IndustryGamers - Informing the Games Industry

Online Game Market to Surpass $15 Billion This Year, says Analyst

Posted March 25, 2010 by James Brightman

Whether on consoles or PC, online gaming has really taken off in recent years. The rise of casual and social games has certainly been a big contributor. Lazard Capital Markets recently held a meeting with PlaySpan, which helps facilitates payments for virtual goods in online games, and the firm noted that there are big growth opportunities in micro-transactions. Lazard's Colin Sebastian said the worldwide market for online games should surpass $15 billion this year, and sales of virtual goods are likely to exceed $1 billion.

The shift away from subscriptions and towards free-to-play, micro-transaction supported games has been a big lift for the online gaming space. "As witnessed through the rapid growth of social games, iPhone apps and other 'bite-sized' content online, PlaySpan is seeing significantly improved rates of monetization (30%-500%) for content that leverages a micro-transactions model," Sebastian noted. "As such, the company expects there will be further shift away from subscription and download models online."

Sebastian continued, "Games such as [Turbine's] DDO (Dungeons and Dragons online) that were built with a subscription model have had success improving monetization using PlaySpan’s platform. For content owners, micro-transactions also offer a more direct relationship with consumers and possibly higher customer lifetime value."

While the social gaming space suffered a bit of a black eye last year with scammy offer-based ads, the rise of Facebook Credits should spur further growth. "Facebook Credits will help legitimize the market," Sebastian said. "PlaySpan is optimistic that Facebook will successfully leverage its nascent payment platform, and in the process further legitimize the micro-transaction and virtual goods market. However, the company does not believe Facebook will be able to extend the payment service easily beyond Facebook, given the investment and complexity required to operate outside of its walled garden. PlaySpan also does not expect Apple to expand payments beyond the iTunes/iPhone/iPad ecosystem. As such, we currently see little risk to eBay’s PayPal business from the emerging payment platforms."

James Brightman has been covering the games industry since 2003 and has been an avid gamer ever since the days of Atari and Intellivision. He was previously the EIC of GameDaily Biz.