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Gaming in Transition and Revolution, Part 3
Over the past few blogs, I touched on two of the four biggest game-changers I see hitting the gaming ecosystem simultaneously. First, we covered the trends and impact of mobile platforms. Second, we covered the trends and impacts occurring at the format and business levels. For this discussion, we’ll cover what I think is another enormous trend impacting the games market: globalization.
I cannot emphasize the importance of the globalization trend enough. By percentage of market share, as other geographies begin to mature and disposable income rates increase abroad, the U.S. and other traditional gaming geos become smaller as an overall percentage of market share. The primary reasoning behind this is that most of the industrialized nations’ markets have already been saturated with game systems.
Makes sense, but why should we care? There are several reasons why the entire gaming ecosystem should pay heed: source of revenue, more choices, fierce competition, and innovation and growth shifts.
Source of Revenue: There’s a big disparity between the Western and Eastern hemispheres’ traditional gaming revenue streams. For the combined consoles, nearly 83 percent of their revenue is derived from both North America and Western Europe. For the PC, North America and Europe represent about 42 percent of the revenue.
Conversely, when we look at a geo like China, 99 percent of PC gaming revenues are derived from non-retail sources. Given some of those stats, there seem to be some interesting spikes pointing to PC gaming being in a really good pole position in those geos, transitioning from an emerging to a maturing market.
What we’re seeing is some really good gaming-capable PCs that are very respectable and affordable entering the market in numbers never before possible. Consequently, the PC gaming TAM in the BRICS is going to skyrocket over the next decade or more. The games ISVs -- such as those in China -- or games ISVs that go through the extra spit and polish will theoretically be able to target a TAM that is 10 times that of any individual console, which will become more critical over time to scale to given existing trends toward such things as the free-to-play business model.
More Choice: This can be a double-edged sword. On the downside, an end user may have to sift and search through over 400,000 or more available games or apps -- and that number is growing. On the other side of the coin we have game choices that we simply wouldn’t -- or couldn’t -- have imagined now available to us, and across a broader swath of platforms. The games ISVs able to reach and appeal to these broader geos and markets are more likely to increase their chances of success.
Competition: There isn’t just a schism with the various console manufacturers fighting for their lives, we also have some very successful PC gaming ISVs coming out of the East, hungry to expand into North America and Europe. This, coupled with all the shifts occurring in the business models and format shifts -- along with the current craze for mobile -- and we are in interesting times indeed.
Innovation and Growth Shift: If a publicly held company wants to grow and be able to fund research and development for either the next game or platform, it is going to be increasingly difficult with added competition and ignoring the aforementioned shifts. Perhaps seeing some of the innovation erosion might also finally be the straw that breaks the proprietary consoles’ backs. Countries like Russia are trying to shift toward Linux. It’s not too much of a stretch to see that possibly happen in other BRICS as well.
This would also have implications for things such as the OS’s needing to be supported and things such as either Web graphics and or OpenGL-based graphics solutions. Cause and effect here could potentially be extremely disruptive, but also lead us closer to a “buy the game once and play anywhere” scheme.
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