It may come as no shock to learn that video and computer gaming will continue to be the hottest market in the entertainment industry, at least for the rest of this decade. Even mainstream market researchers are now making this bold forecast. For example, PricewaterhouseCoopers—one of several mega firms that have weighed in on computer graphics-related markets recently—has released a study, “Global Entertainment and Media Outlook,” which predicts that electronic games will continue to be the fastest-growing segment of the industry during the next five years. The report concludes that the electronic gaming market will expand at a compound annual growth rate of 20 percent and will top $55 billion in annual revenue by the end of the decade.
However, what may be more surprising to discover are the factors that will be responsible for this growth and the opportunities that will present themselves to digital content professionals as a result.
Clearly, the most powerful force driving the games market is consumer demand. According to a new study from the Entertainment Software Association (ESA), "Essential Facts about the Computer and Video Game Industry," more than half (54 percent) of all US households have purchased or plan to purchase one or more games this year. Moreover, ESA's latest research shows that today's game players will likely be "gamers for life"—because a majority expect to play as much or more in the next decade as they do today—while each year the ranks of new players will continue to swell.
Of course, such demand for gaming is based on an assumption that we have come to take for granted, namely that gaming technologies will advance at the same dramatic pace we have seen in the past. For example, 10 years ago, the top-selling titles were
Donkey Kong Country and
Mortal Kombat. But these games are "simple and charming by today's standards," says ESA president Doug Lowenstein.
Will gaming technology continue to advance at the same rate? Absolutely, and not just in computing power, but in a host of other areas that will enable the kind of innovation that will expand gaming's popularity. In fact, a new assessment from Deloitte Research, "Moore's Law and Electronic Games," outlines the advances expected in technologies that could influence electronic gaming. A brief summary reveals the following trends:
Processing: Moore's Law—which states that the transistor density of a silicon chip will double every two years—is alive and well in the game-console market. In fact, the next generation of consoles, which are expected to debut at the end of 2005 or early 2006, will feature central processing units (CPUs) capable of more than one trillion calculations per second, nearly 10 times faster than current models.
Chip sets: Besides console CPUs, other chips—including graphics processing units (GPUs), random-access memory (RAM), and even mobile phone processors—will follow the same trajectory predicted by Moore's Law, roughly doubling in capacity every two years. For example, processors in high-end mobile phones currently top out at 400mhz, but are likely to reach speeds of 1.5ghz by 2010, outpacing today's PCs and consoles.
Storage capacity: Since 1990, the growth in storage capacity has been outpacing Moore's Law by a wide margin, and advancing 12 times faster than processor density. At this rate—given today's PC hard-drive capacities of approximately 80gb—hard-disk storage for game systems will expand by far more than an order of magnitude, to between 1tb and 2tb, by 2010.
Broadband connections: By 2010, 450 million homes worldwide will have broadband connectivity at speeds greater than 1Gbit/second. In addition, of the more than 2 billion mobile phones in use, at least half will be connected to 3G networks, which will feature data transfer speeds in excess 100Kbit/second and make the downloading of games and assets practical.
These technological advances will certainly enable innovations in electronic gaming—just as the innovations will, in turn, generate revenues to fund further technology R&D. But in the meantime, what's the best strategy for game developers to capitalize on these enabling technologies?
For developers of high-end console games, the ante will certainly be raised. Advances in processors and storage capacity mean that games will become enormously more complex—with improved graphics, intelligence, and game play—but also far more expensive to produce. Some estimates place the expense of developing a next-generation title well into the tens of millions of dollars, an order of magnitude higher than the cost of creating a game for current consoles. Fortunately, the returns may be higher as well. But in any case, it's clear that to make money, a publisher will need to spend money, and a lot of it.
For everyone else, perhaps the best strategy is to find a niche and fill it. As entry costs rise, smaller game developers will be forced out of the high-end market. Fortunately, evolving technologies and industry expansion will create unprecedented opportunities in other segments of the interactive entertainment industry. These will include programs that offer pure entertainment, as well as those that use gaming techniques for education, training, information delivery, cultural and social experimentation, and more. And it will present options for developing titles on a variety of platforms, not just for consoles and PCs, but also for online and mobile devices as well.
The options are many and the potential rewards are huge, perhaps more so than at any time or in any market. In each case, the key will be to become the recognized expert and leader in a given field, offer something of unique value, and act quickly before fast-moving technologies and fleeting opportunities pass by. It's a high-risk, high-stakes game, but those who place no bets may be taking the biggest risk of all.
Phil LoPiccolo
Editor-in-Chief