Prime Prospects

When economic climates are favorable, business planners often use market forecasts to support strategic decisions they’ve already made. When conditions are chaotic, they may turn to them for something more.

Of course, there's little doubt about which environment those of us in the computer graphics industry are facing. So to help developers and users chart a course during these turbulent times, we asked a couple of the leading analysts in the digital content creation (DCC) and 3D computer graphics markets—Jon Peddie, president of Jon Peddie Research, and Samatha Staples, principal of Acacia Research Group—to share their views about the current state of affairs and the prospects on the horizon.

Peddie: While the larger industries supported by DCC tools—film, broadcast, gaming, advertising, and the like—continue to remain strong, the DCC market will grow just 3 percent in 2003. This will be due not only to the continuing economic decline, but also to the recent price-cutting, and hence lower profit margins, associated with DCC software—including tools for 3D modeling and animation, digital video editing and compositing, and graphics and imaging editing.

In terms of opportunities, companies should look to improve the DCC production workflow. This would simply not mean improving the management of the assets through the production process. (Many companies are still breaking their picks trying to mine that particular opportunity.) Rather, what's needed is an integrated system so that everyone involved with a project could work together simultaneously and interactively. Indeed, most content creation occurs in silos, independent of the next phase. For example, once a 3D animation is completed, it is usually handed off to another department or group for compositing into the final product. A fully integrated system would fill a huge need.

Staples: In terms of 3D computer graphics, game-development—which accounted for nearly 40 percent of professional 3D software revenue last year—will continue to dominate demand for 3D tools in 2003. The film industry, responsible for 22 percent of software sales, and the broadcast/advertising industry, responsible for 18 percent of sales, will follow. To reach users in these markets, software vendor sales strategies will become more cutthroat. Competitive upgrades, tiered pricing, and seat leasing will be increasingly employed by toolmakers in order to keep revenue levels from tumbling. Even so, some 3D software tools won't survive the next two years.

One bright new frontier is the television market. Ever more 3D computer-generated graphics are appearing in advertisements. And as feature films continue to raise the bar of expectations for visual effects, 3D graphics will trickle down to broadcast programming. In the gaming industry, pipeline productivity will grow in importance, triggering the increased adoption of middleware such as rendering and game engines.

But perhaps the biggest growth opportunity will be in the visualization/simulation market for training, distance learning, defense, and a host of related applications. In fact, combined hardware, software, and service revenues for vis/sim products, already twice that generated in entertainment-related applications, are expected to nearly double during the next five years.

The challenges for survival are many, but fortunately so are the opportunities.

Phil LoPiccolo
Editor-in-Chief