Author: by Tim Merel
[Tim Merel with investment bank Digi-Capital says in this in-depth analysis, "the games market is fundamentally splitting in two, like the media market of a decade ago" -- into the "Value" and the "Volume" markets.] We are entering a world where the games market is fundamentally splitting in two, like the media market of a decade ago. Back then what we now call "old media" scoffed at "new media" upstarts for giving away content, bizarre business practices, and products and services which made no sense to the wise old birds. "They'll destroy more value than they'll create" was the mantra. Well welcome back to the future. Today's games market is fundamentally splitting into "Value" and "Volume" markets, both by sector and geography. The two-speed market this is creating may have more rapid and profound effects on the games market than it did on the media market, with meteoric rises for some and slow going for others. Let's start by defining what we mean by "Value" and "Volume." Value
-Users: thousands to tens of millions -ARPU (Average Revenue per User): $-$$$ -Costs: $ millions to tens of millions -Operating profit: negative to 20%+ -Growth rates: negative to <10% -Business model: unit sales, subscriptions, virtual goods
Volume
-Users: thousands to hundreds of millions -ARPU: ¢ - $$ -Costs: $ tens of thousands to millions -Operating profit: negative to 60% -Growth rates: negative to 20%-100%+ -Business model: unit sales, free, virtual goods, ads
Please note that these are not hard and fast rules, so there will be exceptions (such as World of Warcraft in retail MMO when we get to sectors). But as a way of thinking about how the games market is dividing and what it means, they are useful rules of thumb. In terms of thinking about where each games market sectors fits, here's a starter: Value sectors
-Pure console -Retail MMO
Volume sectors
No tags.
