Nearly one-fifth of active gamers in the U.S. spend money on virtual items

The gaming business is undergoing a major shift away from subscription models as virtual items become a larger part of its economy, reaching almost $6 billion worldwide in microtransaction revenues by 2015, according to international research firm Parks Associates.

Gamers are investing real money in virtual items in Farmville, World of Warcraft, and other online games, to the point they are filing lawsuits to establish ‘ownership’ of these virtual goods. The enormous player base, availability on multiple devices, and the introduction of instruments such as Facebook Credits contribute to growing revenues.

The Parks Associates’ new report Online Gaming: Global Outlook finds 19% of active gamers in the U.S. spend money on in-game virtual items. In contrast, subscribers to premium online game services decreased from 35% in 2008 to 28% in 2010. Publishers of social games, like Zynga, have seen revenues explode as larger percentages of their customers opt to pay for virtual items. The same trend is visible for massively multiplayer online games, where companies such as Nexon America have managed to reach millions of dollars in revenues from microtransactions.

It is becoming increasingly difficult to justify subscription fees. Thanks to social games and free-to-play MMOs, both casual and hardcore players have the option of playing quality games online for free. The virtual-items model that has proven so successful in Asia is finally generating significant revenues in North America.

Pay-TV providers missing the middle market for gaming

Premium pay-TV gaming features do not currently maximize the market’s revenue potential, according to a new report from international research firm Parks Associates.

Many pay-TV providers, including Comcast, Cablevision, DISH Network, and DirecTV, offer premium packages that include simple, single-player games. Gaming ARPU: Games & the Service Provider finds roughly 5% of broadband households in North America and Western Europe are willing to pay about $5 per month for a premium gaming feature, the current average cost per game.

The number of subscribers would increase threefold if cost per game were lowered to $2.50. In the U.S. in particular, the boost in adoption rates would push annual revenues for single-player TV games over $300 million. Every country surveyed had similar growth in interest except the U.K., where the adoption increase would not compensate for the lower price point.

“Pay-TV providers are leaving money on the table,” said John Barrett, Director, Research, Parks Associates. “The industry’s attention is split between free gaming and more expensive, advanced features. Between the two extremes is an opportunity that has not been fully exploited.”

Despite this finding, Barrett predicts providers will continue to focus their efforts elsewhere. “Most service providers are giving up on the middle ground in gaming because the results have been unimpressive so far. It’s ironic because the rest of the gaming industry is trying to follow the success of the Nintendo Wii and target a more moderate gamer.”

Gaming ARPU: Games & the Service Provider analyzes the market potential for integrating TV and gaming services through pay-TV providers, connected TVs, and game consoles.

Parks Associates reports social networking users to exceed 95 million by 2013

Expanding population creates new opportunities for advertising and connected TV --

Social networking is moving to the television, driven by a young audience interested in video features such as multiplayer games, chat, and content discovery. This trend will help increase U.S. ad spending in social media to almost $3 billion by 2013, according to Parks Associates.

The international research firm, in its report Social Media & User-Generated Content, finds over one-fourth of broadband users ages 18-24 are interested in social media features on the TV. Key applications include multiplayer gaming, in-program chat, and “most watched” lists. At the same time, 23% of U.S. broadband households want to view content from sites like YouTube and Flickr on their TVs.

For younger consumers in particular, their appetite for social experiences don’t end on the computer screen but are enhanced via their access on TVs and mobile phones. This expansion of social media has implications for service providers, advertisers, and CE manufacturers as well as the networking sites.

Parks Associates forecasts 95 million social networking users by 2013. This diverse population will have a variety of different needs and wants. For example, threats like the Koobface worm, which targets Facebook users, underscore the need for integrated customer support solutions that can address social networking security issues. Service providers could combine these offerings with their network support services to sell a complete protection package.

Free newsletters are available from Parks Associates. Subscribe now to get the latest insights from Parks Associates’ analysts.

Casual gaming revenues to top $1 billion by 2013

Social networking and community features enable gaming companies to expand --

Online gaming companies should embrace social networking and community features as key strategies in continuing the rapid growth of the gaming market, according to international research firm Parks Associates. In its new report Networked Gaming: Driving the Future II, the firm forecasts the market for premium casual games will exceed $1 billion in revenues by 2013.

Parks Associates notes that social and community features can help companies in casual gaming expand beyond their traditional target demographic of women ages 35-54. Offering features such as a persistent identity and integration with social network sites allows companies to maintain their core audience while broadening their appeal.

