Research firms size up online gaming

ABI Research says pay-per-download will replace subscription fees, while DFC Intelligence questions Sony's need for an Xbox Live-like service.

A pair of industry research firms have released snippets of their latest reports on the future of online gaming this week, and the two are focusing on very different aspects of the market going forward.

ABI Research is predicting that as the market for online gaming expands, the bulk of its revenue will be provided not by subscription fees, but by game and content downloads. The firm suggests that the console and handheld content-download market, valued at $1 million in 2005, is about to explode, growing to more than $3.8 billion by 2011.

"Sony's new PlayStation Network Platform--which will launch with its PlayStation 3 console--and Nintendo's Wi-Fi Connection service for its Nintendo DS and Revolution are changing the market for online console and handheld services," says ABI analyst Michael Wolf. "With both of the dominant handheld gaming platforms and two of the next-generation consoles doing away with fees for the majority of online gameplay, consumers will come to expect online multiplayer gaming as a core component included with the purchase of the game."

While the report suggests that Microsoft will have to make some adjustments to its subscription-driven service in the long term, it does note that the Xbox Live Marketplace has met with early success in terms of online content distribution.

Another new report this week paints a different picture of the online console market. DFC Intelligence's latest analysis suggests Sony isn't going to be much more involved in online gaming in the next generation than it was in this one, and that the company might not need to be.

"Sony's strength is retail and pushing hardware," DFC Intelligence said in a statement. "Trying to compete head-to-head with Microsoft on a sophisticated network service does not necessarily make sense given current market conditions. It would be different if online connectivity was a key selling point for a game system, but right now it isn't."

DFC brought up the most successful Xbox Live title, Halo 2, as evidence of the currently limited audience for online gaming.

"Even with all its success, Halo 2 sold to only about a third of the Xbox-installed base," DFC pointed out. "And of that third only about another third (at most) were Xbox Live subscribers. So we are still talking about a subset of a subset."

DFC estimates that online gaming will continue to grow but will still represent a limited segment of the market. By 2011, the firm expects that less than a quarter of new consoles will be connected to an online service.

37 Comments

  • thatguytony

    Posted Apr 10, 2006 9:22 pm PT

    Wow, more clueless analysts running off at the mouth and making predictions. Why in the hell does this become news?

  • Sandman100

    Posted Apr 7, 2006 2:42 pm PT

    Online is important for next-gen consoles. It is way the Xbox is better than the PS2 because of it I think. I love playing online with Halo 2. It so fun. The PS3 need to focus on online play much more this time around. Nintendo need to get some games that is fun to play online. Downloading content will be a big part off it to. It will be a multiply billion dollar industry by 2010. I agree with the because the 360 is so popular, and a lot of people downloaded content for that. But subscription fees will be a pretty nice pie to.

  • adamevex

    Posted Apr 6, 2006 12:19 pm PT

    Trust me free online gaming is what will push the expansion of the next gen consoles. If sony wants to use advertising to keep it free, then they should aim to have it streamlined individually, where you get to see only stuff you're interested in. They have already learnt their lesson from Live, so i don't think their service will suffer

  • NICKnPSL

    Posted Apr 5, 2006 6:11 pm PT

    well really who didnt see any of that coming?

  • StumpyTrash

    Posted Apr 5, 2006 4:04 pm PT

    The naysayers about multiplayer gaming on any system should know that it's a great way to extend the replay value of a game (people STILL playing Halo, Rainbow Six, etc.). Plus, if you're competitive, it's a great way to prove that you're better than someone else too.

    Manatassi is right about the new rating system on Xbox 360- it really is a great tool for deciding who you do (and don't) want to play with. All it takes is a little bit of patience to do a quick rating of someone you just played with and you can either avoid them or play with them again later. You can use ratings almost like a semi-friends list too.

    I think it would be a neat idea business-wise for Sony if they do use advertising to run the service for free, but in all honesty, who would really want to see all those ads? I guess we'll just have to wait and see what they come up with...

  • anubis8515

    Posted Apr 5, 2006 11:42 am PT

    i agree with acummuta about the constant cussing online...but on the other hand i think litlle kids should not play on live..at least not with mics anyway..the yell and are so stupid, it can ruin a game at times....so the whole zone thing is cool...so if i want to go underground i can, and if not i can...i think when more highspeed internet goes standerd and with young games getting older we will see alot more people on live

  • frontier49

    Posted Apr 5, 2006 10:19 am PT

    Anal-ysts have made some ridiculous predictions over the years, but every now and then a report has some interesting info.

  • Merl57

    Posted Apr 5, 2006 10:10 am PT

    Im sorry but online gaming is vital to games no a day. We are a information driven society and Online games are very popular. The problem is when updates destroy the core of the game and put in a new one like Star Wars Galaxies or when Arenanet changes skills for Guild Wars. People get very upset when the experience is severely altered, but as we get more online we will get less social.

