Parks: Casual Gaming Revenue To Top $1 Billion By '13

The market has begun to gain traction across the board. Premium casual games, for example, will exceed $1 billion in revenue by 2013. Subscription services will become a major driver for growth in the casual game industry, increasing from $138 million to $417 million between 2008 and 2013, according to the research firm.

Video game makers are reaching beyond traditional target markets to find new buyers. "Take a look at Wii, for example," said Stuart Sikes, president, Parks Associates. "Nintendo managed to capture a market segment who didn't think of themselves as gamers."

Casual game companies will continue to serve females ages 35-54, but have put plans in place to attract other demographics with new game genres, distribution channels, and business models. Community features, subscription services, and advertising models are becoming increasingly important to casual game manufacturers.

And as the game industry matures, new models emerge. While subscription models tend to attract heavy gamers, those who play less frequently gravitate toward ad-supported or free games, Sikes said.

One model Sikes has been watching allows consumers to try before they buy. With free to play, players can sample the game--and if they want more, can subscribe, which also unlocks new features and levels. Free-to-play games, however, have a conversion rate of about 2%, which means the majority of trials do not result in revenue, he said.

U.S. consumers spent $491 million on premium casual games and services in 2008. Individual game downloads based on the try-and-purchase model accounted for 67% of the revenue. By 2013, expenditure on premium casual games content and services will reach $1.1 billion and the percentage of revenue from the try-and-purchase model will decline to 53%.

The virtual goods model, another where the game is free-to-play but supported by micro transactions, allows gamers to purchase new levels, tools to improve play. The game operator receives a commission on goods sold, or on player-to-player transactions. Today, this drives revenue for many game sites in Asia. Nexon America and K2 Network have free-to-play networks. SOE is introducing free-to-play virtual goods-based games "Free Realms" and "The Agency."

Virtual worlds and games that adopt a combination of virtual goods and advertising-based business models have growth potential. They can increase their user base fairly quickly because many are free to play and have social or network community features.

Massively multiplayer online role-playing games (MMORPGs), casual games, online console gaming, games-on-demand, and digital distribution services generated more than $2 billion in 2008. Parks Associates estimates that about 3.4 million tapped into subscription-based MMORPGs, and 800,000 households subscribed to premium-based services toward the end of last year. By 2013, those numbers should reach 4.6 million and 2 million, respectively.