Game Changers: New Devices
March 27, 2013, Game Developers Conference, San Francisco—Joost van Dreunen from SuperData Research talked about how new devices will change games. Developers who take advantage of the new platforms can take advantage of alternative business models to increase revenues and make more money.
The trends in these devices are changing distribution and publication. In the past, these aspects of games was out of the hands of the developers. In ’83, the first mass market consoles appeared and started an on-going cycle of changes. The console business was affected by the next generation of machine, and new game types appeared as the platforms gained in performance and graphics capabilities.
Now, the average gamer has 2.6 boxes for gaming, broken down as Wii with 65 percent, Xbox with 52 percent, PS3 with 42 percent, and PS2 with 36 percent. In addition, 21 percent are playing on machines other than consoles. Historically, new hardware increases the total market. Per capita spending in the USA for games and hardware was under $5 in ’87 and by ’08 increased to about $65.
The dollars per cycle has increased as the consoles moved up from 16- to 128-bit operations. The 16-bit machines drew less than $15 per capita for additional purchases. This amount increased to about $20 for the 32-bit machines, and this trend continued to $33 for the 128-bit consoles. The latest machines generate over $50 in extra purchases.
One fly in the ointment is that gamers are moving to other platforms. Free-to-play games are making about $14 per person and 42 M people are playing these games. Pay-to-play games like MMOs are receiving over $8 M per month for their efforts. The increasing number of platforms is creating distortions in the marketplace. Consoles have about 63 M users per month, compared to browser-based games at 225 M people per month, and mobile at 250 M players a month.
The number of games on browsers and mobile is increasing at a very high rate, and many of these games are available on multiple platforms. The economics of supply and demand tell us that the market increases when prices drop. The sustainability of a $50 disc for a game cannot compete in the long-term against the $0.99 iTunes games. We are in the early stages of a product lifecycle where the release of a big AAA game still reduces the number of hours in free-to-play games.
Game consumers are playing on PCs for many games. About 81 percent play on PCs compared to 57 percent on consoles. These percentages are reversed from only 5-years ago. Two thirds of PC users would switch to a console if the game were comparable. The issues for the PC are that is doesn’t have an intuitive user interface, the control ergonomics are unwieldy, and most cannot play on a big screen.
The increase in mobile devices brings another challenge. 69 percent of mobile users have no interest in handheld game devices. These new devices need marketing to grow. The latest surveys show that 40 percent of mobile users will stay with the single mobile device for game play. The next group would play on consoles over other devices. For some reason, consoles are not price sensitive, the average player expects the next generation of console to cost $347. Gamers still want the big titles like “Call of Duty”, “NFL Madden”, etc, so the software is driving the hardware purchases.
Current research doesn’t show the budget allocations for the next generation of harder and software. Nevertheless, the big titles will continue to sell consoles. The publishers want the audiences and help to sell the hardware through kiosks in stores to demonstrate the new game play.
The new markets, like the on-line games, are still learning how to present and demonstrate new games. The challenges of discovery and differentiation differ from the in-store buying experience. The game developers and publishers want to reduce risk, but are facing financial inertia. As a result, the Android and iOS games have low capital expenditures for development and hardware while consoles require extensive investments for everything. As an example of this move, EA is reducing physical sales by moving to more digital downloads to reduce inventory and distribution costs. Now, the digital sales are outpacing the discs.
Games need talented developers with discipline, experience, and now physics knowledge. The artists and game theorists are just as important as the programmers in new games. The next generation hardware for games can only address a finite market, and the gamers are moving away from that dedicated hardware.
