Videogames Play Through Recession Woes

Economic uncertainty that is hampering most media won’t stop the growth in video games.

Revenue generated in the U.S. and Canada by the videogame industry, minus hardware sales, will grow at an average clip of 5.8% annually over the next five years, according to PricewaterhouseCoopers analysis due out Tuesday.

Such growth prospects exceed that of other media, with notable exceptions being online advertising and Internet access — the latter being driven by a continuing shift from dial-up to more expensive broadband.

Revenue from PC games will continue to decline, but console, hand-held and wireless games will more than make up the slack. Plus, in-game advertising will lead the category, with 13% growth annually for the next five years.

Video game advertising, which generated just $30 million in North America in 2004, will grow to $886 million this year and to $1.4 billion in 2013, according to PwC.

Advertising in videogames is more diverse, innovative, accountable and targeted than competing venues, said Stefanie Kane, a partner at PwC’s entertainment and media practice.

The report says the video game industry — without hardware — in North America will bring in $17.2 billion in sales this year, growing to $21.6 billion in 2013. By then, the game industry will be three times larger than the recorded music industry, which is expected to sink 4.4% annually to $7.2 billion in 2013.

By further comparison, filmed entertainment in North America will rise 3.4% a year to $45.1 billion in 2013 and the biggest media segment — TV subscriptions and license fees — will grow 5.4% annually to $97.3 billion during that frame.

Kane says that the “unlimited hours of fun” after an initial purchase of a game is one reason that cost-conscious consumers will keep buying games even in economic rough patches.

She also said that videogames are beginning to transcend demographics, with casual games being played by older generations and females, even if hard-core gamers remain young males.

Globally, the videogame market will grow at a 7.4% compound annual rate to $73.5 billion in 2013, according to PwC.

Nielsen Business Media