The Gaming Market: time to break in?

Following on from earlier posts, it would seem that casual gaming on the iPhone is going to be big – and big for the consumer as opposed to the publisher. There are some incredibly fluid and fun-looking games like Rolando as well as the traditional games like MahJong. And if you like the idea of using your iPhone like a steering wheel, there’ll be a hundred games like it – I’ve seen about 20 by now – and it makes the one or two which have an on-screen steering wheel seem innovative in comparison.

Market Size in terms of Potential Customers
If you went by market size, the mobile market as a whole would seem incredibly lucrative with a billion handsets being sold every year (or some equally incredible number). Only 10% of these are smartphones and the memory and resources on some of the non-smartphones mean that casual gaming is limited to mini-golf, snake and tennis games reminscent of the console games of the 1980s.

The PC industry similarly is massive with worldwide PC shipments for 2008 estimated to be nearly 300 million units (according to Gartner) but a large percentage of these will not be participating in the gaming market as they are put to work as ATMs, information monitors, shop tills and overpowered typewriters. The PC industry also has high expectations on the quality of games and for those people who want simpler games – it’s a flooded market and realistically you’re competing against Solitaire which is on every Windows PC known to man. That said – the cost of development tools has dropped considerably so that it is accessible to the hobbyist – look at Unity, XNA or any of a hundred other game engines and game development applications.

The handheld gaming market, dominated by the Nintendo DS Lite with 51 million units shipped (and the original DS shipped 20 million) and the PlayStation Portable with 37 million units shipped, would also seem to be massive but this is an expensive market to try to break into.

After that, the Console industry would seem most lucrative due to the numbers of units sold (the Wii has shipped 24 million from November 2006 to March 2008, XBox 360 has sold 19 million from November 2005 to March 2008 and Playststion 3 has sold 13 million from November 2006 to March 2008) but the costs for making games in those markets can be incredibly high (as we have discussed before) and you need separate toolkits for each console – driving the cost of development up.

Market size can’t, therefore, always be an indication of the number of potential customers – it has an effect, certainly but, as an example, the Nintendo DS market of 70 million has a potential customer size of zero if you can’t afford the costs of building a development team, training them and purchasing the tools required for game development on that console.

I attended an InvestNI event a couple of years ago where the consensus from a paid market research company was that the gaming market at the time was stagnant. It was too hard to break in due to the costs and the lead that other companies and other countries had was too big to break. I thought at the time it was probably not far from the mark especially where the mainstream consoles lie.

In contrast, newer handhelds like the iPhone, though with only 6 million shipped (and millions predicted for the next 6 months) has a much higher potential market size. This is because:

• The tools for building are readily available and free (though there’s a £50 charge for the certificate)
• Due to the App Store distribution, the customers are accessible and many of them are looking for new software to load
• The hype machine is already built.

The proof is in the pudding. We have companies coming out of the woodwork to provide applications – whether these be games, IM apps, clients for their online services or just utilities. Unity (mentioned above) has also announced they will be making their game engine capable of creating iPhone games.

This is good, of course, because competition lowers prices and the consumer gets the break here. It’s a new platform, probably with 20 million potential customers by year end.

It’s hard to comment on the shakeup that Android and a new Open Symbian operating systems will bring to the market but it’s definite that the market is changing from the stagnant episode of the last few years.