Analyst: Casual gaming ready to explode

Casual gaming has arrived in the US, and is set to double its domestic revenues in just two years, according to a new industry overview from Pacific Crest Securities analyst Evan Wilson. In a 34-page recap of the casual gaming industry released today, Wilson estimates that the US casual business will hit $725 million in 2008, up from a 2006 total of $375 million.

"We expect casual games to be the primary industry growth driver for 2008 and beyond," Wilson wrote, "as well as the best source of [mergers and acquisitions] and [initial public offering] activity and all-around favorite buzzword."

Wilson said the developing field of casual games is pushing the industry forward, helping the business overcome a number of different factors holding it back.

"Gamers are frustrated about slow innovation and the prevalence of sequels in the traditional console game industry, while nongamers are increasingly excluded by the increasing difficulty of games," Wilson notes.

In addition to fostering new business models like digital distribution, ad-supported gaming, and pay-per-item microtransactions, casual games have lower development costs and leave room for experimentation with new gameplay mechanics. They are also proving increasingly adept at building persistent online communities. In tandem, these factors help the business by reducing the cost of entry for consumers, expanding the audience, increasing the "shelf life" of a game, and lessening the effects of piracy.

Wilson singled out Korea as a hotbed of innovation when it comes to the expanding casual market. In particular, he applauded the Koreans for pioneering the pay-per-item model, as well as successfully taking console games and turning them into online experiences. Electronic Arts' FIFA Online is one such success.

"We expect more former console games to see success online in Asia, and expect that they will be monetized through the item-based revenue model," Wilson said. "Eventually we expect that US publishers will explore the same model stateside as part of the overall push to distribute games online and to a broader audience. We expect to see US publishers increase their focus on casual games considerably in the near term, partially due to the success of Korean-based players on US soil."