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Trends to Watch in the Games Industry

March 9, 2009

 Ned and I co-authored this article for the March issue of the Consumer Electronics Association's Vision Magazine. It focuses on trends in the growing games industry. We hope that it will be a starting point for a discussion here on our news portal, as well as in person at our upcoming LA Games Conference on April 28-29, 2009. Just a reminder to register early - you get $250 OFF regular price if you register by March 15. And who doesn't need to save money these days?

In case you haven’t noticed, revolutionary change is sweeping through the media landscape. The aristocracy of old media - the media moguls, studio-heads and record label executives - have seen their power and influence challenged by wiz kids in their dorm rooms and a new class of savvy executives and entrepreneurs, focused on games and online entertainment. While revenues from DVD sales continued to fall in 2008 (a year that saw the entire home video market decline in value by 5.5% to $22.4 billion according to data from market research firm Digital Entertainment Group), U.S. video game sales grew 26% to around $10.96 billion, bolstered by a record-breaking $5 billion month of December alone (according to sales data compiled by market research firm NPD Group).

At Digital Media Wire’s upcoming LA Games Conference (www.lagamesconference.com), presented in association with the Consumer Electronics Association, hundreds of top media and games executives will gather. They are there to take a closer look at the sometimes troubled relationship between “old media” and “new media,” and will examine how these two groups can best work together to the create compelling and profitable entertainment enterprises for the future.

Here are five trends that will be front and center at the event:

1. The Battle for the Digital Living Room: When it comes to hardware, the battle for the digital living room is expected to shift into high gear in 2009. Game hardware sales for 2008 came in at $7.81 billion, an 11% increase from 2007, and accessories rose 14% to $2.57 billion. At the same time, the CE industry saw Blu-ray spending increase threefold, to $750 million, in the wake of Sony Blu-ray’s victory in the format war over Toshiba’s HDDVD. Now the question on many people’s minds is; with consumers clearly spending more money on game hardware, will they use their Xboxor PS3 to gain access to other forms of entertainment than just games? Microsoft is placing a big bet on that they will. Xbox Live now lets you stream movies from Netflix directly to your TV and chat with your friends, putting Microsoft in direct competition with cable companies and telco providers.

2. Hollywood and Games: As games companies have grown more powerful, they have started to question the value of paying high license fees to Hollywood, in order to use characters and themes from popular movies and music to develop video games. Instead, they are creating their own narratives like the Xbox game Halo or Grand Theft Auto IV, and even starting their own record labels like Electronic Arts has done with its ArtWerk Music Group. The studios are responding by starting their own games divisions and even looking at making their movies and TV series seem more like video games, such as “The Dark Knight.” But, is there enough money to go around? These issues will be discussed during a special “Game Convergence” track.

3. Madison Avenue and Games: As games have grown in popularity, Madison Avenue’s fascination with the industry has increased, spurring new opportunities for advertisers and brands to reach consumers through the games, virtual worlds and social networks. Even Barack Obama used advertising n video games as one of the means by which he reached out to young people, in what was considered by many to be an almost flawless presidential campaign. So how are brand marketers and their agencies really navigating this space? What advertising campaigns work in games and online communities? How are consumers reacting to ads in games? How are advertising executives working with game developers? What are the opportunities and challenges in incorporating advertising and brands into games and online communities? On the other side of the coin - how can game companies generate revenue and free mass advertising by incorporating digital game content into brand advertising? These are the issues at the heart of the discussion as marketers begin to further shift marketing budgets from traditional media to new media.

4. Power to the Third Screen: Another interesting development is in the area of mobile games, already a multi-million dollar industry. While there are more cell phones in the world then there are televisions and game consoles combined, mobile games has long been considered the ugly stepchild of the games industry. With increased focus on the challenges that need to be collectively overcome for the industry to progress to a true mass market phenomenon, the conference will feature a special session on innovation, pricing, new devices, marketing and distributionmodels for mobile games. Is the iPhone model the way of the future? How are the operators working to make mobile games to really take off? What factors are driving and hindering the industry? How is the mobile gamesmarket working with successful online games and brands to grow the mobile games market? Is a licensed game or branded title needed to succeed in the current mobile games market? The conference will explore these issues and more.

5. Games of Tomorrow: Next Generation MMOGs and Virtual Worlds: The success of the massively multiplayer online games genre is undeniable. According to research from Strategy Analytics, MMOGs generated $1.5 billion in subscription revenues worldwide in 2008 and are expected to grow to more than $2.5 billion by 2012. With more than 11.5 million monthly subscribers, World of Warcraft (known as “WoW”) is currently the world's largest MMOG and has driven others, like Electronics Arts, to launch their own MMOGs, hoping to cash in on the phenomena. In a much anticipated panel, game industry heavyweights working on MMOGs and virtual worlds will share their views and predictions on the future of this market. What can we expect for the games of the future? What platform is best suited for this form of social gaming? Which aspects of gaming will remain constant? Is the evolution of gaming in countries such as Korea and China a sign of things to come?

For more on what is happening in the robust games industry, don’t miss the opportunity to attend the upcoming LA Games Conference at the Hollywood Roosevelt Hotel on April 28-29, 2009, and join the discussion about the future of the fastest growing entertainment medium in the U.S. Are you game?

Joakim “Jay” Baage Event Director, LA Games Conference VP of Content and Business Development, Digital Media Wire Email: jay@digitalmediawire.com

Ned Sherman, Event Chair, LA Games Conference CEO and Publisher, Digital Media Wire Email: ned@digitalmediawire.com Image by Dekuwa Source: www.dmwmedia.com


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