From all the razzmatazz, you’d be forgiven for thinking that, for continued industry growth, next gen games need only be flashier, higher-res versions of today’s games. But there is a broader game-playing demographic that disagrees with this, and is already spending money on very different kinds of games.
Since the advent of PlayStation, the industry has relied on late teen / early twenty-something males for its livelihood. Let’s call this average gamer Brad. Brad has enough disposable income to spend £600+ a year on software and accessories. Brad actually hasn’t aged much – he is still in his early twenties, but he’ll rapidly age when the next generation launches, then get younger as the consoles themselves age. Apparently, (so ESA tells us) Brad is consistent when it comes to buying games. On consoles, Brad prefers action (30%) and sports (18%) games. On PC, Brad plays strategy (27%) and family (20%) games. So far, so predictable.
Investment hypotheses for listed games companies are frequently predicated on perpetual, rapid console market growth, a view understandably inspired by the strong historic performance of the industry over the last 10 years but reinforced by over-exuberant projections by some market research companies outside the industry.
The problem is there aren’t enough Brads to sustain these historic growth rates. In fact, if one compares the total volume of consoles sold for the last 3 cycles and the projections for the current cycle, the rate at which this addressable market of console owners is growing from cycle to cycle is actually falling fast. Put simply, those devilishly canny marketing campaigns have now reached almost every Brad out there. However, it would appear that many games publishers will be keeping their fingers tightly crossed that the same formula of action, sports and strategy games will continue to expand the market.
But Brad and his tastes are already changing. In the USA, across all platforms (including online and mobile) 43% of gamers are now female; 72% are over 18 (19% are over 50). Married females in their 30s-40s easily outnumber hard-core gamers playing online and mobile games. So Brad’s wife (Brenda?) is becoming increasingly important to the industry. Brenda wants shorter, kid-friendly lifestyle games with more socialisation. At some point recently a watershed moment passed, like the Berlin wall falling without a sound.
Some heard it fall, and are investing in content and interfaces with broader appeal. This means the definition of what represents a game is also changing. Both Singstar and EyeToy have been slow-burning hits achieving over 7m copies in PAL territories alone. Nintendogs has sold 1.5m copies. New interfaces are seeding new games concepts. The accessible new Revolution controller should also open up gaming to new players. Microsoft will make a concerted push of its casual Live Arcade games when 360 launches. EA has recently tempted Spielberg back into this growing field.
These mass-appeal games have a completely different retail profile than the normal 3-4 month bell sales curve for a traditional game. They sell in slowly increasing numbers as word spreads virally between families and friends. Many have become evergreen titles with extended shelf-lives that players collect like music. However, a quick look at the charts indicates there’s substantial room for improvement – especially on console where only 20% of players are female.
To meet its expected growth targets therefore, the industry must broaden its appeal further, and learn lessons from truly mass media such as television and film. For a start, those creating games must also reflect this broader audience – it’s no coincidence that Singstar’s creators have many more female developers than average.
If the industry fails to broaden the addressable market of console owners, growth rates of games software will not be sustainable, and investment in the industry will dry up. Over the next decade, recognising and exploiting these fundamental changes will become not just a critical success factor but possibly also a survival factor for every games company.