Sunday, June 24, 2007

Serious Games: A Sizeable Market - Update

Games becoming an important part of culture

In my previous post Serious Games, Serious Money: A Sizeable Market, dated March 12, 2007, I've tried to extrapolate a few "back of the envelope" figures for the actual size of the Serious Games market, departing from PricewaterhouseCoopers' media outlook report 2006 for the video game sector worldwide.

This report has now been updated, with the following major highlights:

Video Game Sector Projections

By 2011, the worldwide gaming market will be worth $48.9 billion at a compound annual growth rate of 9.1% during the five-year period. The compound gains handily exceed the 6.4% advance that PwC eyes for the overall entertainment economy during the period.

(Personal Note: As piracy rates subvert the actual market size, my best estimate for the worldwide video game market could rise to $58 bi by 2011).

Its data include consumer spending on games, but do not include spending on hardware and accessories.

Key growth engines will include online and wireless games, new-generation consoles, as well as the burgeoning in-game advertising business.
The overall gaming audience continues to expand and become somewhat more female and older than in the past thanks to casual games and games becoming an "important part of culture" - which in my view would embed the Serious Games segment.

Whereas the military was one of the first customers of Serious Games, it has been joined by a long line of users, including other government agencies, healthcare providers, schools (both K-12 and universities) and Fortune 500 companies (for team building, leadership training, sales training and product education, among others).

For the U.S. gaming business, PwC projects 6.7% compound annual gains for 2007-11 to $12.5 billion. In the U.S., the size of the games market will top the music sector next year, it projects.

In the U.S., online and wireless games should see the biggest gains through 2011, as PwC predicts online will expand from an estimated $1.1 billion market last year to $2.7 billion in 2011, and wireless will double from $499 million to $1 billion.

In-game advertising will be a key spark for U.S. gaming revenue, growing from an estimated $80 million last year to $950 million in 2011, according to PwC. But this estimate could prove conservative as "advertisers like to reach the younger males" that many games tend to attract.

Video Games Sector Current Status

For 2006, PwC's preliminary estimates are for the U.S. gaming market to have expanded 10.6% to $9 billion, and it expects the first-ever jump beyond the $10 billion mark this year to about $10.4 billion.

Worldwide game spending jumped 14.3% to $31.6 billion in 2006 and should rise 18.5% to $37.5 billion this year, according to the preliminary data.

Serious Games Segment

This is my conservative estimate: the Serious Games market would be ranging between $200 - 400 million per year only in US, in 2007.

There is now an emergent supply chain for Corporate Serious Games, with a number of corporations taking the first steps and commissioning Serious Games development, which could easily make available additional $ 400 - 600 million per year. The same applies to Healthcare providers (e.g., training for surgery, for emergency medical response, and for managing surgical teams), bringing the overall figure for the Serious Games market close to $ 1.5 billion in 2008.

As Serious Games are Gaining Solid Traction in Europe and the video game industry is finding more and more business outside the entertainment sector, this figure could rise to $ 2 billion shortly.

Friday, June 22, 2007

Serious Games Gaining Solid Traction in Europe

Serious Games challenging us to play a better future

Serious Games Europe reports that Serious Games are gaining solid traction in Europe. In addition to the establishment of the Serious Games Institute in the UK reported in April, they have the following upcoming events already scheduled:

Apply Serious Games: Themes include: Effective immersive environments & virtual worlds. When to use platforms and when to build your own - with a debate on MMOGs vs Virtual Worlds and a shoot-out between Second Life and Forterra's OLIVE; Connected systems: web 2.0 with games and virtual worlds; How & Where mobile is best connected to make the full complement of interactive platforms. 28 June, London, UK

Serious Virtual Worlds: First International Conference on the Professional Applications of Virtual Worlds. 13 – 14 September 2007 @ The Serious Games Institute, Coventry TechnoCentre, UK. The theme for this first Serious Virtual Worlds conference is ‘The Reality of the Virtual World’ and takes a close look at how virtual worlds are now being used for serious professional purposes.

In addition:

CGames 2007: 11th International Conference on Computer Games: AI, Animation, Mobile, Educational & Serious Games. 21-23 November 2007 @ the Université de La Rochelle, France. Organized by The University of Wolverhampton, England, is one of the leading research conferences devoted to the advancement of the theory and practice of games development.

Wednesday, June 20, 2007

Game Developers chase Serious Games Business Models

Via: Mass High tech News

The ideas for Serious Games technology -- from military simulation to personal health care -- are coming quickly for entrepreneurs, but establishing a business model is a different story.

The traditional model for many entertainment-based games -- a boatload of development before revenue, followed by huge amounts of marketing and retail distribution -- are not practical for the budding "serious games" industry.

Kent Quirk, for example, started CogniToy LLC in 1997 to develop entertainment-based games. The company was "moderately successful," according to Quirk, with a title called "Mind Rover," which sold about 20,000 copies in the late 1990s.

But now he is working on a game called "Melting Point," which has been built to educate both children and adults about the environmental factors of global warming by allowing them to experiment with various environmental, scientific and political factors in a simulation game. Quirk originally wanted to take Melting Point to consumers in the traditional gaming manner. But as the idea came closer to commercialization, he realized that he couldn't follow the same blueprint.

"Originally I was going to sell to the mass market as a downloadable game that took two hours to play," Quirk said. "But it's too difficult as a small company with limited funding, so I have simplified it to a 5-minute Flash game."

That short game will act as a marketing tool for a full-length game that Quirk hopes will be adopted by a partner and become server-based, where it can be sold to educational institutions or individuals.

CogniToy, however, is just one model in a nascent serious-gaming industry looking for a standard approach. Others, such as Compass Rose Games LLC in Marblehead and Dragonfly Game Design Inc. in Westborough, have adopted a contract model.

Compass Rose is working on a game that helps patients with diabetes modify their behavior to control their disease. The company works under a model in which it is hired to develop games for third parties. CEO Tom Hunter would not divulge client names.

The nine-person DragonFly, which was spun out of Worcester Polytechnic Institute in 2003, works on a similar contracting model. It has developed a budget-balancing game for the U.S. Government Accountability Office.

"We chose that model because it's more stable," said Michael Gesner, CEO of DragonFly. "You don't have to rely on royalties after the product is developed to move forward."

Lexington's Whatif Productions LLC develops simulation software for the U.S. military, COO Fred Skoler said.

Venture capitalists have tended avoid game companies because of the uncertainty involved, said David Rauktys, a partner at Burlington-based consulting firm Venture Advisors.

"Generally, VCs avoid a lot of traditional gaming companies because the success models behave more like Hollywood: It's a consumer-driven blockbuster model," Rauktys said.

Despite the uncertainty of a standard go-to-market model for "serious games," most insiders are optimistic about their commercial future. And while the serious gaming segment is still too young to have significant market numbers attached to it, observers think it could capture a portion of the traditional gaming market (expected to reach $44 billion by 2011, according to California-based research firm DFC Intelligence) over the next several years.

Dragonfly's Gesner added that the ongoing experimentation with business models is part of the maturation process, and that once someone sets a standard, innovation will follow.

"I think there is plenty of money to be made in this industry. It's just a matter of someone taking the ball and running with it," he said.