Market Trends Reveal Change of Video Game Buying Habits 

Downloads projected to increase by over 1000 percent from manufacturers' proprietary networks and will remain the industry's most exciting growth opportunity

By Jody Baram 
  
IDC and IDG Entertainment (IDGE) unveiled new research at the new Entertainment for All(TM) Expo (E for All(TM)) (http://www.EforAllExpo.com) at the Los Angeles Convention Center. The studies revealed  increasing acquisition of video games via online methods, as well as in-depth information on those people who are purchasing games. Retail chains and online resellers relying on video game sales as their main revenue source may want to rethink their product mix because the writing is on the wall.

"By the end of 2007, over 31 percent of online capable video game consoles in North America will be in active online use by 14 million online console gamers," said Pidgeon. "The increase in revenue derived from the online use of game consoles, including subscriptions (mostly Xbox LIVE), downloadable content, and advertising represents the largest growth in the console software sector. In North America alone, online console revenue will triple from $133 million in 2006 to $583 million in 2007. Consumers are increasingly purchasing games by non-traditional means such as downloads or subscriptions."

IDC's Pidgeon noted that the retail marketplace will need to shift in order to adapt to these significant changes in gamers' purchasing behavior. In fact, IDC projects that video game console software sales through traditional third party online and retail stores will see a 19.5 percent revenue growth over 2006, whereas downloadable content will see a growth rate of 1,029 percent and subscription sales will increase "only" 158 percent.

"In 2007, game-related downloadable content derived from manufacturers' proprietary online console networks will reach $296 million, while subscription revenue will increase from $107 million in 2006 to $277 million," said Pidgeon. "While software sales are still significant -- increasing from $8 billion in 2006 to $9.5 billion this year -- content sold, accessed, or downloaded online to video game consoles over manufacturers' proprietary networks will remain the industry's most exciting growth opportunity in this hardware cycle."

Moving from the overall game marketplace to consumers themselves, IDGE released new information on the people purchasing games. IDGE's marketing director, Simon Tonner, provided data from their third annual U.S. Gamer Segmentation Study on the five key gamer segments, based on their attitudes toward gaming, as well as their social characteristics, and purchasing habits. The groundbreaking research provides industry professionals with uniquely in-depth information about how to best target gamers of all levels, from the most involved to the very casual.

"In order for game publishers and retailers to truly connect with today's gamers they need to understand the subtle but important differences in the role video gaming plays in their lives," said Tonner. "As gaming becomes more interactive and mainstream, marketers need to understand what motivates these various gamer segments, how their tastes differ and what are they looking for when shopping for their next game or console."

According to IDGE, the five gamer segments are as follows:

Core Gamers:     Core Gamers choose gaming as their main form of
entertainment and want to maximize their time gaming.
They prefer gaming over going to the movies or out to
dinner.

Status Gamers: Status Gamers are proud of their gaming skills and
enjoy being the first to try the newest and hottest
titles. They also like to discuss their gaming
experiences at school or work.

Social Gamers: Social Gamers view gaming as a communal experience.
They prefer to play games with people they care
about, forming a social link, and coordinate social
functions around gaming.

Active Gamers: Active Gamers prefer games where movements are
reflected in the game and allow gamers to get out of
their chairs. They use gaming as a physical release.

Casual Gamers: Casual Gamers use gaming as an emotional release and
as a way to play different roles. Casual gamers view
gaming as a secondary form of entertainment and don't
feel the necessity to be the first to try a new game.

"Besides differentiating psychographic profiles, the key gamer segments we identified also differ in their spending habits. 'Status Gamers' have spent the most on video games and systems over the past 6 months and are expected to spend the most in the next 6 months with 'Core' and 'Active' gamers close behind," said Tonner. "In the past 6 months alone, 'Status Gamers' have spent, on average, $296.20. On the opposite end of the spectrum, 'Casual Gamers' have spent $82.20 over the same time period."
 
So, what's a retailer to do when their higher margin products are siphoned off by other channels? Maybe providing a better customer experience for the Status gamer and innovative live community events to lure Social and Active gamers away from their consoles and into the stores. Video games and the video game industry aren't going away any time soon. And neither is the insatiable appetite for new experiences. We bet that retailers can find the right formula to stem the tide sooner rather than later.