M2 Insights - Media and Markets

M2 Analysis From E3 2010

July 20, 2010 - Billy Pidgeon: In a series of demos on the show floor and offsite events during the recent E3 2010 in downtown Los Angeles, videogame publishers, platform vendors and other industry players presented carefully prepared cases for prospective market share increases to buyers, partners, the press, analysts and, ultimately, targeted hardcore and mainstream gamers.

Powerful factors are adding considerable complexity to the dynamics of the rapidly maturing videogame industry:

* mass market access
* convergent platform expansion
* the effects of a severe economic downturn

Analysis: iPad and Game Development - Does Flash Matter?

April 22, 2010 - The dust has settled from the initial iPad launch madness, and there have been an infinite number of articles and blog posts on the iPad. Starting out somewhat skeptical here at M2 Research, we wanted to take a closer look at the iPad's potential as a gaming platform.

Games of course represent a significant portion of the 150k+ apps on the App Store. Apple says there are 50,700 games and entertainment titles currently available. At the iPad launch there were close to 60 games announced with many more in the works. Some have already estimated that the iPad App Store will make over $1billion by 2012.

The Next Frontier - Female Gaming Demographics

March 9, 2010 - As an analyst I am drawn to trends that shift markets. I see nothing shifting the gaming market more significantly right now than the impact that girls and women are having on the industry. The growth and market dynamics related to female players are utterly fascinating.

As a female I am drawn to the personal impact this growth means to me. At M2 Research we have several female analysts now. So yes, it is a personal topic for us here. One of our analysts is extremely versed in MMOs, both casual and core. Her World of Warcraft rogue character made the US top 50 Guild. So besides being a hardcore gamer and an analyst for M2 Research, she is also over 35, and a mom of three small children. The reality is games are not just for one particular type of player any more.

Online Virtual Worlds for Kids - Predictions for 2010

February 16, 2010 - For many years toy and video game companies have been battling each other for the mindshare of kids. Toy companies have strong products targeted at children from pre-school up to about second grade, when they turn 7 or 8. Then, at about age 8, video games start to replace traditional toys.

The typical business model enables video game companies to license their products to toy companies to generate additional revenue. At the same time toy companies have been offering more interactive toys to reach the slightly older child. Media companies like Nickelodeon, Cartoon Network and Disney have effectively found a way to provide programming for both the younger and older kids and license their properties to toy and video game companies who in turn use their networks to market back to kids.

Over the last few years, an entirely new competitor for children's time has come onto the market - the online gaming world. Several "independent" companies have figured out how to capture the attention of the 8-12 year old child in a completely new way -- through virtual worlds and online gaming experiences.

Take a look at all the gaming worlds started by independent companies that have been introduced over the past several years. In 2008, there were 14 new virtual gaming worlds for kids 8-12 introduced in the U.S. Over 70% came from companies not in the traditional toy, entertainment or video gaming space. And, with the exception of the NFL and Disney Fairies, the majority of these virtual worlds were completely new brands, with no prior brand recognition with kids.

Japanese Trends and JETRO

February 5, 2010 - There is no denying that the Japanese video game market has suffered from the downturn in the economy. Enterbrain estimates game sales in Japan for 2009 were $5.4 billion, down 6.9% from 2008.

Dean Takahashi noted in a recent VentureBeat article:
"In Japan, unit sales fell 2 percent (a 5 percent decline in console software units and a 1 percent decline in portable game software. While the recession gets some of the blame, so does the shrinking PlayStation 2 software market, which saw a 57 percent decrease across the top global markets (56 percent down in the U.S., 67 percent down in the UK, and 55 percent down in Japan)."

According to the Japan External Trade Organization, also known as JETRO, there were several reasons for the downturn in video game sales last year:
  • Overall console sales were down
  • Retail hardware prices were cut
  • On the software side, there simply was a lack of big title hits available

2009 - The Ups and Downs

January 5, 2010 - Layoffs Killed the Party - M2 Research estimates that the final count for layoffs since the economic meltdown in late 2008 reached 11,488 worldwide, with the majority of the losses coming in 2009. All the major publishers were impacted by the layoffs: EA, THQ, Activision, Sega, SCEA, Midway, Disney, Eidos, and Lucas Arts.

The larger publishers were not alone in their need for cost-cutting measures. Smaller studios were also impacted. Some of the smaller studios with layoffs included:
  • Harmonix - 39 laid off
  • Smith & Tinker - 15 laid off
  • Slipgate Ironworks - 50 laid off
  • Sulake - 40 laid off
  • Idol Minds - 50 laid off
  • Heavy Iron - 65 laid off

In fact, the majority of the layoffs came from the studio level, with the total company count coming from more than 95 companies worldwide. Over half, or 55% (52 studios), were from the US.