  • Manatassi

    Posted Apr 5, 2006 8:36 am PT

    Online gaming has changed a huge amount on 360 compared to Xbox.

    For the last 2 months i havent met a single loud mouth online. not one!
    and the ones i met at the start i simply rated and muted... if they warented it i filed a complaint.

    if you actively use the rating system and are polite and freindly online then you will have a good time and meet people that are interesting. I have made a few freinds since getting my 360 and its made the whole experience of spending time online far better.

    I never went online with anyone i didnt know on the xbox, now I have an active freinds list that is growing steadily.

    As for sony making the PS3 online service free, I cant see them providing the level of service that Xbox live provides without the resourses, along with the huge deficit they will be left with if they price the PS3 at a saleable price. Either the service will be similar to the PS2 which was laughable, or they are going to have to find a way to make their money somehow.

    Siting the previous generations online service userbase is frankly foolish in this case as the similarities are minimal at best. the amount of people going online is growing and taking PC's into the equation is demonstrating an increasing upward growth. not including a decent online service once people realise what online gaming is capable of would be foolishness on sonys part. not that i cant see them doing this as they clearly are far behind microsoft on this front.

  • mr_squibble

    Posted Apr 5, 2006 8:27 am PT

    I'm still not interested in online gaming. Although the prospect of downloading new content is nice, it's definitely not a selling point for me. Playing against people online doesn't really interest me either, as I have minimal interest in shooters and MMORPGs. The only online game genere that could peak my interest is driving games. However, the main system selling point for me is the games I'm interested in playing, regardless of whether they have online functionality or not.

  • acummuta

    Posted Apr 5, 2006 8:14 am PT

    As a gamer and as a parent I have my own take. I play XBOX LIVE, when I'm in the mood, and I think its a great innovation. I love the option to "not play with myself". But when I got out onto Halo 2 and listen to all the wannabes cursing up a storm because they only know four words: "f**k", "s**thead", "a**hole", and the occasional "ni**er" because some stupid white kid thinks he's the only race on the planet - it reminds me that I don't want to throw my kid into that, lest he become like them...Stupid.

    But that is what I like about the new culturing of the "future" of gaming. I like that Microsoft has created a family LIVE "zone". Hopefully it works. My kid has his own XBOX. He plays Halo 1 and 2, but he's not hooked up to LIVE. Maybe Halo 3, when its using this system, will take advantage of the zones and stick the families with family and the underground with the underground. If this can really happen then parents like me will get their kids their own LIVE account and the market will grow even more.

    Until then, I'll be enjoying the games myself, filtering out the stupid, and wait until my kid is old enough to endure it himself.

  • ashuncc2

    Posted Apr 5, 2006 7:59 am PT

    Online conectivity is the main reason I am for MS.

  • Autolycus

    Posted Apr 5, 2006 6:10 am PT

    alot of people are confused about new technology. Then you have all the bible thumpers and stepford wives that wont let their children play online because they think it leads to sexual activities. There are still a LOT of hurdles in Online Gaming. The largest is the misperception and the closeminded thoughts of the general public.

    peace

  • spidey008

    Posted Apr 5, 2006 5:39 am PT

    Xbox Live is a revolution for consoles. I don't see Sony or Nintendo doing very well in the future if they don't have some kind of online gaming mechnism similar to Xbox Live.

    As more and more households hook up to broadband connections. The online gaming community will only expand.

  • choasgod

    Posted Apr 5, 2006 5:17 am PT

    ABI is right, how can DFC ( whoever is it ) say online gaming isn't about to explode ??

    Look at Xbox Live it has set new standards for consoles and Ps3 and DS wi-fi are rasing those standereds by letting us to choose how much we pay. PSNP ( playstation network platform) is going to include advertisments to allow sony to give us more content for free without taking a hit in the pocket ....

    No doubt Sony's move will force M$ to rasie there standered higher again to maintain there title of online king .... this will bring the online industry to a another leap forward.....

  • soulknight63133

    Posted Apr 5, 2006 3:25 am PT

    that's sick, Kravyn81...lol hope you wash your hands. Imao.

  • Kravyn81

    Posted Apr 4, 2006 10:05 pm PT

    I like to play with myself mostly.

  • VFA-102

    Posted Apr 4, 2006 9:43 pm PT

    Shadowhunter, learn to spell. That was an almost unreadable arguement. 50 dollars a year for a superior online service is not much to ask for. I do say though that more games need online coop. Take GRAW, up to I believe 16 people, could be wrong on the number, playing co-op at once. The problem there is the limited number of levels. Multiplayer co-op needs more levels. The analysts are a little funny though. Over 10 million downloads for XBOX 360 owners, when the base is probably only about a million says that it is definitely a growing industry.

