Has the gaming bubble burst?


By some reports in the financial sector, the meteoric ascent of computer games in the 2000s has officially ended, with sales of titles like Diablo and World of Warcraft dropping 28% in the past two years. The New York Times recently ran a story comparing gaming today to the dot-com phenomenon of the 1990s, as it now “ has found itself teetering at the edge of a financial cliff.”  But closer examination of the situation reveals that while big-name console games have indeed sold less, the number of people playing games on smart-phones and tablet computers continues to surge by as much as 35% in 2012 alone. Excerpted and linked below are two stories on this topic.


“Gaming Faces Its Archenemy: Financial Reality,” New York Times, 10/7/12

“Not long ago the creators of video games were declaring their medium the art form of the 21st century. Games could aspire to the drama and spectacle of movies but would captivate society with their irresistible interactivity. More than 200 million Wii, Xbox 360 and PlayStation 3 systems were sold worldwide. Sales of portable gaming machines surged as well. Upward of 12 million subscribers were paying $15 a month to play the online game World of Warcraft, and competitors were plotting to develop worthy rivals. The motion-sensing Kinect system from Microsoft generated considerable buzz, with its promise of freeing players from having to push buttons and wave wands. And yet the gaming world has found itself teetering at the edge of a financial cliff. In the first eight months of this year retail sales of video games plummeted 20 percent in the United States. That followed a lackluster performance in 2011, when sales fell 8 percent. An analysis on the Web site Gamasutra this year said it was possible that 2012 would be the worst year for retail video game software and hardware sales since 2005. The struggling economy has certainly been a factor in the decline, especially considering that young men — long a core audience for games — were hit so hard during the recession. Another development will sound familiar to anyone who once had a groovy record collection: the democratizing, disrupting effect of less expensive digital downloads has changed the business model. Nearly everywhere, it seems, people have been sharing Words With Friends, slinging Angry Birds at pigs or springing their creatures through a precarious Doodle universe. All those games, made for smartphones, sure are popular, and the financial picture improves when their sales are included, but they can be had for pennies and seemingly become disposable almost as fast as they are released.” (New York Times)

“Online Gaming: Number of US Mobile Gamers Jumps 35% to 100 Million” Trend Report on Mobile Games, 3/29/12.

The total number of Americans that play games on their smartphone, tablet or iPod Touch has now surpassed the 100 million mark, a year-on-year increase of 35%. Europe shows a growth of 15%, totaling 70 million gamers for seven key territories. Men slightly outnumber women in the US (52%) as well as in key European countries (55%). Growth rate in terms of time and money spent is significantly higher. In addition to the growing installed base of smartphones and tablets, three key drivers are accelerating growth of this games market segment: uptake of in-game purchases in free games, tablets and smartphones each creating their own market and the popularity of “mid-core” games. In 2011, mobile gaming took 13% of all time spent on games worldwide, totaling more than 130 million hours a day, and 9% of total money spent on games, grossing $5.8bn. The free-to-play business model is increasingly converting players into continuous payers and already accounts for 79% (EU) and 90% (US) of mobile game spending. In February, the top 5 grossing games for Europe and US were all free games, with Dragonvale, Smurfs’ Village and Zynga Poker topping the charts. Paid games enter the top 5 at launch, but in most cases drop out within a month. 69% of US mobile gamers play games on a smartphone, 21% on a tablet and 18% on an iPod Touch. Figures for Europe are comparable: 69%, 16% and 11%.

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