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The online games market was worth $15 billion in 2009, and will grow to $20 billion in 2010

By on June 22, 2010
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How much is the online games industry worth?

It’s a tough question, and is plagued by a difficulty of definitions. For example, Inside Social Games estimates that only half of the $1.6 billion they forecast to be spent in the US in 2010 on virtual goods will come from social games. The rest comes from casual games, free-to-play MMOs and also include goods from virtual worlds that are not really games at all.

Global online games revenues 2010

Colin Sebastian, an analyst at Lazard Capital Markets, has put together the most comprehensive forecast of the online games market and he has some very big numbers. Altogether, the online games market was worth $15 billion in 2009, and it will grow by a third in 2010.

That’s a lot of growth. Here’s the chart and my analysis follows.

 

GAMESbrief analysis of the Lazard online game revenue forecast

Lazard have included almost every sector: the massive growth of Chinese online gaming, revenue forecasts for virtual worlds. MMOs, casual games and console downloads. It’s pretty comprehensive. So let’s try to split some elements out.

“New gaming” is twice as big as “old gaming” online

By Old Gaming Online, I mean taking traditional skills (building games that are products and shipping them) and applying them to the online world. It means revenue that is easy for traditional developers and publishers to understand. it represents a change in distribution channel, not a change in distribution model.

In my definition of Old Gaming Online, I’ve included: World of Warcraft (because it’s a traditional in-the box business model backed by subscriptions), iPhone games/apps (because these games are still mainly products, not services), Xbox Live, PSN, Nintendo, PC Downloads and In-Game advertising.

In total, Old Gaming Online generated $4.6 billion of revenue in 2009, growing to $6 billion in 2010, a growth rate of 30%.

New Gaming Online (China, Asia, Korea and RoW Online, virtual worlds, social networking games, casual games and EA digital) generated $10.6 billion in 2009, growing to $14.1 billion in 2010, a growth rate of 33%.

New Gaming Online is already twice as big as Old Gaming Online ($10.6 bn versus $4.6 bn), and it is growing faster (admittedly not by much). That’s a real problem for traditional games company, who understand the world of Old Gaming Online better then New Gaming.

If some of this growth is coming from cannibalising boxed product sales, rather than growing the demographic (which it is), traditional games companies need to do well in both Old Gaming and New Gaming Online to avoid seeing their market share, and their revenues, falling.

China is only a third of online games revenues

China is often quoted as being the lion’s share of online gaming revenues. That’s true if you are only thinking about virtual goods. But of all online revenues, China represented only 30% of online revenues in 2009, and that share will fall to 28% in 2010.

It’s still a huge market, but it’s only part of the market, and it’s not growing as fast as many of the other online markets.

Activision’s online influence is waning

World of Warcraft represented 10% of global online gaming revenues in 2009. That’s forecast to drop to 8% in 2010, mainly because Warcraft is showing much slower growth than other segments.

These are only forecasts (and my numbers differ slightly from Lazard’s due to rounding errors) but they show a much more comprehensive picture than usual of the many different online gaming segments.

I expect I will refer back to these figures often. Let me know if you find them useful, and also if you see different conclusions from me in the figures.

(Thanks to WorldsinMotion.biz for the heads-up)

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com
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  • In this context, “social” means on Facebook and “browser” means anywhere else on the web, typically core games like Bigpoint’s SeaFight and Dark Orbit.

    Those definitions are blurring, particularly with the emergence of Facebook Connect, but at the time of this report, I’m pretty sure that is the distinction.

  • Richid5

    Whats the difference between social and browser gaming?

  • Thanks for the feedback Paul. I think that Lazards’ view of the online games market has changed since last June, and I agree that in-game advertising seems very far from reaching $1 billion.

    I think whether or not to include mobile in online is a debatable one. I could see arguments either way. Do you have a sense of global mobile revenues?

  • Nicholas – good article and stats. re Lazard’s chart, i dont think mobile is online so the iphone line and about 1/3 of EA Digital (which is mobile) can be backed out. i would love to see the data or assumptions for their in-game advertising line which im guessing is mainly console as i dont believe it since in-game advertising on console is more or less dead. offers and ads around and in online games is growing but its definitely not even close to $1bn yet. its a big opportunity though which im sure we will a lot of innovation around in the near term

  • Brandi Belle

    That’s a good article. I never thought that online gaming can worth that much, pretty large numbers wow.

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  • I think they are captured all over the place. In China Online, Korea Online, casual MMOs and ROW/Other. But the taxonomy of the games industry is challenging.

  • big numbers! Interesting to see that social networking games are less than 10% of the total. Where do browser games fit in the chart?