Over two million gaming consoles were sold in 2009, a 13.4% increase from the previous year.
This is according to the first edition of the PWC's South African Entertainment and Media Outlook, which presents annual historical data for 2005 to 2009.
It also provides annual forecasts for 2010 to 2014 in the entertainment and media industry.
It states that console and handheld games represent the majority of video game spending, reflecting 64% of the market in 2009.
“The mobile market is the second-largest category, representing 16% of total spending. Growth has been fuelled by the introduction of new mobile phones that facilitate the playing of games,” the report states.
Vicki Myburgh, entertainment and media industry leader for PWC Southern Africa says: “We expect the growth rate to moderate somewhat over the next four years as this generation of consoles continues to age.”
Market drivers
According to the report, the console game market will continue to be driven by new games being marketed for the existing generation of consoles over the next few years. This includes Nintendo's Wii, Xbox 360 and PlayStation 3.
“The latest handheld devices, the Nintendo DS, the PlayStation PSP and the PSP Go also continue to support the market,” it adds.
It is anticipated that the online market will expand due to the increase in penetration of broadband households and growing digital distribution of content, PWC says.
“We expect that by 2014, the next generation of consoles will begin to be introduced, which will spur renewed growth in console games,” it adds.
Myburgh says SA should expect the growth rate to pick up in 2014 as the initial introduction of newer consoles is anticipated. “By 2014, an estimated 2.9 million games will be sold, up 4.7% compounded annually from 2009,” she adds.
The PC game market was flat in 2009 as consumers shifted to the newer consoles, PWC says. “The online games market in SA is relatively small because of low broadband penetration.
“Within this market, massively multiplayer online games (MMOGs), which allow thousands of people worldwide to play the same game simultaneously, are getting popular,” it adds.
The report reveals that the growth of smartphones with improved graphic capabilities will drive demand for mobile games.
“At the same time, new application stores that make the purchasing of games more user-friendly will increase the number of gamers willing to purchase games,” it says.
The growth of 3G networks, with faster speeds, will provide an environment enabling mobile games to approach the quality of console games, it also notes.
According to PWC, the market for PC games will continue to deteriorate as consumers turn their attention to newer technologies. “The growth of MMOGs, which usually require the retail purchase of a PC game, will partially offset the continuing decline of the retail PC game market,” it points out.
Video game advertising is emerging as an additional revenue stream, the report reveals. “The dynamic in-game advertising segment is increasing in importance and is being fueled by the growth of the online game market.”
Great expectations
The video games market, according to the report, consists of consumer spending on console and handheld games, personal computer (PC) games, online games, mobile games and video game advertising. “In the case of console, handheld and PC games, spending consists of the purchase of the game software.”
PWC states spending on mobile games consists of the cost of downloading games, and “spending on online games consists of subscriptions for services that enable users to play games on that platform as well as content that is downloaded to enhance the gaming experience. Spending on hardware and accessories used to play games is not included.”
According to the report, new games generally sell for a higher price compared with games that have been on the market for a number of years and which are often discounted.
“We expect a modest increase in the price of games through 2014 to reach an average of R367, a 1.4% compound annual growth,” Myburgh says. We expect spending to rise by 5.5% in 2010 and then to slow somewhat to 4.5% in 2013, she adds.
According to her, PWC expects a pick-up to 11.0% in 2014 associated with the demand for games for the new consoles. “For the forecast period as a whole, spending will increase from R787 million in 2009 to R1.1 billion in 2014, a 6.2% compound annual increase.”
The report also anticipates online games to exhibit the strongest growth of the end-user segments during the forecast period as broadband penetration in SA improves.
“Mobile game spending is anticipated to be the second-strongest consumer category as the number of gamers who use their phones to play increases.”
The Outlook includes historical and forecast data on the Internet, television, filmed entertainment, radio, recorded music, consumer magazine publishing, consumer and educational book publishing, newspaper publishing, business-to-business publishing, out-of-home advertising, video games and sports industries. It gives a detailed breakdown of each of these sectors.
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