From computer games and internet online gaming to games played on wireless devices or advanced consoles like Microsoft Corp.’s Xbox, these forms of interactive gaming entertainment are producing soaring revenues.
But revenue is only one of many benefits and the current legion of
games developers, distributors and device makers are not the only ones that
stand to gain. By riding this interactive wave, many media, entertainment, communications and technology companies can use games to either build customer loyalty, drive penetration, provide added value, partner with sponsors or
extend brands.
Games and gaming offer a variety of business opportunities to companies either inside or outside of the traditional games sphere. For companies that are involved directly in games creation, distribution, or
devices, the revenue potential is vast. The US interactive games market, including PC, videogame console, and online games played for fun and entertainment, generated an estimated $10.9 billion in revenue in 2001 and is projected to grow to more than $18 billion by 2005.¹
Interactive gaming, comprised of games played for money
such as online lotteries, sports betting and other legalized gambling, produced
an estimated $3.1 billion in revenue in the United States in 2001, an amount
that is expected to more than double by 2003². U.S. Internet gaming is
forecasted to significantly increase due to new gaming providers, greater
consumer acceptance, and predicted favorable legislation. Globally, the
opportunity is much larger due to a rapid growth of online gaming in Europe and
the Far East.
In addition, the audience for interactive entertainment is expanding due to the growth of technology platforms that deliver a range of
games and gaming experiences, from rich, high-end videogames for loyal gamers to simpler brain-twisters for mainstream players. While PC and console games will capture most of the market in the near term, wireless and interactive TV
platforms will grow rapidly over the next few years.
However, research has shown that global media companies are unequally prepared and equipped to exploit the interactive gaming environment.
In recognizing this expanding opportunity companies need to think quickly about how they plan to approach the vast gaming world. If they choose to ignore or wait out the market, they could be left behind in the competitive race for audience and market share. Furthermore, gaming could affect existing media
assets, possibly eroding market share and/or asset value over time. All of this amounts to a call to action for media & entertainment companies: get into interactive games and gaming today, or risk the loss of revenues, brand equity, and customers in the future. So, where do they begin?
How to Play To take advantage of this opportunity, companies need to take a holistic view of the games and gaming markets. Each participant must determine where they exist in the value chain, which consists of three main parts: content creation, delivery platform and consumer experience. Next they must determine what their objectives are, be it revenue generation, customer loyalty, product extension or brand building.
Alliances and partnerships are also key. Competition in the games and gaming markets is fierce and a return on investment is far from guaranteed, so it is difficult for any company to go it alone by making a pure-play in the games arena. Indeed, some players may need to create alliances with companies that they may directly compete against in other businesses. Each
company will need to decide whether their optimal strategic option can be best
achieved through alliance and partnering or merging and acquiring.
Alliances are most likely to be successful where the involved companies have complementary cultures, capabilities and customer bases. Currently, existing competitors in the content development and publishing area, such as Electronic Arts and Sony, are linking with players in
the delivery area. Along the same vein, other companies are teaming to increase
their competitive position; for example, Sony and AOL Time Warner are joining in part to improve their position against Microsoft.
Current non-participants can join through content development or sponsorships that extend their brand. For example, a packaged good provider like Heineken has an opportunity to leverage its brand through a gaming sponsorship. Each company needs to determine a role that makes the most sense for its brand.
There is a broad array of content and technologies that
participants can leverage, from simple games like Tetris to the rich graphic games of the advanced consoles from Microsoft, Sony and Nintendo. With wireless and iTV services, it is incumbent upon providers to offer applications that are simple and intuitive to play so that they produce an instant take-up by a large audience. The key to a good interactive game lies in the story that it tells, the creation of a whole new reality that appeals to a vast audience, not in the level of complexity it challenges users to overcome.
However, even if they get all of the above just right, companies still face significant challenges in taking advantage of the business opportunities represented by interactive games and gaming. These challenges fall into the following categories:
- Consumer proposition and brand—Consumers are segmented by varying usage of games, ranging from casual to avid players, and providers need to develop innovative
propositions around these groups.
- Technology and infrastructure—Each delivery platform has unique characteristics and content must be provided through a scaleable and efficient infrastructure.
- Value chain—A company’s position in the value chain needs to be aligned with the company’s overall strategic objectives.
- Strategic partnering and organizational change—Looking externally requires an examination of a company’s ability to realize its ambitions and tailor its organization
accordingly.
- Revenue streams—Various options, whether subscription, pay-per-play or sponsorship based, need to be properly fitted to the offering, platform and targeted consumer segment.
And the Winners Are… Once the pieces are put into place, and the market has begun to mature, it is likely that the interactive entertainment business will be led by several types of companies, each with different assets and
capabilities. They include:
- Rights owners—Success in the games market depends on great games.
- Distributors—Size matters, and the biggest distributors can buy the best content.
- Technology providers—Specialist technologies, user friendly
software and efficient distribution networks are key.
- The owner of the consumers—By controlling access to customers, network operators and TV broadcasters are eyeing the publisher/aggregator functions.
- Major entertainment brands—They understand the importance of
branding and can use it in a cross-media concept.
While these players have the upper hand, both traditional and non-traditional participants have many opportunities to benefit from games and gaming, provided they determine their role, deal with the challenges of the medium and join with the right players to achieve their objectives. With the
coming upsurge in interactive entertainment, many companies will be big winners, if they play their cards right.
About the Authors: Joe Erickson is a Partner with Accenture with global responsibility for the Games, Gaming and Portal industry segments and Altaf Kara is a Partner with the Accenture Media & Entertainment practice.
¹ Veronis Suhler/IDC, PC Data, Forrester, Accenture analysis (May 2001)
² The American Gaming Association, Christiansen Capital Advisors LLC, Datamonitor, Accenture analysis
Talk to someone about this topic To Top |