2002 – Consoles Will Lead Gaming Software Market

Consoles Will Lead Gaming Software Market

By CyberAtlas staff

A report from Datamonitor predicts that by 2004, revenues derived from gaming software will rise 22 percent from 2001, and consoles will lead the way.

Datamonitor, which predicts that worldwide game software revenues will grow from $17.7 billion in 2001 to $21.6 billion in 2004, expects Sony’s PlayStation 2 (PS2) will dominate the home console market. The report also expects Microsoft to overtake Nintendo for second place in the console sector as the company successfully establishes the Xbox brand as a serious name in gaming. Among handhelds, Nintendo’s Game Boy Advance will hold a virtual monopoly.
The year 2004 will represent a peak in terms of revenues for the games industry, according to the report. In 2005, the market will start to decline as consoles reach a maturity stage in terms of penetration and sales.
The United States will remain the largest single market for games with $7.4 billion in 2004. The European market will be worth $6.7 billion in 2004, with Britain accounting for 30 percent of total revenues, closely followed by Germany. Asia-Pacific will lead the industry in terms of revenues ($7.6 billion in 2004), with Japan continuing to drive this region. Although Greater China (China, Hong Kong, Taiwan) will experience strong growth, authorities still have to tackle serious piracy problems in that region.
Datamonitor found that PC gaming will represent a stable driver for the gaming market, but the coexistence of three major home consoles in the market will provide the public with great diversity in terms of games. Apart from the increasing power of the next-generation consoles, which will deliver near photo-realistic graphics to the public, the addition of appealing multimedia features in home consoles – such as DVD players – will help broaden the penetration of home consoles into homes. According to Datamonitor, online console gaming will also be a major factor in the success of this new generation of home consoles.
“There is no doubt that the PS2 will retain its leading position in the home console market over the next few years,” said Adrian Drozd, Datamonitor games analyst. “By the end of 2005, there will be a global installed base of more than 90 million for Sony’s latest console, which will dwarf the Xbox total of less than 40 million. However, although Sony has gained the initiative in this round of the console battle, Microsoft is well placed to challenge it when the next generation of consoles is launched. It is highly unlikely that the U.S. giant will allow its main competitor to steal a march in the way that Sony was able to do with its early launch of the PS2.”
The online capabilities of gaming consoles have attracted a lot of attention from analysts. GartnerG2 expects online console gaming revenue in the United States to grow from $138 million in 2002 to $2.3 billion in 2005. It also predicts that online console gaming, a bonus feature of games in 2002, will become an assumed feature in 2005.
According to Forrester Research, online gaming is expected to be the killer console application in Europe where powerful and flexible next-generation consoles are springing up for a number of applications.

April 8, 2002