February 2009 Please use our online form to request a PDF copy of Playing Games Playing Games: A Revolution In Interactive Entertainment is a preview of trends in the global gaming environment and their impact on the service provider ecosystem. The videogame industry has experienced dramatic growth over the past few years. In North America, software sales of games surpassed $16 billion in 2007 (well over the $10 billion in Hollywood film box office sales over the same period) and are expected to grow at over 16% annually for the next five years. This rapid growth is fueled by technological progress including increased network access, faster broadband speeds, next-generation consoles and more capable mobile devices. Not only is the gaming industry experiencing significant growth, but it is also going through dramatic changes. Game developers are continuing to expand the gaming market by tapping into new customer segments. In the process, many types of ground-breaking games are being developed which in turn have facilitated the creation of new gaming genres as well as innovative business models. The resulting user base is widening the gaming demographic across numerous platforms including PCs, consoles and mobile devices. In light of this growth, service providers have two options: Either sit by and watch players from other industries or new market entrants capture the value created, or position themselves to best take advantage of this growth by becoming an integral member of its value chain. Historically, service providers have let others capture value in new applications and content areas, such as with iTunes and digital music, where the service provider solutions were too late and ineffective to make a difference. Doing the same with gaming would be a mistake given that larger revenue opportunities are at stake. Unlike music, gaming is an interactive experience. It goes well beyond just filling time between activities to becoming a prominent, and for some, a dominant mode of entertainment. Thinking of gaming as just another form of entertainment nestled as a subcategory within information and entertainment services will limit its market potential. It is imperative that service providers first recognize the importance of gaming as a category moving forward and position themselves adequately to capture value. For some it may involve fundamentally changing the way business is done, but as we will show through the course of this study, such changes are a critical part of being a market player in the gaming sector. In this study we will also examine the changing dynamics of the gaming industry, its implication for service providers, as well as ways in which service providers can best avail themselves of the emerging opportunities. Some of the key questions we address include: What are the key lessons learned from service provider experience with networked gaming to date? How will network requirements be impacted by online and mobile games? How will emerging trends in gaming impact the fixed and mobile market dynamics? How can service providers best position themselves to capture value from emerging gaming business models? What are the key opportunities for service providers? What will they need to do in order to compete successfully in gaming moving forward? What are the risks to service providers if they do not react appropriately to the changing gaming ecosystem? Scope and Methodology Gaming is a very broad category and for the purposes of this study we have focused exclusively on digital games that can be played on one of many digital devices namely a personal computer (PC), a console (Xbox360, Sony PS3, Nintendo Wii), or a handheld device (mobile phone, Nintendo DS, Sony PSP). On these platforms all games can be broadly categorized as core, casual or gambling, however this study only includes an assessment of core and casual games. We recognize that digital gambling has been a rapidly growing category within gaming and warrants a study of its own, but due to regulatory constraints in the US and other countries, which potentially threaten this opportunity, we have excluded it from this study. Throughout this study we will collectively use the term service provider to reference traditional telecom service providers (Incumbent local exchange carriers (ILEC), competitive local exchange carriers (CLEC)), mobile network operators (MNO), Pay TV service providers (Cable, Satellite and interactive TV), and Internet service providers (ISP). Where appropriate we have also referenced the above players by their general category such as MNO or Pay TV providers. For this study we have relied upon: 1) Secondary research based on a comprehensive review of industry context and recent developments. 2) Primary research based on numerous interviews with major service providers, gaming industry players, and additional value chain participants. 3) Qualitative and quantitative strategic analysis of emerging trends and their impact on the gaming market. Questions or comments? Contact us. Playing Games has received a lot of press coverage. Learn more>