Games makers play catch-up with mobile market
The bass and drums are as loud as ever, but the mood music has changed at Gamescom, Europe's biggest gaming fair, as developers whose bedrock business has targeted console gamers play catch-up with the mass mobile market.
Smartphones such as Apple's iPhone and Samsung's Galaxy as well as tablets have revolutionised not only the mobile world but the gaming universe.
"Ten years ago we used to measure our market in terms of 200 million people. Now we are at a billion people playing games and we have a straight line view on 2 billion," said Frank Gibeau, head of labels at Electronic Arts.
In Europe, 36 per cent of 11.3 billion euros spent on games in 2011 came from mobile and digital channels, IHS Screen Digest data shows.
"We expect that to increase to 44 per cent this year. By 2016 we are forecasting a 54-per cent share for digital and mobile channels," said Piers Harding-Rolls, Head of Games at the research firm.
"At the moment, it's not only what you play that is important, but also where you play," Jim Ryan, Chief Executive at Sony Computer Entertainment Europe, told a press conference.
Investors are beginning to ask how traditional games distributors such as Electronic Arts, Activision Blizzard and Take-Two Interactive Software will cope with the competition.
Will the makers of hits such as "Star Wars", "Call of Duty" and "Grand Theft Auto" be outplayed by the likes of Zynga, which distributes the large majority of its games via Facebook.
As if to mark a changing of the guard at the Cologne games fair, Sony, which makes the PlayStation console, is the only one of the big three console makers that has even turned up.
Microsoft and Nintendo, makers of the XBox and Wii consoles, respectively, have decided to showcase their products later this year.
Free-to-play here to stay
Since the introduction of so-called free-to-play games on personal computers, smartphones and tablets, the ground is changing beneath the feet of traditional makers.
Customers can get to know games without spending money, and only if they try it and like it do they have to start paying. And they can add new levels to a game for just a few euros, where once their only choice was to pay 40 or 50 euros for a disc.
The new model could also work to the benefit of developers.
Instead of spending millions upfront, they only need to build a very small portion of the game, test it with real gamers and learn what they like and don't like.
"We like this new model," EA's Frank Gibeau added. "It's a lot more like a life operation that you continuously build. It's a lot more like a service."
Although the gaming industry is usually fairly resilient in economic downturns, the free-to-play and online segment is actually helping it grow through the tough times.
"We know from the old Romans, even in worse times people need entertainment. People stay at home and spend more on home and family entertainment," said Uwe Bassendowski, managing director at Sony Computer Entertainment in Germany.
He expects a slight decrease in German sales from discs, but mainly due to lower prices. "However, this effect will be more than offset by revenues from our online business. So bottom line, we expect to grow our revenues."
"It is not even a blessing in disguise. They are right there," EA's Chief Operating Officer Peter Moore said.