Game companies should use social networks and gamer communities as marketing and distribution channels for their new and existing games. Gaming has proven remarkably recession-proof, so as companies try to capture subscriber dollars, these offerings will serve as differentiators in a very competitive market.

These features can also build gamer interest and loyalty among the growing number of free-to-play MMORPGs, which will include over 20 million gamers by 2013. The report recommends large game publishers should build cross-platform, gamer-centric networks. Online publishers should also leverage open-platform efforts like Facebook Connect and MySpaceID, allowing users to enter online gaming websites with their social network ID and share their online activities with their network of friends.

Networked Gaming: Driving the Future II analyzes a variety of networked gaming technologies and business models. The report includes company profiles, consumer data, and market forecasts.

Parks Associates is supporting Engage! Expo

Parks Associates is supporting Engage! Expo.

Engage! Expo takes place March 10-11, 2009, at the Javits Convention Center in New York (the same location as Virtual Worlds 2008). Engage! Expo is the event for media, entertainment, youth brands and toy companies to learn how to combine their existing online efforts with the unparalleled engagement opportunities and new revenue streams of the 3D Web and Virtual Worlds.

Virtual Goods and Gifts are generating an estimated $200 million in the US and $2 billion in revenues worldwide. Engage! Expo is the only place to learn more about these trends and network with the industry leaders that are making it happen.

For more information, click here.

Could Video Games Score Bigger in 2009?

2009 could end up being an even better year for the video gamers. According to Mike Snider's recent USA Today article, "Video games score with variety," Grand Theft Auto IV & Mario Kart Wii sold 5 million copies.

With today gaming market so diverse, there is something for everyone whether it be crime fighting, cartoon racing or solving puzzles. Today, there are games that appeal to everyone. According to research and consulting firm Parks Associates, the number of U.S. households with at least one game console grew from 42.7 million in 2005 to 44.9 million in early 2008; in addition, more than 1/2 of adults and 97% of teenagers play games translating to 3/4 of U.S. consumers.

As more people are attracted to games, more games are introduced into the market. These gamers are now even segmented (social, dormant, occasional, etc.) Would you have thought 10 years ago we would be exercising by playing video games? And, now we have the Wii Fit to help use with those New Year's Resolutions! What will they think of next?

Stay tuned more exciting releases in 2009. Among the top list include: 1). Zelda and EA Sports' Active Fitness for Wii; 2). Killzone 2 and God of War III for PS3; and 3). Halo Wars and Halo 3 ODST (Orbital Drop Shock Trooper) for Xbox 360.

Read more about this USA Today article at:
http://www.usatoday.com/life/lifestyle/2008-12-29-top-video-games_N.htm

Research indicates expansion of entertainment-at-home services despite poor economic conditions

Parks Associates announced that almost 66% of U.S. consumers have altered their spending habits in 2008 as a result of the country’s deteriorating economic conditions. These changes have had the greatest impact on entertainment spending outside of the home, according to Digital Media Evolution, a new consumer survey, but also open new areas for growth in customer support services.

Parks Associates reports consumers have cut spending in 2008 primarily on outside entertainment sources, creating greater dependence on at-home entertainment services and new opportunities for broadband, communications, and entertainment providers in offering customer support, self-diagnostic, and troubleshooting solutions.

In 2008, U.S. consumers are most likely to cut their spending on dining out, travel, and out-of-home entertainment. Additionally, Digital Media Evolution found that nearly 50% indicate that they will be spending less on consumer electronics because of economic conditions in the fourth quarter of 2008.

Parks Associates advises providers to take back-to-the-basics approaches to revenue growth and cost savings. Service provider costs for supporting home networks alone could total hundreds of millions of dollars annually. By implementing self-diagnostic and troubleshooting solutions and building remote support capabilities, service providers can turn customer support from a liability into an opportunity, reducing OPEX costs initially and growing revenue-generating customer support businesses in the long term.

Newsletters from Parks Associates Inform on Home Systems, Digital Health, Value-added Services, and Digital Entertainment

International research firm Parks Associates announced four free newsletters, distributed online to inform industry executives on developments in home networking, digital health, digital entertainment, consumer electronics, broadband services, wireless connectivity, and home systems.

Parks Associates’ industry analysts, with over 20 years experience studying advanced technology markets, produce these newsletters on a monthly basis to provide analysis on industry topics and developments. Newsletters frequently cite worldwide trends and important areas of growth. According to Parks Associates, the number of households worldwide with a data network will grow to 240 million by 2012, while more than 50 million will be using place-shifting solutions outside the home.

Parks Points covers a variety of topics, including Web video, customer support, virtual worlds, storage, and mobile video.

