Videogame Makers May Need Consoling

Online games will gobble up more of the total videogame market in the next four years, and the forecast could not look bleaker for consoles.

In its 2011 Gaming Ecosystem report, technology analyst firm Gartner predicts that global videogame sales will hit $112 billion in 2015, marking a 51 percent increase, compared with $74 billion this year. Initially, the numbers appear promising for all sectors of the industry, with hardware, software, and online sales expected to increase over the next four years.

But upon closer review of each sector's predicted growth rate, the report signals a dismal long-term future for console game and equipment companies. For starters, hardware sales are predicted to increase from $17.8 billion in 2011 to $27.4 billion in 2015. That increase in sales dollars will, however, leave the hardware side pulling in the same share (24 percent) of total videogame sales four years from now that it pulls in this year.

The overall sales pie, in other words, is getting bigger, but the relative size of hardware’s slice will not change. The outlook in the report is even worse for software sales, which account for 60 percent of the current $74 billion industry ($44.7 billion in 2011). In 2015, those sales will tally only 50 percent of the $112 billion industry (estimated at $56.5 billion in 2015).

So who will be gorging on a bigger piece of the pie? According to Gartner, that will be online game companies, which will see sales increase from $11.9 billion in 2011 to $28.3 billion in 2015. That would mark a jump in market share from 16 percent this year to 25 percent in four years. Most of the increase is expected to come from soaring growth in spending on virtual goods (digital clothing, weapons, equipment, etc.) within the games.

The Gartner report arrives three weeks after investment firm Digi-Capital predicted that mobile and online game revenues would hit $44 billion and account for half of global videogame revenues by 2014. In the same report, the console game market was expected to remain flat or down over the next three years.

The news is the same in the United States, where market research firm NewZoo predicted last week that the nation's social and mobile gaming industry will enjoy a 37 percent increase in revenue (up to $6.7 billion) over last year’s figures. Console gaming, on the other hand, will suffer a 20 percent drop (down to $8 billion).

The common thread running through each report: Console games still lead mobile and online games, but the tide is swinging rapidly in the other direction.

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