In a Fragmented Market PC Games Lead the Way

February 29, 2008

This month DFC Intelligence announced the acquisition of tools and technology research company M2 Research (press release). This acquisition will help us expand our coverage of the critical issues and challenges the interactive entertainment industry faces cost effectively delivering products across multiple markets and platforms, using multiple business models. The game industry is growing on a global basis, but controlling costs is becoming more critical than ever. Furthermore, the issue of cost control is complicated by the growing number of platforms being used for games. Consider that in 2007 some of the biggest selling games were for the Xbox 360, a platform that came in sixth place worldwide for unit shipments of video game hardware in 2007.

In today’s market the dedicated video game systems are only one piece of the equation. In terms of revenue, the largest single platform worldwide for 2007 was the PC. On a global scale, the PC as a gaming platform has maintained strong growth for some time. DFC estimates there are over 260 million PC gamers worldwide, and that should grow to close to 350 million by 2012. Of course, many games on the PC are available for free and it has always been difficult to generate revenue from the PC game market. However, as mentioned, DFC Intelligence estimates the PC gaming market is the largest single game segment on a revenue basis and it is expected to grow 80% over the next 5 years. On a worldwide basis the PC gaming market (including online game revenue) accounted for nearly 30% of interactive entertainment software revenue in 2007. Of course, that does not include all the PC hardware sales that are generated from gamers.

Of course, a major problem with the PC as an entertainment platform is it is somewhat amorphous in terms of adhering to a strict set of user-defined parameters. However, that downside is also in part what makes it such a distinct platform. The PC, like the TV has become a necessity in the household as a way to communicate and stay connected with others. There are obvious disadvantages of the PC over consoles that are well recognized – the cost of the hardware and the lack of plug-and-play features. However, unlike ten years ago, everyone now needs a PC and it is the video game systems that are the luxury. This is especially true in emerging markets where the PC has become the game platform of choice.

The PC platform is also the driver of much of the industry technology and innovation. The openness and dynamic nature of the PC lends itself well to advancing technology more rapidly than its closed-boxed counterparts. It is updated frequently, so when there are new technology shifts the PC is first to market. Game consoles on the other hand are updated every 5 years, leaving a great deal of time to pass before technology can catch up. It is this openness that allows for endless experimentation of the entertainment itself, as well as new business models distribution and revenue outlets.

Of course there are a growing number of gamers spending big bucks on souped-up, cutting-edge PC systems such as Intel’s Skulltrail or AMD’s Spider that can cost upward of $10,000. While uniquely impressive, these systems do not make up the core of the market. Much of the growth for PC games has come from the growing number of sub-$1,000 systems that have mass appeal to engage both individual and multiplayer gaming.

In 2007, the top selling title was actually an online game, Blizzard’s World of Warcraft. This is a product with over $1 billion in revenue for 2007, its third full year of operation. Of the 10 million World of Warcraft subscribers, 2 million alone were added just in 2007, many of whom are coming from emerging markets such as Asia.

The PC outstrips all the other platforms in emerging global markets. What we are seeing is a demographic shift in the industry whereby the PC is no longer viewed as an advanced piece of consumer electronics relegated to only the upper class. Instead it is becoming viewed as a vital household appliance used as a form of communication and expression in a world that has become borderless.

As such there are many variables needed to properly address the growing and fragmented market that is gaming. As the purchasing habits of consumers change there is a growing necessity to address other purchasing criteria aside from straight retail sales. Retail figures alone do not adequately capture the growing trend of online transactions both for digital distribution and micro-transactions. Additionally, as the tools are becoming more accessible and people start to experience more with the social dynamics of gaming, the PC lends itself well for consumer-defined content.

Whether it is the epic/AAA games, the multiplayer elements of social gaming, or casual gaming, consumers are selecting multiple platforms to best fit their lifestyle and demographics to their entertainment preferences. In the U.S., it is becoming routine for a single consumer to play games on consoles, PCs and portable game systems. With the acquisition of M2 Research, DFC Intelligence will have a growing focus on tracking and analyzing the PC as both a dedicated game platform and a driver of the tools and technology that are necessary for all aspects of video game business.

DFC Intelligence’s research services provide detailed strategic analysis of the interactive entertainment industry.

A sample of reports on the video game and PC game market include:

DFC Dossier The DFC Dossier is published ten times a year and provides subscribers with regular updates and analysis of the latest market trends. If you would like to see a copy of the latest DFC Dossier contact Ozzie Monge at

The Online Game Market This 800 page report contains a comprehensive analysis of the online gaming market. Includes current sales trends, market forecast, and in-depth company profiles.

The Market for Portable Video Games This 185 contains complete five-year forecasts by platform, a look at portable game software, portable game online trends, and business models and revenue expectations for game publishers.

Worldwide Market Forecasts for the Video Game and Interactive Entertainment Industry Complete five-year forecasts for all individual console and portable game platforms by region (Asia, Europe, North America, rest of world)) through 2012. Also included are PC game forecasts and historical sales figures. The report has several scenarios for future market growth including an analysis and forecasts for new systems from Sony, Microsoft and Nintendo, as well as portable game systems.

The Business of Computer and Video Games This report includes an historical analysis, overview of individual hardware system, top-selling games, game genres, consumer demographics, business models, retailer profiles, marketing elements and case studies, industry trends.

Market Leaders in the Video Game and Interactive Entertainment Industry This 750+ page report profiles major companies in the interactive entertainment industry. Each individual company report is about 25-50 pages and has an historical background, financial overview, product analysis and a frank assessment of the outlook for that company.

Overview of the Video Game and Interactive Entertainment Industry This report is designed to provide an overview of some of the key trends in the video game and interactive entertainment. The focus is on highlights from the forecasts and analysis of trends, game genres and business issues found in DFC reports.

The Game Market in China This 350 page report contains a complete look at the rapidly growing Chinese game market, including forecasts to 2010, government regulations, market entry strategies, business models, distribution options, game genres and numerous company profiles and case studies.


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