Home Systems Newsletter provides updates and analysis on home systems, including wireless and powerline controls, universal remotes, and home theatre systems.

European Research Update examines the European market for digital living products and services, informed by market-leading industry research projects including Entertainment 2.0 in Europe.

Digital Health Newsletter provides information on technological advances as they impact modern healthcare solutions. Past topics include connected medical device monitoring, retail clinics, and universal health coverage.

To subscribe to these newsletters, visit www.parksassociates.com/newsletters .

Blockbuster and Microsoft Live Mesh - content to go

The Dallas Morning News has an interesting article this morning about Blockbuster and Microsoft working together on mobile movie options. Using Microsoft's Live Mesh solution, the speculation is that we may see movie kiosks in airports that will allow for the download of Blockbuster movies to mobile and portable devices.

Blockbuster's go-to-TV strategy: 2Wire is the partner

While Netflix has been busy making different consumer electronics partner announcements, Blockbuster has been silent for a long time. Finally, it was announced today that 2Wire is the CE partner for Blockbuster's Internet movie services. The 2Wire MediaPoint™ digital media player is free if one prepays for 25 BLOCKBUSTER ONDEMAND movies at $99. In its release, 2Wire touted the Media Player's connections (Wi-Fi and Ethernet) and support for HD content. The Dallas Morning News did a nice write-up today on the Blockbuster-2Wire collaboration, noting that the service will start with 2,000 titles (well below the 12,000 offered by Netflix, and the 20,000+ from both iTunes and Amazon.com. Blockbuster says that its big differentiator will be more timely content. They note that titles such as Forgetting Sarah Marshall, Get Smart, Sisterhood of the Traveling Pants 2, The Strangers, and The Love Guru will be among the available offerings when launched.

Hmmmm...Sarah Marshall is probably worth an Internet stream. The others? I'm not so sure.

Sonic Solutions Acquires CinemaNow

Wow. Looks like Sonic is really going to ramp up its Qflix download-to-burn offering with the acquisition of CinemaNow. It's another fire sale ($3 million) in the Internet video space. However, I think there's a lot of upside for Sonic, not only in the download-to-burn space, but also as CinemaNow is working more closely with CE vendors and service providers to offer its content as part of a value-add broadband VoD offering.

Sony adds Slacker Personal Radio to BRAVIA Internet Video Link

We told you back in July that more people are enjoying listening to their music collections at their TVs. Looks like Sony is taking this to the next level, as they have integrated Slacker content with their BRAVIA Internet Video Link TVs. Slacker offers CD-quality music across many different genres, allowing users to personalize their listening experience.

Sony doesn't like the Xbox streaming its content from Netflix

Sony has yanked its titles from being played on the Xbox via Netflix. No surprise there, since Sony is trying to get its own PlayStation NETWORK running in direct competition to the Xbox LIVE Marketplace.

From the Future of Television Conference

I am in New York this week spending time at The Future of Television East event, which was held Tuesday and Wednesday. It was another interesting conference, with a mixture of media executives and the "old guard" of television plus the companies that are now making noise in the online video space (Hulu, blip.tv, Break.com, etc.).

There are definitely some differing opinions about what online and mobile video means to the broadcasters. Representatives from NBC-U, CBS, and ABC are all very positive about raising TV audience numbers. However, a new IBM study says that active online video viewers are watching less TV.

Interesting data from CBS about average audience age for a how like How I Met Your Mother:
• On air: mid-40s
• Online: 28

CBS says says that while 75% of Internet users are watching some video online each week television viewing has gone up 8% in all demographics since 2000. Teenagers are watching 7% more television over that time.

What Jeff Zucker said last year about how digital media is effectively turning “analog dollars into digital pennies” looms over all of this supposed good news the broadcasters are reporting. Many in the audience were interested in knowing whether the broadcasters felt that they were actually growing their revenues as opposed to simply stemming their losses. Nobody ever answered that question. I sense that we’re still in such a fuzzy area about this new age of digital distribution that nobody really knows the answer. Lots of hope that VoD and targeted advertising can boost revenues for both the broadcasters and the cable operators. Lots of hope that social networking aspects of this new digital era will allow consumers to be more fully immersed in both programming and advertising, but it seems largely theoretical right now.

