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Interactive Gaming Industry Targets Entertainment Lead

5/28/2001 02:00:00 AM Eastern

LOS ANGELES — Bolstered by the release of next-generation game consoles and increased online game play, the interactive entertainment (IE) industry is poised to continue growing at its five-year 15 percent annual rate – a pace more than three times that of the film and computer hardware businesses.

That was the assessment of Doug Lowenstein, president of the Interactive Digital Software Association (IDSA) in issuing the State of the Industry Report for 2000-01 at the Electronic Entertainment Expo (E3). According to IDC Research estimates quoted by Lowenstein, the IE industry will reach a level of $16.9 billion by 2005 with an additional $1.1 billion coming from online gaming then.

"Even if the actual number is only two-thirds of the IDC estimate it suggests that game revenue will soon once and for all leave the motion picture box office behind for good," Lowenstein said.

"According to many analysts, the new game consoles that will be launched here at E3 will eventually be in more American households and any previous game machines," Lowenstein said.

Citing Forrester Research numbers, Lowenstein said video game consoles would be in nearly 70 million households by 2005.

"That's not the 90 percent penetration level of VCRs – yet," he said. "But the 70 percent level would represent one of the most successful consumer electronics products in American history."

The demographics bode well for such optimism, according to Lowenstein. Deutsche Bank Alex Brown found that the target population for the video game industry in 1980 was 20 million Americans. Today the target population for video games is 96 million and by 2005 it will be 119 million.

Also changing is the way in which video games are played. According to an IDSA 2001 consumer research, nearly three-fifths of all console units are now located in either family rooms or living rooms.

"This is significant," Lowenstein said, "for it means that video game consoles occupy a central place in the home entertainment complex."

The research also indicated that video game players are no longer mostly teenage boys. Today's video gamers are everyone. The most frequent PC gamers are older than 18 and 57 percent of the most frequent console gamers are older than 18. Some 40 percent of the most frequent PC gamers are female and 36 percent of the most frequent console gamers are women, Lowenstein reported.

"The average number of persons per household who play games ranges from 2 for the console to 2.5 for the PC," the IDSA president reported.

Those people who report playing games most often in the home say they are playing more often, with the former average of PC game play rising from 10 hours per week last year to 11 hours in 2001. The most frequent console gamers report using their systems 10 hours per week, up from about 9.7 hours per week a year ago.

"What does this mean for other entertainment?" Lowenstein asked. "Thirty six percent of the most frequent game players tell us they are watching television less and playing video games more."

Most telling, Lowenstein said, is that 34 percent said they found video games to be the most fun form of entertainment.

"More important for the future of entertainment, 57 percent of those who described themselves as the most frequent users of video games in the home, say video games are more fun than any other activity with TV a distant second at 15 percent."

Other IDSA findings showed: 32 percent of Americans say they play games on handheld systems, 5 percent play games on PDAs and 11 percent say they play games on cellphones.

A big source of future growth will come from online game playing, Lowenstein said. Quoting IDC Research, he said about 40 million Americans play video games online, and 72 million will play online by 2004. IDC estimates that revenues from online games will reach $2.3 billion by 2005.

The IDSA consumer surveys showed the percentage of the most frequent gamers who play online grew from 19 percent last year to 24 percent this year. Lowenstein the report also shows "a strong increase in the amount of gamers accessing the Internet through cable modems and DSL services.

"Analysts predict that broadband penetration will reach 25 percent of U.S. homes over the next several years, and this surge in highspeed access bodes well for Internet games," he said.