ANALYSIS - Recession to help online games firms push West

SEOUL/SAN FRANCISCO Mon Feb 2, 2009 2:19pm IST

Related Topics

SEOUL/SAN FRANCISCO (Reuters) - As recession ripples around the world, Asian online games firms hope those seeking cheap entertainment, many of them newly jobless and with time on their hands, will drive a long-sought expansion into Western markets.

Online games, which allow thousands of players to compete simultaneously over the Internet, are a dominant form of video gaming in China, South Korea and other parts of Asia.

Blockbusters such as 'World of Warcraft (WOW)' by Blizzard Entertainment, a unit of France's Vivendi, and the 'Lineage' series from South Korea's NCSoft have attracted millions of users across the region.

Analysts estimate the online game market at about a fifth of the size of the video console game market. Total PC game revenue is expected to reach $19 billion by 2013, according to entertainment industry research DFC Intelligence.

Easy broadband access and a game culture built around cyber cafes helped gaming on PCs prosper in Asia. In North America and Europe, however, Web-based games have failed to duplicate their Asian success, largely due to lower broadband penetration and cultural differences.

Now the spreading economic downturn could do what years of marketing couldn't, developers and publishers said.

"During economic downturns, people will look for the highest return on their entertainment dollar. Online games provide an immersive virtual world for people to escape the daily struggles," said Lan Hoang, CEO of Aeria Games & Entertainment, which offers Asian games in the U.S. and European markets.

Many online games are offered free, generating revenue from micro-transactions such as character customisation and game enhancement. Others charge monthly fees of around $20.

Analysts say online games are not only recession-proof but can even get a boost from an economic slump, because people stay longer at home and have more time on their hands to play.

The so-called "massively multiplayer online role-playing game (MMORPG)" typically takes months of extensive time investment, as a user -- say, a warrior or sorcerer in the fantasy world -- builds skills and takes on adversaries in a series of missions.

Online gamers' profiles are different from buyers of Nintendo's Wii consoles or DS handheld players, which have proved a roaring success with easy-to-play games for a broader population.

"I don't think (online multiplayer games) get impacted at all, because people who play them are addicts," said Michael Pachter, an analyst at Wedbush Morgan. "Losing their jobs makes them more likely to play because they have more time to play."

"These days more people stay late in the evening playing games," said Jung, a manager at a crowded Web cafe in downtown Seoul. "I think they don't have other places to go."

In South Korea, online gaming quickly spread to become a social phenomenon in the early 2000s in the aftermath of the Asian financial crisis, which left many young men unemployed.

MORE BROADBAND, NEW GAMES

Brightening the prospect for online games in the West is the rapid growth of broadband, a prerequisite for the service.

Gartner expects U.S. broadband penetration to swell to 77 percent of households by 2012 from 54 percent in 2007. The numbers could also jump to around 70 percent from about 50 percent in France, Britain and Spain.

"Internet is a must while game consoles are just an option. If you have Internet access, then why not play some games?" said Shim Jun-bo, an analyst at HI Investment Securities.

The recent success of Web communities in the United States, such as MySpace, is also encouraging. Game communities, where gamers get together to find clan members, exchange information and share feedback, play a critical role in retaining users.

U.S. game sites such as pogo.com, as well as the subscription games such as "WOW" are already seeing robust traffic, said Colin Sebastian, an analyst at Lazard Capital Markets.

"We think it's a robust growth category in terms of video games and Internet media," he said.

Now Asian developers are launching new games with more globally appealing themes and enhanced graphics, targeting a broader user base. They are also diversifying game genres to include sports, shooting, dance and other casual games.

NCSoft aims to introduce new MMORPG game 'Aion', which boasts detailed 3D graphics and took $17 million to develop, in North America and Europe this year after a local launch in November.

Neowiz Games, partly owned by video game giant Electronic Arts, will offer baseball game 'Slugger' in North America after modifying contents to reflect U.S. leagues.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

India-U.S. Talks

India-U.S. Talks

Kerry to woo Modi's India, but quick progress unlikely  Full Article 

Paring Debt

Paring Debt

Jaiprakash to sell hydro plants to Reliance Power  Full Article 

Mideast Conflict

Mideast Conflict

U.N. Security Council calls for humanitarian ceasefire in Gaza  Full Article 

Market Eye

Market Eye

Foreign investors prefer Indian cyclicals, utilities - Macquarie  Full Article 

Debt Investment

Debt Investment

India's FII debt limit hike credit-positive, says Moody's  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage