Online Games Business To Triple in Five Years?

A new report suggests that the revolution won't be televised; it'll be downloaded

According to the market researchers at Strategy Analytics, the video game industry is in the midst of an online revolution. Led by massively multiplayer titles such as Blizzard's incredibly popular World of Warcraft, the global online games market, which currently is worth about $4 billion, is expected to triple in the next five years.

Strategy Analytics' report Online Games: Global Market Forecast explains that the MMOG market and games such as WoW are "blazing the way for electronic sell-through and digital distribution of both PC and console games."

"The rapid growth of the addressable market for digital distribution of both PC and Console games will help clear the way for distribution of mainstream hit titles which has up to now been restricted to the physical retail channel," commented Martin Olausson, Director of Digital Media Research at Strategy Analytics.

Looking at the global music, video and games markets (which Strategy Analytics considers the "three main online entertainment markets") the online games category generates the most revenue. Strategy Analytics said that the global online games market generated an estimated $3.8 billion in 2006 and the market is projected to grow with a compound annual growth rate (CAGR) of 25.2 percent from 2007 through 2011, ultimately reaching $11.8 billion and therefore representing approximately one third of the total games software market by 2011.

"The main driver for sustained growth in the online games market will be the continued uptake of broadband services around the world," said David Mercer, Principal Analyst at Strategy Analytics. "Additionally, the very lucrative revenue opportunity in both the massively multiplayer segment and the electronic sell through market will continue to attract new entrants into the online games market."

While digital distribution is making more and more full games available for download for PC gamers (through services such as Steam, Direct2Drive, etc.), console makers have been much slower to offer entire games for download—although Sony is starting to do this on its PlayStation Network, with Warhawk being a primary example since its available for download or on Blu-ray disc.

There are some in the industry that believe the next round of consoles won't even come equipped with any kind of optical drive—everything will be online. The retail sector certainly won't be happy about that.

Recently another market research firm, Electronic Entertainment Design and Research, said that online games generate more than twice the revenue of offline titles.

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