The death of E3 (Electronic Entertainment Expo) as we know it notwithstanding, the future is bright for gaming, which is already a big business and will continue to grow in the years to come.
According to DFC Intelligence, revenue from interactive entertainment (that’s electronic games in plain English) will reach US$42B in 2010, up from US$28.5B in 2005.
I’m convinced that gaming will become one of the leading means for communication and social interaction among people from all over the world, becoming a new common ground in the face of the decline of mass media.
Which is why I find it amusing that many people still think of gaming as a frivolous activity or something that only kids can enjoy. Let’s face it, we gamers don’t get much respect, and while I’m not glossing over the harmful effects of too much gaming, the unfortunate truth is that the media often focuses on negative news.
The thing is, anything is open to abuse. Gaming in itself isn’t inherently good or evil. For instance, some people are reckless or drunken drivers, often resulting in tragedy. This doesn’t mean, however, that you will blame the cars or ban them altogether, just because of some bad apples.
Those who think that nothing good comes out of gaming may be surprised to learn of efforts such as the Serious Games Initiative. What some people fail to realize is that games are an excellent way to teach complex skills. We accept the fact that airlines make use of flight simulators before letting a pilot fly an actual plane, yet we don’t see that video games can also be used for training.
Some business schools use the simulation game Capitalism II to teach students. Certain real estate firms include Sim City as part of the application and training process. And the great thing about games is that we’re willing to absorb a lot of information and develop manual dexterity in order to win.
Books such as Got Game: How the Gamer Generation Is Reshaping Business Forever are examining the implications gaming has for society. Just as the Internet has revolutionized the way we do business, the generation that grew up on gaming is now taking the skills they’ve learned while playing and applying these to the workplace.
You can listen to the “IBM and the Future of Online Games” podcast where I was one of the guests to find out more about our views on the social relevance and business impact of gaming. We recorded this in Mumbai, India, where I was one of the speakers at India’s first gaming expo last year.
At present, online games are already a killer app for broadband. Home users who might have been happy with dial-up connections now find they can’t stand lag when playing online games.
Gaming is also bringing in money to different game development outsourcing hubs due to the rising cost of video games — the biggest titles have budgets rivaling those of Hollywood films.
The two business trends for gaming that excite me the most, however, are game commerce or g-commerce, and gamevertising/advergaming.
Games are becoming a driver for e-commerce, in the form of virtual items that players purchase in order to customize their characters or gain a competitive advantage. G-commerce is encouraging the development of micropayment systems for different sites, and in fact the trend in South Korea as well as other leading online gaming markets is to offer the game for free (i.e. do away with the monthly fee) and rely on g-commerce for revenue.
Meanwhile, in-game advertising will reach more than US$700M in 2010, according to the Yankee Group. Gamevertising is the next big wave for advertisers. Chances are, the people they’re trying to sell their products and services to aren’t reading newspapers or watching TV, but instead are surfing the Web or playing PC and console games.
As the Yankee Group stated in a press release, “In a highly fragmented media environment, Yankee Group finds that video games present a promising window of opportunity as a growing advertising medium. As television advertising loses its effectiveness, advertisers must reach a largely segmented audience with discerning tastes.”
In fact, Microsoft, which entered the console game market with the release of the Xbox in 2001 and last year jumped the gun on rivals Sony and Nintendo by launching the Xbox 360, has purchased in-game advertising network Massive Inc. for a rumored US$200M to US$400M.
The killer app for Microsoft in the gaming arena is its broadband-only online gaming network Xbox Live, which is now becoming a full-blown community and g-commerce marketplace.
Microsoft’s ambitious bid for gaming dominance will see the integration of its Xbox 360 console with PCs and mobile devices. I won’t be surprised if Microsoft will finally add a web browser to the Xbox 360, or even give away the Xbox 360 for free just to hook us all on Xbox Live.
The real revenue may come not from the sale of the console or Xbox 360 games sold in stores, but from downloadable games on Xbox Live; g-commerce from the sale of virtual items that companies provide or users create; and ads that will be displayed on console, PC and mobile games, as well as on MSN and other sites.
In fact, it seems Microsoft might even offer its Massive video game ad network to rivals Sony and Nintendo, which would be very ironic indeed.
Whatever the future might hold, one thing’s for sure: gaming is more than just fun and games.