Trends And Opportunities In The Evolving Market For Video Games

1. Cartoon Digital 2013
Trends And Opportunities In The
Evolving Market For Video Games
Munich, June 2013
Laurent Michaud
Tel: +33 467 144 439
Head of Consumer Electronics
& Digital Entertainment
l.michaud@idate.org

2. Sommaire
1. Game Industry Organisation p 03
2. 8 Key Trends p 08
3. What Synergy between video game and cinema/animation? p 23

3. Game Industry Organisation

4. Value Chain : Hardware + Software+ Service
Design &
Creation
Tools
Providers
Middleware
Providers
Developers Publishers Distributors Retailers
Home Consoles
(Microsoft, Nintendo, Sony, and a lot of traditional publishers)
Mobile Phones & Smartphones
(Apple, Samsung, HTC, Nokia, RIM…EA Mobile, Gameloft, SuperCell, King and many indies)
Computers and Online Games
(Zynga, King, CD Projekt, Wargamming.net)
Smart TV
(Onlive, Playcast, Visiware, Tectoy, SreenAngels…)
Handheld Consoles
(Nintendo, Sony, and less and less traditonal publishers)
Tablets
(Apple, Samsung, Microsoft…EA Mobile, Gameloft, SuperCell, King)

5. Value Chain : Hardware + Software+ Service
Design &
Creation
Tools
Providers
Middleware
Providers
Developers Publishers Distributors Retailers
Home Consoles
(Microsoft, Nintendo, Sony)
Mobile Phones & Smartphones
(Apple, Samsung, HTC, Nokia, RIM…)
Computers
(PC, Mac)
Smart TV
(Onlive, Playcast, Visiware, Tectoy, SreenAngels…)
Handheld Consoles
(Nintendo, Sony)
Tablets
(Apple, Samsung, Microsoft…)

6. Value Chain : Hardware + Software+ Service
Design &
Creation
Tools
Providers
Middleware
Providers
Developers Publishers Distributors Retailers
Home Consoles
(Microsoft, Nintendo, Sony)
Mobile Phones & Smartphones
(Apple, Samsung, HTC, Nokia, RIM…)
Computers
(PC, Mac)
Smart TV
(Onlive, Playcast, Visiware, Tectoy, SreenAngels…)
Handheld Consoles
(Nintendo, Sony)
Tablets
(Apple, Samsung, Microsoft…)

7. Value Chain : Hardware + Software+ Service
Design &
Creation
Tools
Providers
Middleware
Providers
Developers Publishers Distributors Retailers
Home Consoles
(Microsoft, Nintendo, Sony)
Mobile Phones & Smartphones
(Apple, Samsung, HTC, Nokia, RIM…)
Computers
(PC, Mac)
Smart TV
(Onlive, Playcast, Visiware, Tectoy, SreenAngels…)
Handheld Consoles
(Nintendo, Sony)
Tablets
(Apple, Samsung, Microsoft…)

8. 8 Key Trends

9. Introduction: A Secular Growth
World Video Game Market, 2012-2016 (millions EUR)
2012 2013 2014 2015 2016
Mobile Games 5 165 6 352 7 661 9 092 10 643
Offline Computer Games 2 778 2 553 2 259 1 887 1 504
Online Computer Games 13 292 15 377 17 351 19 146 20 834
Home Console Games 15 063 12 251 12 472 15 365 18 664
Handheld Console Games 5 572 7 303 8 416 9 087 8 995
Total 41 870 43 836 48 159 54 577 60 640
Growth Rate 4.7% 9.9% 13.3% 11.1%
World Video Game Market, 2012-2016 (millions EUR)
Source : IDATE – December 2012

10. 10
1/ More than half of World Video Game Revenue comes from digital sales
Source: IDATE, December 2012
Digital Revenue Breakdown (Million EUR)
8 Key Trends
Source IDATE, December 2012
World video game market: physical vs. digital game sales,
2012-2016(Million EUR)
2012 2013 2014 2015 2016
Total World Video Game Market 41 429,9 44 211,7 49 436,6 54 776,0 59 113,9
Digital Video Game Market 23 917,3 27 981,5 33 420,3 40 031,1 46 556,0
Digital Market Growth Rate 17,0% 19,4% 19,8% 16,3%
Digital Market / Total Market 57,7% 63,3% 67,6% 73,1% 78,8%
2012 2013 2014 2015 2016
Home Console 2 863,3 3 643,3 5 551,7 8 428,9 11 285,6
Handheld Console 336,9 662,3 1 241,7 2 059,4 2 817,0
Computer 15 078,0 16 955,3 19 013,5 21 129,1 23 373,0
Mobile 5 639,1 6 720,5 7 613,3 8 413,6 9 080,5
Total 23 917,3 27 981,5 33 420,3 40 031,1 46 556,0
Copyright © IDATE 2012