From TelcoTV

We're at the TelcoTV show in Anaheim this week, and getting updates on the trends in telco/IPTV services on a global basis. Some of the things that have caught my eye include:

• Web integration of VoD and remote DVR services. Everyone seems to be talking about a Facebook integration and recommendations for VoD titles. I saw an interesting demonstration from SeaChange, where their Affinity recommendation engine allows users to recommend things like VoD titles. That could enhance the VoD take rate.
• Also, interesting to hear of strategies that put IPTV content on PCs. Cisco has worked with Adobe to provide a solution to Telecom Italia, where their content is available on the Telecom Italia yalp.it portal. Working with Verimatrix, SeaChange is offering a "soft set-top box" application for PCs. They are aiming this at universities, where students may be less inclined to have TVs, but still want to view premium TV content on their laptops.
• All kinds of interesting social networking applications built around Facebook applications and enabling features such as recommendations, chat, etc. Nortel announced a number of social networking and interactive services, including Digital Vault, where subscribers can upload their personal content to secure network-hosted storage solutions.
• There are all kinds of multi-screen demonstrations, where viewers can watch DVR content and then move it to a mobile device to continue watching. You can bet that telcos are looking to leverage their mobile assets and add a new dimension for viewing.
• Delivering non-linear advertising (interactive, VoD, etc.) is a big topic this year. It will be an interesting area to watch.

Netflix and TiVo

Chalk up yet one more connected CE platform for Netflix Watch Insantly Internet video content. The two companies have announced that they're teaming up to provide TiVo® Series3, TiVo HD, and TiVo HD XL subscribers the ability to stream 12,000 movies and TV episodes.

If you're keeping track at home, here are the announced devices that support Watch Instantly features at the TV:

• Samsung BD-P2550 and BD-P2500 Blu-ray players;
• LG BD300 Network Blu-ray Disc Player;
• Xbox 360; and
• The Netflix Player by Roku™.

TV and Social Networking Article from The Wall Street Journal

In yesterday's Wall Street Journal, Christopher Lawton says that the television experience is about to take a cue from what's been happening with connected game consoles. Both Microsoft and Sony will be launching social networking features that can be accessed through their online gaming services.

We tested a number of social-networking-at-the-TV-features in our TV 2.0: The Consumer Perspective report and found that the ability by users to share recorded content with friends and see "Most Watched" lists (like what Verizon is doing with its "Whats Hot" feature) are the most appealing social networking features on the television screen.

More and Better Game Console Bundles This Holiday Season

I was telling a reporter the other day that although it's unlikely that the three console makers will reduce their prices to adapt to the poor economic environment, we'll definitely see more and better bundles this holiday season, especially from Microsoft and Sony. Guess what, we are still a month away from Thanksgiving, Black Friday style deals are already emerging. Here's one example from Dell's online store. Not a bad deal, really...

Courtesy of dealsea.com.

Xbox 360 120GB HD Elite Holiday Bundle $330, Oct 23
Dell Home has Xbox 360 120GB HD Elite Holiday Bundle for $400 - $70 off coupon code "9VZC3829M7GXC9" (limit 400 uses) = $330 with free shipping.
Package includes:
Xbox 360 Elite Console System, 120GB detachable hard drive
Wireless Controller (black), Headset (black)
Network Cable, Component Cable, HDMI Cable
LIVE Gold Membership, Lego Indiana Jones and Kung Fu Panda

Samsung and DivX

Samsung's been busy this month. I just caught this press release from October 15 where Samsung and DivX announced a multiyear agreement to add high-quality DivX® video playback to a number of Samsung digital television models. The DivX Certified Samsung devices are expected to be available in worldwide markets beginning in early 2009, and will be able to playback DivX media files directly via USB slots or via Ethernet connection certified by DLNA.

Internet Video at the TV: More News this Week

Bringing Internet video directly to the TV via network-connected consumer electronics devices is a big trend that we discussed in our report Internet Video: Direct-to-Consumer Services (Second Edition). I'll be discussing this and other Internet video trends in a Webcast this afternoon, as well. We now have a couple of new news items that reflect this trend.

First, you had to think that this announcement was coming. LG Electronics' BD300 Network Blu-ray Disc Player can connect to Netflix Watch Instantly content. Now, Samsung has announced that it has reached a deal with Netflix has to bring movies from the Internet to television sets through Samsung electronics devices, including new products that also play movies in the high-definition Blu-ray format. Samsung, the big Korean electronics manufacturer, will allow users of two new $400 products, the BD-P2500 and BD-P2550 Blu-ray disc players, to access video through a Netflix Internet video service that currently offers more than 12,000 movies, television shows and other titles. The companies also plan to work on integrating Netflix's Internet service into other electronics products they didn't name.

Also, Jaman, an online provider of international and independent films is now available through TiVo set-top boxes. TiVo will also give users the ability to download Disney films via CinemaNow. A CNET article today covers both announcements.