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Michael Gartenberg, Vice President and Research Director

Understanding the PC and Console Game Market and Audience Shifts in composition create new opportunities. Michael Gartenberg, Vice President and Research Director. Key Questions. What does the industry look like? What is the impact of an older gaming demographic?

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Michael Gartenberg, Vice President and Research Director

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  1. Understanding the PC and Console Game Market and AudienceShifts in composition create new opportunities Michael Gartenberg, Vice President and Research Director

  2. Key Questions • What does the industry look like? • What is the impact of an older gaming demographic? • What is the future for the online sector? • How does the gamer audience really segment?

  3. What Does the Industry Look Like?

  4. “Innovation” in technology and content coupled with flexible retail marketing improves profitability and extends audiences Rising development costs Competing Devices Daunting complexity High upfront costs Limited Interest/appeal Console Market Growth Enhanced device functionality High value offerings Low prices Hit titles Niche content Audience appeal Combination Margins Source: Jupiter Research: US Game Forecast 2004

  5. Beyond replacement: new technology and content entices new audiences 45 LAST GENERATION Installed base by platform (millions) 55 CURRENT GENERATION Source: Jupiter Research: US Game Forecast 2004

  6. Steady modest growth in console households as approach maturity (in millions) Projected US Household Penetration Game Console Households Source: Jupiter Research: US Game Forecast 2004

  7. Higher average prices have been met with higher annual sales this cycle Hardware units Annual sales (projected) Source: Jupiter Research: US Game Forecast 2004

  8. 126 124 121 119 115 112 110 107 103 99 94 91 88 84 Console Gamers Platform totals Action PC Gamers Intensive audience: console larger than Action-PC despite near ubiquity of PC (in millions) Note: intensive gamers defined as playing more than 5 hours per week Source: Jupiter Research: US Game Forecast 2004

  9. Console revenues dwarf Action-PC revenues and enjoy cyclical boom (in millions) Source: Jupiter Research: US Game Forecast 2004

  10. Games play important role in media consumption time of online consumers * median Number of Hours per Week (self-reported) Question: On average, how many hours per week do you spend on each of the following activities? *How much time per week do you spend playing games? Source: Jupiter/The NPD Group, Inc. Entertainment & Media Survey (8/03), n = 2,509; Consumer Survey (6/02), n = 2,551 (US only)

  11. In fact one third of gamers play for more than 5 hours per week = roughly 50 million US gamers are medium to heavy game users 32% Source: Jupiter Games Model 2004

  12. Intense competition & slowing audience growth force developers to focus resources where they count… • Console audience grows up • Despite powerful capabilities favorite genre is dominated by low-intensity puzzle and board games • Game software revenues driven by action/arcade games • High-intensity users core of games audience Unique and changing demographic composition of games audience reveal opportunity:

  13. The average console users is already an adult 29 25 19 Average age (yrs): Tomorrow Today Yesterday Source: Jupiter Games Model 2004

  14. Importance of an older console audience • Different set of tastes with which to craft content • Mature themes, artwork • Online connectivity • Adults determine broadband purchase • Adults sanction payment of subscription services • Heightened online security concerns for children

  15. Game genre age breaks Older Skew Stark youth skew Source: Jupiter/The NPD Group, Inc. Consumer Survey (6/02), n = 2,551 (US only)

  16. Genre preferences present distinct opportunity to target female teens Percentage of Online Teens Question: Please choose your three favorite types of video or computer games from the list below. Source: Jupiter/Ipsos-NPD Teen Survey (11/02), n = 890 (males, ages 13-17, US only), n = 856 (females, ages 13-17, US only)

  17. Genre preferences present distinct opportunity to target female adults Percentage of Online Adults Question: Please choose your three favorite types of video or computer games from the list below. Source: Jupiter/The NPD Group, Inc. Consumer Survey (6/02), n = 2,551 (US only)

  18. Game genre income breaks Source: Jupiter/The NPD Group, Inc. Consumer Survey (6/02), n = 2,551 (US only)

  19. So What About Online?

  20. Online Action PC User Base Significantly Larger Than Connected Console Base Until 2006 (in millions) Number of Networked Gamers Source: Jupiter Research Games Model, 1/04 (US only)

  21. Substantial Comparable Revenue Growth and Opportunity Through 2009 (in millions) Networked Game Revenues Source: Jupiter Research Games Model, 1/04 (US only)

  22. Subscriptions start to count and nearly double from 2006 to 2009 Middle of cycle 2009 2003 Subscriptions Software Rentals Accessories 2006 Systems Software sales Start of cycle Source: Jupiter Research: US Game Forecast 2004

  23. Digital Distribution Represents a Significant Piece of Pie by 2009 Middle of cycle Start of cycle 2003 2009 2006 Source: Jupiter Research Games Model, 1/04 (US only)

  24. How Do You Segment the Audience?

  25. Game Industry Today Employs Very Simple Audience Targeting Gender(mainly male) Genre Age (mainly under 24) Region (US/Asia/Europe) Platform Source: Jupiter Research (11/03)

  26. PC Action and Console Games Common Among Younger Adults Gamers (including parlor gamers) as a percentage of all online users: 78% 73% 68% Percentage of Consumers Question: Please choose your three favorite types of computer or console games from the list below. (Select top three.) Source: Jupiter Research/Ipsos-Insight Consumer Survey (7/03), n = 1,795 (ages 18–44, US only)

