When it comes to online games, a common perception is that the money is in the big budget high-end monthly subscription games. Of course, this is not necessarily a misperception. The largest online game companies such as Blizzard Entertainment, NCsoft, Sony Online Entertainment and Shanda Entertainment, now generate hundreds of millions of dollars in annual revenue from high profile massively multiplayer online games (MMOGs). Nevertheless, according to the latest DFC report Online Game Market Forecasts 2007, the fastest growing segment of the market in 2006 was digital distribution/virtual item sales.

In 2006, DFC estimates that the worldwide online game market was $4.5 billion. DFC forecasts that by 2012 the worldwide online game market will pass $13 billion. However, there will a significant difference in growth among regions, platforms and game genres and revenue will come from an increasing range of business models and products.

Subscription revenue remains the largest portion of the market. However, by 2012 it is forecasted that consumer spending on digital distribution and virtual items will account for over 40% of revenue. For PC games, digital distribution is expected to become the leading business model in East Asia. However, the video game console systems are expected to see strong growth in digital distribution and by 2012, revenue from digital distribution on console systems is expected to pass $1 billion.

Some other key points from the Online Game Market Forecasts 2007 report worth noting:

• Broadband penetration in the twenty leading online game countries is expected to increase 48% from 2006 to 2012.



• The total overall number of online gamers in the twenty leading online game countries is expected to increase 51% from 2006 to 2012.



• East Asia, which includes the leading markets of China and South Korea, is currently the leading region for online games, accounting for nearly half of revenue in 2006. However, Europe and Japan are showing strong market share growth.



• Worldwide online game revenue is expected to increase from $4.5 billion in 2006 to $13.1 billion in 2012, a 192% increase. The PC is the leading platform for online game revenue, but revenue from console online games is expected to show significant growth between now and 2012.



• In 2006, subscriptions were the leading revenue source for online games. However, the fastest growing segment of the market was digital distribution and virtual item sales.



• By 2012, revenue from advertising and digital distribution/virtual items are expected to equal revenue from subscriptions.



• The two leading categories for online games are MMOGs and casual games. On a worldwide basis, MMOGs accounted for over half of online game revenue in 2006. However, in terns of market share growth between 2006 and 2012 the fastest growing game segments are expected to be First Person-Shooters (FPS/Action) and Sports/Racing.



• North America is the largest market for online game advertising. By 2012, video game console systems are expected to account for 35% of online game advertising revenue in North America.



• Japan is the fastest growing market for online game subscription revenue.



• East Asia is the leading market for virtual item sales and is expected to continue to be the leading market for digital distribution in 2012. However, between 2006 and 2012, Europe is expected to be the fastest growing market for digital distribution and virtual item models.

The entire report can be ordered online at www.dfcint.com.

Courtesy of David Cole at DFC Intelligence (www.dfcint.com). DFC Intelligence's research services provide detailed strategic analysis of the interactive entertainment industry.