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Gaming Execs Mull State of Industry

18 Apr, 2013 By: Chris Tribbey

HOLLYWOOD, Calif. — More than 50% of the American population is playing games of one sort or another.

That’s according to research offered by Eric Goldberg, managing director of online technology company Crossover Technologies, April 18 at the L.A. Games Conference.

“It’s a watershed mark,” he said. “We’re dismissing tablet and mobile as a casual audience. We’re going to see a renaissance.”

But there’s a continuing problem for the gaming industry: More people may be playing, and less people are paying for it.

The NPD Group reported April 18 that the total physical gaming market was $992.5 million for March, down 10% year-over-year from $1.1 billion, with hardware sales accounting for most of the decline ($221.6 million, down 32% from $324.7 million).

“March 2013 saw deep declines of 32% in dollar spending for dedicated video game hardware, with stronger declines for portable hardware than for consoles,” said NPD’s Liam Callahan. “Software sales across consoles, portables, and the PC were up 2% in March 2013, which is the first month since November 2011 where retail spending on entertainment software experienced positive growth.”

Both Microsoft and Sony are prepping to release their next-generation gaming consoles this year, but sales figures for Nintendo’s Wii U console have been disappointing thus far: Wedbush Securities estimates only 55,000 units of the next-gen console were sold in March.

“The long-term appeal of the Wii U will be severely limited by the perception that the PS4 and next Xbox will be much more powerful with greater online integration and multimedia functionality,” said Wedbush Securities analyst Michael Pachter. “Should the new consoles from Sony and Microsoft be price competitive we think that Wii U sales may continue to stagnate.”

While the greatest amount of energy — and money — from the industry is going into consoles, the greatest amount of time consumers spend gaming is happening in the mobile and tablet space, Pachter said at the conference. The industry needs to capture the casual gamer and convert them if it wants the old console business to thrive in the future.

“People who get hooked on casual games are important too,” said Raph Koster, a game designer and author about the gaming industry. He said what the gaming industry needs to realize about people playing Angry Birds is that their platforms for playing are vastly different than in the past.

“It’s important to understand that we’ve been used to thinking of the big three consoles [as our platforms],” he said. [But] Google is a ‘console,’ Facebook is a console.’ They operate as consoles.”

Instead of just focusing on the gamers who shell out $60 for the latest console game, game developers need to “understand the value of all your gamers is important,” said Nanea Reeves, COO of video entertainment network Machinima.

“We’ve been used to shipping product in a cardboard box, but we’re [going from] atoms to bits,” she said.

Chris Early, VP of digital publishing for Ubisoft, said he doesn’t believe the industry will ever completely go to a digital-only world (Koster joked that “retail may shrink down to just collector’s editions”) but he did say there’s a “truly dramatic shift” with the onslaught of independent developers pushing in on traditional powerhouse companies’ territory.

And there’s a reason. For game designers, smartphones and tablets are more accessible, and there are many, many more of them out there, compared to consoles. An independent game developer can make more money with a less-polished product via iTunes or Google Play, compared to going through a gaming console, Koster suggested.

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