• Business Week, Friday, March 10, 2006 10:30 AM

Yesterday DFC Intelligence told us to expect worldwide online gaming subscription revenue to reach nearly $7 billion by 2011, more than tripling the size of that market in the next five years. As Business Week points out, subscription revenue is only part of online gaming's business equation; greater subscriber numbers will also enhance digital distribution and advertising. That said, these worldwide figures can be a bit deceiving, since more than 50 percent of subscription revenue in 2005 came from Asia, most notably China, Taiwan, and South Korea. While online gaming has been successful in North America for the likes of Sony Online Entertainment, Mythic, PopCap and others, the article notes (with the exception of Square Enix and Blizzard Entertainment) "it is hard to point to a traditional publisher that has had a success in subscription online games since EA's Ultima Online." Also, two distinct genres dominate this market: so-called casual games, regarded as simple, easy-to-learn time-wasters, and massively multiplayer online games, which are immersive, complicated, and demand a significant time investment from gamers. The latter relies almost entirely on subscription revenue after retail sales, while casual games make money from advertising, digital distribution and subscriptions. DFC expects the next wave of video game consoles to boost the online subscription market, accounting for nearly a third of subscription revenues by 2011, but as everyone knows, a lot can go wrong with these types of predictions. Who's to say whether traditional video game publishers will embrace online games in the future? Will they see their markets shrink as consumers pay less at retail to pay for recurring subscriptions to the same games? What about the cost of maintaining and developing existing game engines?

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