For several years, the United States has been the dominant force in the gaming industry, a truly lucrative market earning billions of dollars in profits each year. In 2009 total video game revenues reached $77 billion, rivaling that of Hollywood with global revenues reaching $85 billion during the same period. But with current trends in the gaming market, the US will eventually relinquish its hold of the top spot to China by the year 2014 according to new research conducted by industry expert Digi-Capital.
The main growth area in the gaming market has shifted from the console or personal computer based options and is strongly moving towards online and mobile platforms. This is attributed to the explosive popularity of smartphones as well as other mobile devices. This includes internet-ready gadgets like tablets which users find more convenient to use than traditional consoles. China, whose gaming market is focused online, is now on the road to dominate the global market
The Rise of Social and Mobile Games
The report from Digi-Capital predicts the gaming console market to stagnate is growth and revenues in the coming years and will eventually be replaced by online games and social networks. The popularity of online games in social networks has been tremendous. Video game developers such as Zynga are earning billions in revenues from integrated ads and the micro-currency systems which was very effective in making more people play more games by charging very small amounts for game play and other accessories.
Mobile and online games are expected to grow with an 18% CAGR, earning revenues of up to $44 billion or 50% of the total $87 billion that the video games market is expected to reach. Online and mobile game developing companies in the US and Japan are acquiring additional investments to further this growth, a sharp contrast to the stagnated growth of gaming console publishers which require millions of units in sales just to break even.
China Gearing Up to Be Top Gaming Market
Chinese companies are always looking for two types of investments. One is investing in foreign companies which they will use as business platforms so that they can leverage their domestic strength and achieve international growth. Another type is investing in foreign technologies and intellectual properties which they in turn will leverage to dominate the enormous Chinese domestic market. This trend is what’s happening now in the gaming market.
The Chinese games market is currently at 12% of the world’s total as of today but is expected to take on 50% of total revenues by the year 2014 with its current growth rate. This will be in contrast with the US share during this same period which is expected to decrease from 26% to 22%. China is now powering up with huge influx of capital investments with companies such as Tencent moving beyond the local sphere and grabbing a major hold in the US video game market with the recent acquisition of Riot Games.
Tencent is already peaking at 20 million online users at the same time – a figure bigger than the population of many countries – and is expecting these numbers to grow in the coming periods. Aside from Tencent, other Chinese companies such as ChanYou.com, Giant, NetEase and Shanda are experiencing billion-dollar growths – all of which are expanding rapidly and growing beyond the confines of their home markets.