We all pretty well knew that gaming was a big industry. Just looking at E3, at the Penny Arcade Expo
, at the growing presence of gaming in the recently concluded Consumer Electronics Show all cements the idea that gaming is getting much more mainstream than it once was. But the growth of gaming really got a dose of quantification earlier today when Digi-Capital, a game investment bank, noted that mobile gaming could ultimately push the industry into levels of revenue that some may never have expected.
Digi-Capital's report said that, with mobile gaming in place, the whole industry could reach $100 billion by 2017. Further, the mobile and online game sectors of the game industry could ultimately reach a compound annual growth rate (CAGR) of 23.6 percent by 2017 as well, making just the mobile and online gaming market worth around $60 billion. Digi-Capital's managing director Tim Merel noted that, despite the impressive potential upside, games would need to focus on “long-term engagement performance” to help realize the projected numbers.
Merel further went on to note that one of the biggest drivers in the sector is Asia, offering up terrific revenue growth and some downright dizzying profit margins. Indeed, between Asia and Europe, the two regions may account for as much as 80 percent of global revenue share when it comes to online gaming and mobile gaming. The remainder of the numbers Merel offered projected an even clearer picture: nine out of 10 of the biggest merger and acquisition deals started with Asian buyers; that compares to eight out of 10 a year prior. IPOs
in the game space, meanwhile, featured 13 out of 15 companies located in China, Japan or South Korea
However, Merel did note a gap in terms of early-stage funding, as metrics and analytics measures are a big part of fundraising, a gap that may hamper some of the industry's ultimate growth. Merel finished up by noting that, while 2013 was a “year of transition,” 2014 is likely to prove a “year of both growth and disruption.”
Of course, it's a huge problem to note that reduction in early-stage funding. The problem here, of course, is that that gap is perfectly understandable, and perfectly rational, yet at the same time, it may well be a serious problem for the industry. The importance of metrics is clear, especially for investors who may be skittish about putting money into gaming. Nothing succeeds like success, after all, and putting money into products that are proven winners is a path that's comparatively easy to justify. But by like token, these metrics—the demographic data, the analytics, the user counts—they don't come out of thin air. They come from played games, finished product that's out. If there's no investment into pre-finished product, then how are the demographics and analytics supposed to be produced in the first place?
This is an issue that the movie industry was often seen facing; no one wanted to take a chance on the unknown, on the unproven, because there was simply too much money at stake, a development we're already starting to see in the so-called “Triple-A” gaming market. But by like token, if there's no investment in the unknown and unproven, then how can we ever find our platinum hits of tomorrow? The industry needs the new blood to keep the whole market rolling, otherwise there's a substantial risk of stagnation and ultimately collapse.
This risk isn't likely to occur for some time, however, but it's something to keep in mind for future developments. The market needs new life kept in it, and that's only going to come about as the result of investment. The gaming market as a whole is on track for big growth, but without a regular replanting, that particular forest is likely to have limited growth and a serious potential fall ahead.