, with revenues of $334 million in 2011 due to its high broadband penetration, which surpassed 80 percent. Both MMOGs and casual games are very popular in the Netherlands and are driving overall spending. Netherlands- based Spil Games is a global leader in online casual games, with numerous game sites in 19 languages around the world and over 4,000 games in its portfolio. A number of other Dutch companies are developing online game portals, including Zylom, which delivers casual games to 12 European countries and YoudaGames, which has over 2,000 games on its portal. Online revenues are projected to reach $452 million in 2016, a 6.2 percent compound annual increase from their 2011 level. View data in your local currency. Visit the online Outlook at www.pwc.com/outlook Fo r Pr ess U se o n ly
  26. 26. 372 PwC | Global entertainment and media outlook: 2012–2016 Online game market† (US$ millions) EMEA 2007 2008 2009 2010 2011p 2012 2013 2014 2015 2016 2012–16 CAGR Western Europe                     Austria 8 11 14 14 15 17 18 19 21 22 8.0 Belgium 11 15 17 19 22 24 25 26 29 31 7.1 Denmark 20 24 28 31 33 37 42 44 46 48 7.8 Finland 8 11 13 15 17 18 21 22 24 25 8.0 France 301 398 462 509 554 620 697 762 835 904 10.3 Germany 257 309 291 371 417 465 511 559 620 675 10.1 Greece 7 8 10 11 11 13 14 15 17 18 10.4 Ireland 54 71 81 89 97 109 121 129 138 146 8.5 Italy 220 259 282 317 364 423 498 563 626 682 13.4 Netherlands 209 243 282 309 334 358 378 401 422 452 6.2 Norway 19 26 30 33 36 40 45 49 52 56 9.2 Portugal 4 7 7 8 10 11 11 11 13 13 5.4 Spain 146 186 214 227 246 267 295 327 362 390 9.7 Sweden 32 46 53 57 64 71 78 85 92 100 9.3 Switzerland 87 113 129 145 162 183 206 224 246 265 10.3 United Kingdom 446 581 674 741 802 898 1,007 1,103 1,203 1,299 10.1 Western Europe total 1,829 2,308 2,587 2,896 3,184 3,554 3,967 4,339 4,746 5,126 10.0 Central and Eastern Europe                    Czech Republic 18 14 17 20 23 26 29 32 35 39 11.1 Hungary 3 3 4 5 5 6 7 8 9 10 14.9 Poland 7 10 11 12 13 15 16 18 20 23 12.1 Romania NA NA NA NA NA NA NA NA NA NA — Russia 102 151 372 601 736 900 1,064 1,227 1,391 1,555 16.1 Turkey 6 8 10 10 11 13 14 15 16 17 9.1 Central and Eastern Europe total 136 186 414 648 788 960 1,130 1,300 1,471 1,644 15.8 Middle East/Africa                     Israel 8 10 12 14 16 18 20 22 24 25 9.3 Middle East/North Africa (MENA)‡ NA NA NA NA NA NA NA NA NA NA — South Africa 3 6 8 11 14 18 23 28 33 37 21.5 Middle East/ Africa total 11 16 20 25 30 36 43 50 57 62 15.6 EMEA total 1,976 2,510 3,021 3,569 4,002 4,550 5,140 5,689 6,274 6,832 11.3 †At average 2011 exchange rates. ‡Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Fo r Pr ess U se o n ly
  27. 27. Video games | EMEA 373 Wireless games • EMEA has a large wireless telephone subscriber base, and high-speed wireless data technology is also advanced in much of the region. Western Europe is at the forefront in the deployment of 3G/4G LTE (Long-Term-Evolution) technology, which provides wireless high-speed Internet access comparable to the high-speed access provided by wired digital subscriber lines. MMOGs are being developed for the wireless market to take advantage of the speed of the advanced wireless networks. • Casual games continue to dominate the market because they’re quick to learn and easy to play. The most popular mobile games are single-player board games, puzzles, and word games. These casual games widen wireless games’ demographic reach. • Initially, the only games people could play were those embedded in their phones. Currently, Internet-connected phones enable additional games to be downloaded either for free or for a modest fee. • With emergence of the app stores, such as for Apple and Android devices, the market for wireless games has exploded. App stores have thousands of games available for download. Additionally, app stores improve the buying experience dramatically over the carriers’ decks by offering better descriptions, user reviews, and free trials. Additionally, new forms of payment, such as the iTunes Account, are facilitating the purchase of games. • Introduction of the iPad in 2010 and its newer version, the iPad 2, with its faster A5 processor, is driving the market because of its large screen, superior graphics, and familiar ecosystem. In addition to the iPads are many Android tablets, such as the Samsung Galaxy Tab 10.1 and the Sony Tablet S, which are providing a wonderful gaming experience. And smartphones and tablets have become substitutes for traditional portable devices like the DS and PSP. • In addition to casual games, more-sophisticated games are being developed for the wireless market. In fact, there are cloud gaming companies that are delivering console- quality games to wireless devices. Of course, these games are much more expensive than typical wireless games that cost as little as 99 cents. Development costs of these games are accelerating, causing pressure in a market that values low-cost games. • The business model for wireless games is changing. Originally, the market consisted of onetime payments for the downloading of games. A growing number of games are being offered for free, with microtransactions and advertising providing the requisite revenues for publishers. Angry Birds, a hugely successful game worldwide as a paid download, gained even more followers as a free, advertiser-supported