Gaming's New Market Dynamics and the Importance of Middleware
August 19, 2009

Gaming's New Market Dynamics and the Importance of Middleware

By Wanda Meloni

Not to state the obvious, but 2009 has been bad for business. Of course the video game industry has been impacted, but the woes of the game industry have more to do with growing pains from within. Many of the traditional models were breaking down independently of the economy. The retail model is too expensive and development costs are too high to support the added retail cost burden. Up until last year the industry was in a state of paradigm paralysis - the inability to see beyond the current models. Defined as the greatest barrier to a paradigm shift, paradigm paralysis has overshadowed growth opportunities for many game companies.
In an effort to regain momentum, publishers have slashed upcoming games, halted new development and closed studios. M2 Research estimates 12% of the game development workforce has been laid off in the past year. Add to that a freeze on investment funding and traditional game models don't seem to look too attractive.

The future of interactive gaming is in new distribution models, more streamlined development and the use of creative revenue models. M2 Research believes the industry is entering a new period of expansion, something well beyond the traditional concept of gaming - the democratization of games.

Diversity of an Industry
Consumers who play games are not one-dimensional. Today's gaming consumers represent a wide-reaching swath of the mass market. Not only does the demographic profile of gamers now extend to every age, but the growth and impact of females playing games is undeniable. In addition, more people are playing games on multiple platforms. They are playing games on consoles, PCs, portables and mobile devices. Games have become mass consumable products. Take a look at some statistics:

Mass Market: Games now encompass a much wider demographic than just males ages 18 to 25. Nintendo estimates 300 million people play consoles and portable devices, reaching 450 million by 2015. Female players constitute one of the fastest growing market segments.

Multi-platform: People are playing games on multiple console platforms. There are 2200+ titles on the market, 70% are multi-platform and growing. That does not include the 1500+ titles for portable devices.

PC Power: With its open platform, the PC has become the central hub for online and social gaming, virtual goods, and microtransactions. Jon Peddie Research estimates the installed base of gaming PCs is 420 million, growing to over 500 million by 2012. M2 Research estimates 270 million of these PCs have broadband - that is 65% of today's PC gamers.

MMOs and Casual Games: There are hundreds of MMOs, and the list is growing. Casual game developers like Big Fish Games, put out a new game everyday.

Growing Trends: New game boxes like OnLive, Gaikai and Zeebo, and mobile gaming driven by the iPhone's success, have the potential to exponentially expand gaming.

Gaming Renaissance
So what does this all mean for game developers and publishers? If anything it highlights the immense diversity of content, platforms, distribution and most importantly consumer preferences that exists today.

The current gaming renaissance movement does not solely rest with the independent developer, trying to publish their first game. Renaissance, in the true meaning, is about a re-birth or an awakening of the arts, the ability to explore new frontiers in expression and emotional attachments. To that end, this period of gaming renaissance needs to also encompass publishers looking for new ways to engage this growing diversity of consumers on a more visceral level.

Key Driving Forces for Success
Developers and publishers need to find more effective methods for delivering a reasonable ROI on their projects. There are a number of key driving forces that will impact a company's success as this new wave of gaming takes hold, some of which include:
Expansion of gaming platforms
Importance of a social community
Flexibility of developers to move quickly
Quality of content and user interface
Better management of costs and ROI
Broader support of middleware technology
Whether it is the smaller development teams or the larger publishers, there is a very real need for studios to address these driving forces. How successful companies are at covering these factors will greatly impact their growth over the coming years.

For the renascent teams, one way to meet the constraints on time and money is to incorporate middleware solutions into their production pipeline. In order to develop these new and varied game segments there is a requirement for tools that are flexible and open.

Importance of Middleware
The point of middleware tools is to help alleviate some of the production burden by creating a framework for certain components within the production pipeline. For traditional console and PC games, middleware has been a part of the development discussion since the days of Criterion. From a development standpoint, middleware makes sense especially for many studios looking to diversify their product mix.

Some may argue that the use of middleware does not necessarily lower the overall production costs of a game. Perhaps not. In most cases diverted funds tend to get embedded into other parts of the development cycle. But what middleware does provide is a baseline of tools that support the growing complexities of diverse development.

For example, MMOs take 3 to 4 years to develop and Asian game companies have had to rapidly grow their technology base. They simply have not had the luxury of Western developers to build some of their technology from scratch. Japan on the other hand, with its "build internally" approach to development has not been nearly as successful in some of the newer gaming trends. Western companies clearly have an opportunity to lead the space, but they need to rein-in in their costs.

The Future
There is now a greater opportunity to incorporate middleware as the shift to digital distribution, massively multiplayer experiences, casual and social games start to make up a larger portion of the market.

Middleware is just one area that can help studios support some of those key driving forces. Obviously supporting multiple platforms, providing flexible development, focusing resources on content quality and better cost management all play a part in the new gaming renaissance.

The video game industry has reached critical mass. It is no longer a market for an elite few. It is accessible and engaging to a wide demographic. Market demand is there, with saturation not predicted for several years at least.

The companies that will be successful going forward will be those that are able to move beyond the paradigm paralysis of the past and quickly support gaming's new growth opportunities.