  • TheGreenGecko

    Posted Apr 4, 2006 9:34 pm PT

    balindos, that is a very good point about console online gaming. It is a pain in the arse, on PCs, when people with endless draw distances can sniper you from across a level, or you can get mowed down by someone with a machine gun just because your game locks up and you keep strafing left for some reason.

    The latter happens to me even with a high end rig, because the servers and connections of other players are too random.

  • shadowhunter0

    Posted Apr 4, 2006 8:27 pm PT

    1 of the resaon y im not gettign xbox or 360 is the fee i liek sony wasy alot better which they will add buddy list and download content liek mode and stuff that woudl be nice but it its great teh way it is and pc online is fun exepelly 4 mmo games and fps but consol r fun has welling online gaming

    but i do think mmo games liek eq2 should stay on the pc is better there
    and i do agree with teh co-op the need 2 be alto more of those they r alot of fun if u get teh right people

  • Optimusv2

    Posted Apr 4, 2006 7:59 pm PT

    Last I saw the xbox's install base as of the end of 2005 or so was like 28 million and halo sold like 14 million + That guy is definetly wrong as halo 2 has sold to atleast half of the xbox's install base.

    If sony listened to these DFC people they'd be in major trouble this gen leaving such an amazing service as xbox live uncontested.

  • aSOUNDofREVENGE

    Posted Apr 4, 2006 7:35 pm PT

    i dont think the information about halo 2 is correct, i thought the game sold roughly 15 million copies and at the time there was about 30 million consoles sold, 50% is a huge percentage when you think about it, even 33% is huge, they are underplaying the importance of online gaming for consoles

  • ChinoARC

    Posted Apr 4, 2006 6:38 pm PT

    ok I have 2 syllables for everyone....

    CO-OP

    Please, please, PLEASE instead of making just online fragfests and MMO's with no real point than just leveling up can we get some games that actually put you in the actual story of a game or something related to it?

  • ultimate_zero

    Posted Apr 4, 2006 6:02 pm PT

    I wonder how this turns out, as long as they have innovative multiplayer games added on to it, then i believe it'll be successful.

  • thefjk

    Posted Apr 4, 2006 6:02 pm PT

    Yeah more Gaming everyday!

  • TintedChimes

    Posted Apr 4, 2006 5:53 pm PT

    Yeah, do away with subscription so I can play HALO 2 without bumming off my roommate's xbox live account.

  • 481989

    Posted Apr 4, 2006 5:46 pm PT

    Okay, this man obviously has no idea what he's talking about. But then again that's nothing new for video game analysts.

    FYI, the last game to sell to a majority of it's prospective audience was the original Super Mario Bros.

  • metswonin69

    Posted Apr 4, 2006 5:34 pm PT

    A lot of people probably havent bought Halo 2 cuz they used that mod chip thingy to get it for free

  • gatsbythepig

    Posted Apr 4, 2006 5:11 pm PT

    Okay let's try again, who is DFC

  • richdb

    Posted Apr 4, 2006 5:08 pm PT

    Interesting.(I'm from Cleveland btw) I want to see how this plays out w/Sony and Nintendo.This is the wave of the future as gaming goes.Here's a thought more free weekends.

  • Timesplitter_01

    Posted Apr 4, 2006 5:07 pm PT

    I will be waiting to see if Sony online network lives up to expectations before I use it

  • balindos

    Posted Apr 4, 2006 5:04 pm PT

    Online gaming is fun, but it would alot better if they can make more online games that you can with your friends online from one console agianst another group of friends at another console. One on One just gets old. Its just too limited right now. Just get rid of the Subscription (xboxlive) and let people play with thier friends online and let them have thier on gamertag as well. And as for the NEOJEDI saying that online gaming is for pcs especially shooters = you are wrong only because of the fact that online PC games have alot of hacks and cheats and some people just are better than other because thier hardware is better than the other, which makes it no fun. Console gaming you can not load any cheats or have a better console.

  • RunnerGunner480

    Posted Apr 4, 2006 4:58 pm PT

    I agree with buckeye (I live in Ohio as well btw), LAN gaming will always own online gaming. Although I think Xbox Live is a blast. I'm surprised that only a third of Xbox users bought Halo 2. I haven't met one of these people in my life.

  • buckeye1186

    Posted Apr 4, 2006 4:54 pm PT

    Online gaming might be somewhat neat, but NOTHING beats the single player and local multiplayer experiences. And nothing ever will.

  • NeoJedi

    Posted Apr 4, 2006 4:24 pm PT

    Online gaming is for PC's... especially if it's a shooter.

  • Donkeljohn Site moderator

    Posted Apr 4, 2006 4:16 pm PT

    Online multiplayer is the wave of the future, assuming connectivity can endure disaster.

  • lordzod89

    Posted Apr 4, 2006 4:15 pm PT

    Cool, but nintendo need a buddy list for all its games with names and stuff, oh and downloadable content would be nice

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