Online and the next console generation

DFC Intelligence just released a research report titled Will Online Games Decide the Upcoming Video Game Console War?

Their answer was no (more or less).

They took the position that, in spite of Sony’s public posturing, Sony wouldn’t emphasize their on-line service (competing against X-Box Live) very heavily for the coming generation. Particularly striking was this:

However, even with our strong growth forecasts we estimate that less than 25% of the new console systems get connected to an online service by 2011.

For me, this is interesting in thinking about X-Box Live Arcade – the service on X-Box that sells downloadable casual games. Some in the casual industry have been touting it as a potentially huge market in the next 2-3 years. Upon X-Box 360′s launch, with a relatively weak lineup of AAA titles, there was a lot of attention on the Arcade lineup of simple 2D and 3D casual games – Geometry Wars in particular got a lot of attention, and conversion rates were supposedly pretty high.

Like DFC, I’m not entirely convinced that X-Box Live Arcade, and it’s equivalents on the Sony and Nintendo platforms, will eclipse the PC casual/downloadable market in the next couple years. Early adopters of consoles tend to be much more technical – more willing to hook consoles up to the internet and try out odd download services. I think connection rates, download rates, and conversion rates will all fall off significantly as the next-gen installed base goes up.

Maybe it’s just my personal biases. I’ve got all 3 previous gen consoles in my home office, hooked to a nice TV, with a broadband connection 3 feet away. But I’ve never connected any of the consoles. I can get the casual games I want easier through the PC. And so far, the temptation to try sports games on-line against trash-talking twelve-year olds hasn’t tickled my fancy.

If the portals are correct and the biggest market for casual games is 30-50 year old women, then I don’t see that consumer rushing out to buy $500 consoles and hook them to the internet.

Long term – 5 or 10 years from now? Maybe. Would I turn down good opportunities on X-Box Live Arcade in the short term? No. But it’s not going to be a focus of mine in the near term.

8 Responses to “Online and the next console generation”

  1. CasualProducer Says:

    3 million Live Arcade games sold, targeting to those around the hardcore gamers (wives, girlfriends, mothers, kids). An average 20% conversion rate. One title seeing 39% conversion. 60% of the consoles out thee are using xbox live arcade. These seem like good numbers to me. Source – XBOX Live Arcade Session – GDC.

  2. Phil Steinmeyer Says:

    3 million Live Arcade for X-Box 1, not 360, right? (’cause if it was the latter, that would mean an attach rate of 4:1 or so, which is just not credible for a 3 month old console that not everyone has hooked up on-line).

    Assuming it is 3 million for X-Box 1, that’s better than I would have thought (though still pretty small in comparison to PC downloadables). Is there an online resource with that kind of data?

  3. Pag Says:

    I think X-arcade could be really good for smaller scale hardcore games and for active gamers (gamers between casual and hardcore; details at http://sacredcows.pagtech.com/?p=35). People interested enough in gaming to spend a few hundred dollars on a dedicated gaming machine aren’t the same people who buy Bonnie’s Bookstore, frankly. I see no reason why serious gamers couldn’t be interested in fun, cheap, focused games to download.

    A game like Geometry Wars is much better suited to that market than Bejeweled. It may evolve over time, but for the next few years X-Arcade will be best suited for non-casual games.

  4. CasualProducer Says:

    I didn’t have time to see if the information was posted anywhere last night. This was basically the information they gave during the presentation at the GDC. I will see what I can dig up and shoot it over to you. I still say the conversion rate you get from people who check out the games is pretty remarkable.

    Also, keep in mind that Arcade is not targeted at the person who bought the console. It’s targeted at the people around that person who bought the console (girlfriend, parents, kids, etc..). If you get the person who bought the console playing the games, then that is a bonus.

  5. Scott Says:

    Given the growth curve of wifi and online doodads, 25% seems like an awfully low prediction to me looking forward in 5 years. Maybe 25% PAYING supporters ala Xbox Live Gold is high; but I’d have to guess that the next next-generation systems will be wifi and having some sense of connecting to some kind of free very basic service (Silver) at a much higher rate than 25% with cheap downloadables. Then again, I’m no expert on the subject.

    Does anyone know what the percentage of Xbox360 user is who are right now using the xbox live service?

  6. kim pallister Says:

    It was 3M *downloads*, not sales. 20% conversion rate on average. It’s a very healthy business given the installed base. I *think* we posted the slides somewhere, but am not certain. I know some folks blogged pretty accurate transcripts.

    I agree with Phil that I don’t see it eclipsing PC casual anytime soon, but there’s a couple points to note:
    - It provides a market for alternative genres that traditionally don’t do as well in casual (retro arcade, niche hardcore genres, etc)
    - It’s a *great* opportunity for higher quality casual titles to grow revenue across additional platforms.
    - It opens the market for additional business models as well (e.g. ad-sponsored)

    Personally, I think DFC’s 25% number is way low. Just one man’s opinion though. :-)

  7. Matt Says:

    Those numbers are not quite correct. I’m pretty sure it was 3 million games downloaded. And people are buying 20% of games they download. Xbox Live Arcade’s figures are fantastic.

  8. JameyT Says:

    You should put a toe in the water and come play online. And no that doesn’t equate to having to play with foul-mouthed-Ritalin-poppling 12 year-olds.

    There are a number of great communities built for adults that help you fill up your friend’s list on Xbox Live so that you’ll always have others of your ilk to play with. Our site http://www.geezergamers.com is such a site.

    And the comment above about casual games finding a way to others in the house rings truer (from first-hand experience) than you would initially think. It’s the Arcade games that get the friends, family and spouces excited about the 360. They could care less about shooting Nazi’s or buying horse armor, but put them in front of Bejewelled or Zuma or Feeding Frenzy and then try and wrest the controller out of their hands.

    We’ve witnessed the phenomenon of wives now demanding Zuma time or Bejewelled and the husbands having to wait their turn. The wives are now driving Arcade purchases.

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