The State of the Games Industry: 'Consoles Are In Trouble'The Games Summit track of panels at CES contained some interesting topics and revealed some new insights. The panel on the State of the Games Industry was moderated by Mike Vorhaus, the president of Magid Advisors, strategic consulting firm. Panelists included Sean Vanderdasson, Senior Vice President of Game Services at games network Wild Tangent; Sean Spector, Co-Founder and Senior VP of Business Development and Content at game rental specialist (and owners of Direct2Drive) GameFly; Gene Hoffman, CEO of Vindicia, a provider of billing solutions for digital merchants; Nanea Reeves, Chief Product Officer at cloud gaming provider Gaikai; and Chris Early, Vice President of Digital Publishing at Ubisoft. The discussion lead off with some statistics on the industry to provide some background to the opinions the panel would present.
The games market, including consoles, console software, handhelds, PC, mobile, online, and social totals up to $74 billion in revenue for 2011, up 10% from 2010. By 2015 it will be over $100 billion dollars in revenue worldwide (figures from the Gartner Group). Gaming hardware is still predicted to grow at a steady rate, but online gaming is growing rapidly, from $11.8 billion this year to $28 billion in 2015. Gaming companies raised $1.5 billion last year, up almost 50% from 2010, and that does not count the money raised by IPOs like Zynga and Nexon or exits like PopCap games being sold to EA.
Mobile games are predicted to grow from 15% of the total revenue to 20% by 2015.
Most of the questions came from the audience. What do you think of the impact of Steam and Origin on retail stores? Is digital distribution going to kill the retail store? “Absolutely not,” said Chris Early. “People will still want to go in and touch and hold, and use it as a discovery mechanism. The biggest impact is that digital distribution lets us establish a relationship directly with the player.”
Nanea Reeves felt that “It's really not about how you distribute the product, it's how to get it to multiple devices. A digital download is one mode of delivery, and I think it augments the retail channel. If you look at the data a lot of the publishers have, it doesn't cannibalize the retail channel, it's an expansion of it. I think people will want to own the bits at some point.”
Gene Hoffman disagreed. “Physical delivery is going to be challenged, very hard. How many software stores do we have? We do, they're called Apple stores. Is there a retail experience which is game-centric? Probably. Does it look like any retail we see today? Not yet. So from that perspective I think you're going to see a major change in physical retail. On the online side, I expect you're going to have multiple channels. These multiple channels reach different customers in different ways at different times.”
Sean Spector, despite being a digital distributor, said “Consumers want choice and right now they still want discs. They like digital, but they still want discs. So I don't think that is going to end any time soon, but 5 or 10 years from now, who knows?” But he does see the combination of streaming and digital distribution taking its toll.“I think GameStop will take the biggest hit in North America from the retail perspective,” said Spector.
The discussion moved on to streaming gaming, which is making the news at CES with announcements from both OnLive and Gaikai. Gaikai's deal with LG has games streaming onto an LG tv with no additional hardware attached. It's not clear that streaming is the future, though. “Less than 20% of weekly console gamers were interested in having streaming gaming,” according to Mike Vorhaus' research. “I think that will change once gamers can get a game for $6 instead of $60,” said Reeves.
What do you think the impact will be on console games with Google TV making another try for the family room, and perhaps Apple TV bringing apps to the family room this year, thousands of them free or free to play that look pretty good? “The top ten titles will still be the top ten titles,” said Reeves. “It becomes a question of discovery,” said Early. “Your TV has hundreds of channels, so how do you find things? Adding new choices potentially confuses things, but the top ten will still be there.” “I think consoles qua consoles are in trouble,” said Hoffman. “I don't think we have more than a single generation of game consoles ahead."
“Are we all in agreement that there will be a PS4 and there'll be an Xbox 720? And/or when is the console dead?” Vorhaus asked the panel. “Yes, I would agree that there will probably be one more generation and that's it,” said Vanderdasson. “I think the question is does the next one have a disc? Maybe just to be retroactive,” said Reeves. Early responded, “Oh, I think this next one will have a disc.”
“I think some will have one more cycle and I think others will not,” said Reeves. “I think that will be the big news at E3. That's just my prediction.” “That's a very newsworthy opinion,” said Vorhaus. “Which of the three people are not going to have a next console?” “I'm not going to say which one, but I will predict that there will be one.” said Reeves.
“Chris, tell us the true story on the Xbox 720,” said Vorhaus. “We're planning on platforms from each of the manufacturers,” said Chris Early. “The question is what comes after that, and it's not clear.”
The panel ended with a provocative question: What will be the biggest surprises coming up for 2012?
Chris Early, Ubisoft: “I think the biggest surprise we'll see is how much time people will spend on a given brand when they can do it across a bunch of devices and it's all interrelated.”
Nanea Reeves, Gaikai: “I will go with the previous comment. I think one console will opt out of the next gen.”
Gene Hoffman, Vindicia: “I think one of the walled gardens will fall.”
Sean Spector, GameFly: “GameStop will close stores.”
Sean Vanderdasson, Wild Tangent: “True cross-platform gameplay.”
Mike Vorhaus, Magid Advisors: “I think Nintendo will be the one to do what you are suggesting [opt out of the next gen].”
What do you think? Do you agree or disagree with these opinions?
