Doug Twilleager's Weblog The Wonderful World of 3D

Games are huge - online games will be bigger

Something pretty amazing happened last week. Halo 2 earned over 100 million dollars the first day it went on sale. It was almost a race between Halo 2 and The Incredibles to see which entertainment property would earn the most. It is often reported that the games industry is bigger than hollywood box office - that is the revenue generated by movie ticket sales. Some of the details get left out. A large chunk of those game sales are actually hardware sales - the game consoles. Although those numbers trend downward as the consoles age. Also, notice that the hollywood number only include ticket revenues - not all of the extra revenues possible though properties - like merchandise and dvd sales. That does in no way take away from the fact that the Halo 2 numbers were all game software sales. But that isn't what I wanted to discuss. :^)

Here is the most amazing thing about the Halo 2 results. The biggest draw of Halo 2 is its networked gameplay. Reviews are starting to come in, and it is pretty apparent that the single player experience is nice, but it is the online gameplay that makes this game rock. And this is the way the games industry is turning. The 100 million generated that first day is just the initial cost to consumers for enjoying the game. To play the multiplayer aspects of the game, you must be an XBox Live subscriber. That is an additional subscription fee to access the online game world for XBox titles.

This is the great draw of online games to game developers and publishers. With most games, once the title has shipped, they get their initial sales revenue - and then that's it. With online games, the initial sales help cover development and deployment costs, but the subscription revenue is where the online service and the rest of the gravy pours in. A successful online game has massive upside if it executed and serviced properly.

Another interesting twist to this is that Halo 2 is a "hardcore" game. It is interesting to a very small population of the market. In a lot of ways, a large part of the games market today is aimed at hardcore gamers. With the exception of community web game sites, like pogo.com and Yahoo Games, games are aimed at fairly small markets. There are some anomalies - like The Sims and Myst - that have hit truly mass market acceptance, but they are rare. Online games will change that.

Games are social functions. Up until the invention of computer games - all games were played in a social setting. Computer games were born and bread to be single player experiences. This is not the norm in society. Our recent history in computer video games can be seen as a small blip in the radar of human game playing. The video game industry is finally figuring this out. Game communities and social games are starting to emerge.

Game communities will be sprouting up everywhere. They already exist in relatively small pockets. There are Star Wars Galaxies communities, Everquest communities, casual game communities, etc... Which reminds me, why are they called casual games? I just checked pogo.com - 209,000 players, Yahoo Games - 176,000 players, MSN Games - 125,000 players, all playing right now. Doesn't sound casual to me. Anyways, it will get really interesting when more of these casual gamers get put in more places - like mobile.

Mobile game communities will start to launch this year. It really is a natural extension. It is a social device used to keep in touch with your own individual community. So, it is natural to use it for community based games. Then the number of people playing online games gets really interesting.

The 100 million spent on Halo 2 ends up being around 2 million players. Not too bad, but will soon have over 500 million Java phones in the market. If 10% of those people pay $2 a month to participate in a mobile games community, that is a 1.2 billion business. And that is an extremely conservative number. Games are huge - online games will be bigger. :^)

Posted at 09:10PM Nov 15, 2004 by dtwilleager in General  |  Comments[1]