  27. Segmentation by Spending, Time Identifies the Ultra-Gamers • Status Gamers: 21% • 58% male • 34% have incomes >$75K • Serious technophiles • Ultra-Gamers: 29% • 56% male • Young: 61% under age 34 • 37% broadband $51 and Over Money Spent on Games (Monthly) • Barely Gamers: 34% • 51% female • 33% have incomes >$75K • 47% super Net vets • Thrifty Gamers: 16% • 55% female • 49% incomes <$44K • Only 12% online newbies $50 and Under 0 to 5 Hours 5.1 or More Hours Time Spent Playing PC Action or Console Games (Weekly) Source: Source: Jupiter Research/Ipsos-Insight Consumer Survey (7/03), n = 1,154 (PC action and console gamers, US only)

  28. Parlor, Puzzle Games Remain the Universal Crowd Pleasers • Status Gamers • Popular genres: • Parlor (42%) • Puzzle (32%) • Strategy (27%) • Lead segment for: • Racing (19%) • Fighting (12%) • Ultra-Gamers • Popular genres: • RPG (34%) • Strategy (32%) • Action (29%) • Lead segment for: • Most genres • Barely Gamers • Popular genres: • Parlor (45%) • Puzzle (37%) • Arcade classics (28%) • Lead segment for: • Parlor (45%) • Arcade (28%) • Thrifty Gamers • Popular genres: • Puzzle (40%) • Parlor (35%) • Strategy (26%) • Lead segment for: • MMOGs (9%) • Simulation (23%) Source: Jupiter Research/Ipsos-Insight Consumer Survey (7/03), n = 1,154 (PC action and console gamers, US only)

  29. Status Gamers Significant Technology Adopters Percentage of Online Users Question: Please tell us which of the following devices you or other members of your household currently own. (Select all that apply.) Source: Jupiter Research/Ipsos-Insight Consumer Survey (7/03), n = 2,834 (US only); n = 237 (status gamers, US only)

  30. Thrifty Gamers Show Propensity Toward Mobile Entertainment Percentage of PC Action and Console Gamers Question: What are the top three functions you use most frequently on a portable device? (Select top three; top five responses of thrifty gamers shown.) Source: Jupiter Research/Ipsos-Insight Consumer Survey (7/03), n = 1,154 (PC action and console gamers, US only)

  31. Ultra-Gamers Examined 56% male, rather young; not high income (only 21% have incomes over $75K); moderate online tenure 49% have a PS2, 26% have an Xbox, 10% have a GameCube, 32% have a gaming/media PC— 30% own two or more of these Most broadband-oriented segment (37% have broadband) Very strong genre and franchise loyalists— cultivating them should be easy By far the most interested segment in new console hardware (only 12% express no interest in purchasing a new console) Source: Jupiter Research/Ipsos-Insight Consumer Survey (7/03), n = 336 (ultra-gamers, US only)

  32. Thrifty, Ultra-Gamers Share Connected Console Interest Percentage of PC Action and Console Gamers Question: How interested are you in playing online console games (i.e., connecting your game console to the Internet and playing with other people)? Source: Jupiter Research/Ipsos-Insight Consumer Survey (7/03), n = 1,154 (PC action and console gamers, US only)

  33. Online Console Features of Mixed Interest Across Segments Percentage of PC Action and Console Gamers Question: Which features do you consider most important for your next game console purchase? (Select top three; online-related responses shown.) Source: Jupiter Research/Ipsos-Insight Consumer Survey (7/03), n = 1,154 (PC action and console gamers, US only)

  34. Genre, Sequels Motivate the Ultra-Gamer Segment Percentage of PC Action and Console Gamers Question: Thinking about the most recent nonsports game you bought for your PC or game console, which of the following factors influenced your purchase decision the most? (Select top three; top five responses of ultra-gamers shown.) Source: Jupiter Research/Ipsos-Insight Consumer Survey (7/03), n = 1,154 (PC action and console gamers, US only)

  35. Agree Neutral Disagree Who Are the Influential Gamers? All Action PC and Console Gamers “People always ask my advice about games they want to buy.” Influencers Influencers “I am the first to get a new game when it is released.” All Action PC and Console Gamers Influencers “All my friends play computer or console games.” All Action PC and Console Gamers Percentage of Consumers Source: Jupiter Research/Ipsos-Insight Consumer Survey (7/03), n = 132 (influentials, US only);n = 1,154 (PC action and console gamers, US only)

  36. Summary: major opportunities in PC & Console games ahead • Software sales and technology • entertainment, collaboration, learning, core technology • Hardware sales and technology • game consoles, handhelds, PDAs, PCs, peripherals • Licensing revenues • content franchises, core technology, cross-promotion • Subscription services • Vertical ISPs, networked gaming, magazines • Advertising & Promotions • Events, product placement • Broadband value added services • bundled games services, etc

  37. Core Topics for Jupiter Research: PC & Console Games service • Audience, Demographics, & Segmentation • Game consoles • PC games • Emerging platforms (Wireless, iTV) • Multi- & Cross- platform strategies • Game genres • Networked gaming • Licensing & Franchises • Advertising & Cross-promotion • Online communities • Gaming Peripherals

  38. Thank You mgartenberg@jupitermedia.com weblogs.jupiterresearch.com/analysts/gartenberg

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