As Video Games Encroach On TV, Industry Faces A Major Transition

Just as Madison Avenue begins taking the emerging medium of video games seriously as an ad medium, big changes are taking place within the sector, according to studies released this week by two of the industry's biggest players. A white paper released by video game trade magazine GamePro indicates that console-based video games are approaching a classic "transitional" phase between older and new generations of gaming systems. During such periods, the paper says consumers have traditionally stalled purchases of new software in anticipation of the new game platforms.

Meanwhile, another big industry publisher, Ziff Davis Media, has results of the 2004 edition of an annual industry study showing that console-based games have overtake PC-based games for the first time ever, and that video games are beginning to become a serious rival for other traditional media, especially TV.

The Ziff Davis study, "Digital Gaming in America," estimates that 54.5 million U.S. households played console-based games such as Sony's PlayStation2, Microsoft's Xbox and Nintendo's GameCube, while 52.3 million played PC-based games.



Perhaps more significantly, 26 percent of the respondents said their TV viewing had decreased in the last year, and 20 percent said they expect their TV viewing to decrease next year, as a result of video game usage.

"Not only is mobile gaming strongly on the rise, but consumers' interest in media and advertising in general has begun tipping towards digital games and game-related channels," said Dale Strang, senior vice president, Game Group at Ziff Davis. "Gamers generally preferred magazines and Websites over television for their gaming interests, citing magazines as providing credible game reviews and a relaxing experience."

The rapidly shifting patterns have encouraged some big agencies to create video game advertising specialty units, such as Starcom MediaVest Group's Play division, but none seem to have cracked the code yet on how to adapt videogaming into a mass medium on the scale of say TV, or the Internet.

Meanwhile, the Ziff-Davis study reveals yet another new dimension within the video game marketplace, the rapid expansion of so-called "mobile gaming." According to the study, the number of U.S. households playing cell phone games doubled to 16.3 million in 2004 versus 8.1 million a year ago.

How the transition to next generation console systems, which are not due out until 2005, will impact the marketplace is not clear say, according to GamePro, which describes the current industry transition as the "third" major phase for the industry.

"The console segment is at mid cycle, awaiting details on next generation systems expected in 2005," said Wes Nihei, editor-in-chief and vice president, of IDG Entertainment, publisher of GamePro. "Everyone is hoping for price cuts on hardware - and say the health of the industry is tied to both Microsoft and Sony giving in this year."

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