Analyst: Current Consoles “Transitioning” to Online Market


Analysts at Screen Digest say the current generation of game consoles is merely a “transitional” step toward an online market that won’t be fully exploited until the next generation of hardware is launched.

While the online console market is an important one for developers and publishers even in the current hardware generation, analysts predict that users will spend “only” $1.2 billion in full game downloads by 2013, a hefty chunk of change but still only 11 percent of a total potential market that remains dominated by conventional retail sales. Expansions, microtransactions, online advertising and subscriptions fees will contribute but ultimately represent relatively small sources of revenue extended over long periods of time.

One of the major impediments to the development of the online market is the “traditional games value chain,” that is, the brick-and-mortar game sellers. Regular retailers are still far and away the dominant force in the game sales food chain and the move to an online model represents a “substantial threat” to that dominance; publishers, meanwhile, may see the writing on the wall but are still very well aware of the dangers of antagonizing their retail partners and are thus “taking a cautious approach to exploiting the online console opportunity.”

As a result, the move to an online-focused market is progressing very slowly and there is simply not enough time left in the current console generation to fully embrace it. “While the online console market is growing strongly and will provide welcome revenue in later years, today’s consoles have been consigned to the important but ultimately limited online market role of ‘transitional’ devices as the industry only slowly makes its way to a more online-console oriented framework,” said Piers Harding-Rolls, senior analyst at Screen Digest.

“There will be a substantial addressable online market to exploit towards the end of the cycle,” he continued, “but it is likely that this opportunity will remain significantly untapped and it won’t be long before the industry will be forced once again to prepare itself for the next generation of hardware.”

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