Global games software revenues will peak at $21.6bn in 2004
The emergence of new home consoles has revitalised the electronic games market globally and attracted renewed widespread consumer interest. Datamonitor predicts that the games software revenues globally will grow from $17.7bn in 2001 to $21.6bn in 2004.
2004 will represent a peak in terms of revenues for the games industry. The market will start to decline in 2005 as consoles reach a maturity stage in terms of penetration and sales. However, Datamonitor expects that Sony and Microsoft will launch the successors of their current consoles by this time, which will act to revitalise the market.
The US will remain the largest single market whilst Asia Pacific will lead the industry in terms of revenues
Asia Pacific will lead the industry in terms of revenues ($7.6bn in 2004), with Japan continuing to drive this region. Although Greater China (China, Hong Kong, Taiwan) will experience strong growth, authorities still have to tackle serious piracy problems in order to achieve the full potential of these territories.
Meanwhile the US will remain the largest single market for games with $7.4bn in 2004. The European market will be worth $6.7bn in 2004 with the UK accounting for 30% of total revenues, closely followed by Germany.
According to Datamonitor, although PC gaming will represent a stable driver for the market, growth will stem mainly from console gaming. The co-existence of three major home consoles in the market will provide the public with great diversity in terms of games. Apart from the increasing power of the next-generation consoles, which will deliver near photo-realistic graphics to the public, the addition of appealing multimedia features in home consoles, such as DVD players, will help broaden the penetration of home consoles into homes. Datamonitor believes that console online gaming will also be a major factor in the success of this new generation of home consoles.
Although Microsoft's entry into electronic games poses a threat, Sony and Nintendo will maintain an overall lead
Sony will once again dominate the home console market. The initial lead taken by Sony's PS2 in the market will prove unassailable for the two rival consoles, Microsoft's Xbox and Nintendo's GameCube. The strength of Sony's PlayStation brand with the public, combined with a competitive price and a massive catalogue of quality games, will maintain the lead of the PS2 in the market for the foreseeable future.
As proven by the recent launch of the Xbox in Europe, the initial high price tag of the Xbox will hurt its commercial success in the short term. However, Datamonitor believes that coming price cuts, combined with the raw power of the console and its built-in Internet capabilities, will enable Microsoft to overtake Nintendo for the second place in the market. Although Microsoft will not succeed in threatening Sony's hold, it will successfully establish the Xbox brand as a serious name in gaming, which will be of vital importance in time for the next console war.
Although Nintendo's GameCube will reach a significant installed base due to a very attractive price and a loyal fan base attracted by Nintendo core brands (Mario, Zelda...), Datamonitor believes that it will struggle to create a mass-market around its offering in the same way as Sony's PS2. Nintendo's current lack of online gaming initiatives could also prove harmful for the long-term prospects of the console. However, Nintendo will once again establish a quasi-monopoly in the hand-held console market with its Game Boy Advance. By combining revenues of the GameCube and the Game Boy Advance, Nintendo will achieve a higher market share than Sony, giving Nintendo much flexibility for its long-term strategy.
Adrian Drozd, Datamonitor games analyst comments:
"There is no doubt that the PS2 will retain its leading position in the home console market over the next few years. By the end of 2005, there will be a global installed base of over 90 million for Sony's latest console, which will dwarf the Xbox total of less than 40 million. However, although Sony has gained the initiative in this round of the console battle, Microsoft is well placed to challenge it when the next generation of consoles is launched. It is highly unlikely that the US giant will allow its main competitor to steal a march in the way that Sony was able to do with its early launch of the PS2."