Music to games industry ears

DFC Intelligence has recently published two new reports highlighting the increasing similarities between the video game and interactive entertainment industries with the music and movie industries. The reports suggest that the interactive entertainment industry will continue to enjoy growth worldwide but also discusses the issues of rising development and marketing costs for games.

"Revenue for the video game industry could pass the music industry in the next five years. More adults are playing games, the industry is expanding on a worldwide basis, and online distribution is becoming a reality," said David Cole, lead author of "The Business of Computer and Video Games 2004" and DFC president.

"The interactive entertainment industry is still nowhere near the size of the movie industry," continues Cole. "However, production values are starting to compare with those in feature films. Increasing consumer expectations, along with other factors-- including the rising cost of talent, the need for large-scale marketing campaigns, adding online components, and demand for high profile licensed properties--are substantially increasing costs."

The second report, entitled "The Impact of Licensing in Interactive Entertainment," discusses the growing importance of licensed brands in the games industry, and it's not all good news, according to lead author Dave Watson. "Companies are quickly learning that for certain well-known properties, licensed from other media, having the best brand can be better than having the best gameplay," he said.

According to DFC, the household penetration of game consoles in the US is now around 43 percent, which actually doesn't represent any substantial growth in recent years. The market growth experienced is actually a result of the consoles' increased usage within households with several players and, in many cases, multiple systems.

DFC has also noted that the interactive entertainment industry is growing on an international basis and suggests that the next challenge for companies is to expand into emerging markets while maintaining growth in core markets. Territories identified as emerging markets in the reports include South Korea, Taiwan, Singapore, mainland Asia, Australia, and Eastern Europe.