• by Kate Kaye , August 3, 2004

Call it a promising outlook for the state of hand-eye coordination. A new report from interactive entertainment research firm DFC Intelligence predicts that the worldwide online gaming market is poised to hit $9.8 billion in 2009--up 410 percent over the 2003 revenue of $1.9 billion.

The most significant growth factor: broadband penetration. According to David Cole, president of DFC and lead author of The Online Game Market 2004 report, broadband usage will rise from an estimated 81 million households worldwide at the end of 2003 to 228 million in 2009. The company foresees 376 million people across the globe playing online games in 2009, and predicts that the Asia-Pacific region will be the largest market for Web games that year.

"The access to the technology is the key underlying element of all of this," affirms Cole. "Broadband just makes playing games such a more pleasant experience." Leichtman Research Group, Inc. estimates that 23.4 million U.S. households subscribed to broadband at the end of 2003. Current U.S. broadband household penetration estimates range anywhere from less than 25 percent to over 45 percent. According to Cole, DFC measures South Korea as the largest market in the world for online gaming, with household broadband penetration at 67 percent. "I kind of agree with [the DFC report] as far as broadband being a big part of it," comments Dan Ferguson, creative director and co-founder at online gaming development and hosting firm Blockdot. Ferguson cites a recent increase in traffic to the company's Kewlbox.com game site on the weekends as well as during late-night hours, suggesting that users are no longer playing games only during their lunch breaks at the office. This may, in part, be the result of a steady rise in at-home broadband connections.

The DFC report also highlights a growth in the popularity of online games among people outside the stereotypical young adult male demographic. According to DFC, casual gaming sites such as Pogo, Yahoo! Games, and MSN Games at the Zone.com draw tens of millions of users, and many count adult females as 50 percent of their user base.

"Women that come to Kewlbox are extremely dedicated," observes Ferguson. "They like to form teams....They are competitive, but like the camaraderie of it." Sixty-five percent of the Kewlbox's visitors are females, says Ferguson, who notes that over two million unique visitors in all come to the site each month, and account for a total of between 400,000 to 500,000 game plays per day.

Kids, too, represent an emerging market for the gaming industry. The DFC report mentions subscription-based games like Disney's Toontown, a massively multiplayer Web game that lets players act out a cartoon fantasy, and advertising-supported sites like Neopets, which offers free games like Wheel of Monotony and Evil Fuzzles from Beyond the Stars. According to the report, Neopets, a virtual pet site, boasts over 20 million users, and rewards users for watching streaming video movie trailers and commercials by offering special Web currency called Neopoints that are used toward purchasing items for virtual pets.

Despite steady broadband growth and newly interested demographic groups, the report suggests that "Online game companies are still grappling with business models." DFC's Cole explains that game sites are not necessarily generating a lot of revenue through advertiser support alone, regardless of large audience numbers. Many are experimenting with small add-on subscription fees or game sales offers to supplement revenues.

"Online gaming is still an emerging industry," says Cole, "but it's proving attractive to a diverse audience."