game. By providing games for free, publishers are able to expand the number of players and reap their revenues from the microtransactions. Additionally, exposing people to the wireless gaming experience increases the likelihood of these gamers’ also downloading paid games. • There are a growing number of mobile gamers, both because of the rising penetration by smartphones and because the games are significantly cheaper to develop and hence cost much less than console games. Mobile gaming provides an enjoyable experience for short periods of time, as when waiting for a train or bus. • Wireless penetration in much of EMEA is at a saturation point, with penetration above 100 percent in many countries. As a result, future growth will come not from more wireless subscribers but, rather, from a higher percentage of subscribers who play games and pay to play those games. We expect the newer phones and the more- advanced networks to facilitate that growth. • We expect the market for wireless games to continue growing with the increased penetration by smartphones and tablets. Additionally, the growing variety of games being developed to take advantage of the features of the new devices will spur the market. The wireless market in EMEA is expected to increase 8.4 percent on a compound annual basis from $1.6 billion in 2011 to $2.4 billion in 2016. • The UK is the largest market for wireless gaming in EMEA. Almost half of the UK’s 8 million mobile gamers pay for games. As in most other countries, puzzle games, arcade games, and strategy games are the most-popular types of mobile games in the UK. Wireless game revenues were $330 million in 2011 and are projected to increase to $504 million in 2016, an 8.8 percent compound annual increase. Fo r Pr ess U se o n ly
  28. 28. 374 PwC | Global entertainment and media outlook: 2012–2016 • Wireless game revenues in Spain were $262 million in 2011 and are expected to grow 8.6 percent annually to reach $396 million by 2016. Mobile gamers in Spain are spending more per capita on microtransactions than are mobile gamers in many other Western countries. • France, with two of the top mobile game publishers, Gameloft and Zenops, was the third-largest market in the region, with revenues totaling $234 million. Revenues are expected to increase by 8.4 percent annually to $351 million. Games for iPhones and iPads are driving the revenues for Gameloft, as they are for many of the major publishers. Adictiz, a French company that makes games for smartphones and Facebook, developed Paf le Chien, which is available on both platforms and was the most downloaded game in France in 2011, garnering over 3 million downloads between the two platforms. • Wireless game revenues in Germany were relatively low in 2011, at $51 million. However, as a result of starting from a very low base, Germany is expected to show the largest percentage increase in the region, growing by 16.4 percent on a compound annual basis to reach $109 million in 2016. • Italy has one of the highest numbers of wireless subscri- bers of any country in Europe. Its wireless game market was $136 million in 2011 and will increase by 7.6 percent compounded annually to $196 million in 2016. In 2011, Italy launched a mobile payment system to make the purchasing of wireless games easier. Build personalized data sets by segment, component, and territory. Visit the online Outlook at www.pwc.com/outlook Fo r Pr ess U se o n ly
  29. 29. Video games | EMEA 375 Wireless game market† (US$ millions) EMEA 2007 2008 2009 2010 2011p 2012 2013 2014 2015 2016 2012–16 CAGR Western Europe                     Austria 8 11 13 14 14 15 17 18 19 21 8.4 Belgium 11 14 17 18 19 22 24 25 26 28 8.1 Denmark 14 17 18 20 22 24 26 29 31 33 8.4 Finland 6 7 8 10 11 13 14 15 17 18 10.4 France 134 171 192 211 234 256 278 301 326 351 8.4 Germany 36 46 58 47 51 58 67 79 96 109 16.4 Greece 6 7 7 8 10 11 11 11 11 11 1.9 Ireland 58 74 83 93 103 113 124 135 146 157 8.8 Italy 102 114 113 127 136 150 163 174 185 196 7.6 Netherlands 39 51 60 67 75 79 83 88 92 96 5.1 Norway 14 18 20 22 25 27 29 31 33 36 7.6 Portugal 6 7 8 10 11 11 13 13 13 13 3.4 Spain 154 198 221 237 262 285 313 341 369 396 8.6 Sweden 26 32 38 43 46 52 58 64 69 76 10.6 Switzerland 25 33 35 39 43 45 48 52 55 59 6.5 United Kingdom 191 244 273 302 330 361 395 428 465 504 8.8 Western Europe total 830 1,044 1,164 1,268 1,392 1,522 1,663 1,804 1,953 2,104 8.6 Central and Eastern Europe                    Czech Republic 11 14 17 20 23 26 29 32 35 38 10.6 Hungary 3 3 3 3 3 3 3 3 3 3 0.0 Poland 8 10 12 14 16 17 19 20 22 24 8.4 Romania NA NA NA NA NA NA NA NA NA NA — Russia 66 85 97 108 119 130 141 150 160 170 7.4 Turkey 5 7 8 8 10 10 11 11 11 11 1.9 Central and Eastern Europe total 93 119 137 153 171 186 203 216 231 246 7.5 Middle East/Africa                     Israel 8 12 14 16 18 20 22 23 24 25 6.8 Middle East/North Africa (MENA)‡ NA NA NA NA NA NA NA NA NA NA — South Africa 17 22 27 30 33 36 39 41 44 46 6.9 Middle East/ Africa total 25 34 41 46 51 56 61 64 68 71 6.8 EMEA total 948 1,197 1,342 1,467 1,614 1,764 1,927 2,084 2,252 2,421 8.4 †At average 2011 exchange rates. ‡Comprises Algeria, Bahrain, Egypt, Jordan, Kuwait, Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syria, and the United Arab Emirates. Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates Fo r Pr ess U se o n ly

×