Looking at the data on a regional basis, the US represents the bulk of the layoffs at 71% of the total. Europe was second hardest hit with 13% of which the UK made up 81% of that region's loss. Japan was hardest hit in Asia, while Canadian and Australian layoffs remained minimal overall.

Gaming's New Market Dynamics and the Importance of Middleware

August 19, 2009 - Not to state the obvious, but 2009 has been bad for business. Of course the video game industry has been impacted, but the woes of the game industry have more to do with growing pains from within. Many of the traditional models were breaking down independently of the economy. The retail model is too expensive and development costs are too high to support the added retail cost burden. Up until last year the industry was in a state of paradigm paralysis – or the inability to see beyond the current models. Defined as the greatest barrier to a paradigm shift, paradigm paralysis has overshadowed growth opportunities for many companies.

E3 Part II - The Tools and Tech that Make it Interesting

July 8, 2009 - This second part of my E3 coverage takes a deeper look at some of the technology working behind the scenes that make these games so remarkable. There is so much attention given to covering the games at E3 and giving detailed features of the new games on the horizon. But what about the tools and technology used to create these cutting edge games? Where are we at with the development?

E3 Part I: The Big Three Take Their Positions

June 23, 2009 - This year's revamped, revitalized E3 could not have come at a better time for the industry. With the global economic meltdown it was serendipity that E3 organizers decided to go back to a bigger, more open show format. The excitement was certainly there this year and the 40,000 attendees seemed to welcome a return to some of E3's glory days.

This Part I of The Brief will highlight an overview of the big three console companies because they were the epicenter of all things E3 this year. More specifically they each seem to be succinctly rounding out their product offerings into complete gaming ecosystems. Yet each company has a very different vision and strategy for attracting and retaining customers to their individual gaming experience. Continue...

Specifically, the press conferences this year seemed to clinch the entire essence of how the big three are strategically positioning themselves. Each company is working to differentiate itself through its living room connection, its content, or its staying power as a family entertainment experience.

The Gaming Renaissance Movement
Making games differently - from production, to financing and distribution.

May 8, 2009 - Many have noted that the gaming industry seems to be recession-proof. Monthly sales figures continue to show growth in the market. Even though NPD's figures for March are off 17% from the same period last year, NPD themselves noted that Easter generally provides a spike in sales, which fell in April this year and March last year. If you look at overall Q1 08 figures there was 0% change from Q1 09, while software was down just slightly at 2% for the quarter, hardware and accessories were up 1% and 3% respectively.

GDC 09: The Changing Face of Game Development and Market Trends

April 9, 2009 - New Development Trends for Game Developers. There is a growing shift in the way we think about games and develop them � from new technology and tools, to new distribution models. We are in a state of re-invention where development, business and finance models are completely giving way to a renaissance movement that will challenge the current composition of gaming.

Let’s Compare: Oscars’ Best Feature Film to Gaming Revenue

March 9, 2009 - Something caught my eye yesterday morning as I read the WSJ. I was reading about the Oscars Ceremony, which I actually enjoyed despite critic reviews, and saw the 5 pictures nominated for best picture combined only grossed $184 million domestically – that is combined sales! With all the hoopla made about the Oscars, that figure shocked me. And in 2007, the combined revenue for the best picture nominees was only $216 million domestically. The biggest year revenue-wise was 2003, when the best-picture category combined reached $636 million.
"M2 Research estimates a staggering 8450 game industry professionals have been laid off since July 2008. Of these, roughly 6300 or 75% are from North America. That puts the current game industry layoffs in the North American at 12% of the total workforce."
"M2 Research estimates 270 million of the 420 million game PCs have broadband - that is 65% of today's PC gamers."
"What is apparent is that internal game engines are still predominantly used in the most highly anticipated games. Of the 23 games covered here 15 used internal engines, while 8 used third party solutions = 35%. Of course this is a very small sampling, but these games do provide a good representation of the top games listed in many Best of Show rakings for E3 this year."
"The big three have shown us where they stand and have all firmly planted their stakes in the ground on all fronts: consoles, portable, controllers, and market positioning.

Sony is positioning itself as the “ultimate” gaming experience.

Nintendo on the other hand is clearly working the family entertainment angle but also trying to move up with more serious games.

Microsoft seems more and more positioned as a connected-living room entertainment platform.

This makes one company stand out as a long-term competitor and that is the dark horse - Apple."