11. 11
8 Key Trends
Importance of digital revenue
Activision
In FY2012, net revenues from digital online channel account for
34% of total revenues.
Electronic Arts
According to company forecasts, digital net revenue will definitely
overtake physical net revenue by the end of 2014. 36% of Non-
GAAP net revenue.
Ubisoft
In FY2013, Online/digital sales leaped 86% to €148 million, which
represented 11.7% of the Group’s total sales.
Nintendo
On the 15 Nintendo-published titles available on 3DS, in 2012,
11% have come through full digital downloads of those games
Take Two
Interactive
Revenue from digitally delivered content grew 148% year-over-
year and accounted for 22% of Non-GAAP net revenue.
Digital Revenue of Traditional Game Publishers
Source : IDATE – 2013

12. 12
8 Key Trends
2/ The 2012-2016 period confirms the success of Free2Play business model
which could cross the Rubicon and will tease consoles, handheld consoles and
connected TVs.

13. 13
8 Key Trends
2/ The 2012-2016 period confirms the success of Free2Play business model
which could cross the Rubicon and will tease consoles, handheld consoles and
connected TVs.
3/ Intense competition in the segment of mobile games. Even if the game
experience is quite different, Smartphones are getting to compete with
handheld consoles… and home consoles.

14. 14
8 Key Trends
-
100 000
200 000
300 000
400 000
500 000
600 000
700 000
800 000
Unknown
2008-09
2008-12
2009-03
2009-06
2009-09
2009-12
2010-03
2010-06
2010-09
2010-12
2011-03
2011-06
2011-09
2011-12
2012-03
2012-06
2012-09
2012-12
2013-03
# Apps
# Games
Source: IDATE d’après 148apps.biz, mai 2013
Evolution Appstore Games , 2008-2013
Platform # Apps # Games % of Games
Apple Store 880 090 148 614 17%
Android Market 696 527 95 935 14%
Source: IDATE d’après 148apps.biz, mai 2013
Games and Application within Stores

15. 15
8 Key Trends
2/ The 2012-2016 period confirms the success of Free2Play business model
which could cross the Rubicon and will tease consoles, handheld consoles and
connected TVs.
3/ Intense competition in the segment of mobile games. Even if the game
experience is quite different, Smartphones are getting to compete with
handheld consoles… and home consoles.
4/ The tablets game features fit gamer expectations.

16. 16
8 Key Trends
Media Tablet Domestic Shipments
(Million units)
2012 2013 2014 2015 2016
North America 37.7 45.1 48.5 50.1 50.9
USA 36.1 42.6 45.5 46.8 47.4
Rest of North
America
1.6 2.5 3.0 3.3 3.5
Europe 27.3 39.1 51.0 60.7 67.7
France 3.8 5.4 6.2 6.6 6.8
Germany 6.2 8.0 9.1 9.7 10.0
Italy 3.4 4.8 5.6 6.0 6.1
Spain 2.5 3.7 4.3 4.6 4.8
United Kingdom 4.8 6.4 7.2 7.5 7.8
Rest of Europe 6.6 10.8 18.7 26.2 32.1
Asia/Pacific 40.7 57.9 74.2 86.5 93.1
Japan 8.4 12.7 15.9 17.2 17.8
Rest of
Asia/Pacific
32.3 45.2 58.3 69.3 75.3
Latin America 4.4 6.8 10.1 14.1 17.7
Total 110.1 148.7 183.9 211.4 229.3
Source : IDATE, décembre 2012

17. 17
8 Key Trends
2/ The 2012-2016 period confirms the success of Free2Play business model
which could cross the Rubicon and will tease consoles, handheld consoles and
connected TVs.
3/ Intense competition in the segment of mobile games. Even if the game
experience is quite different, Smartphones are getting to compete with
handheld consoles… and home consoles.
4/ The tablets game features fit gamer expectations.
5/ Social Gaming Act 2. Better graphics, more virality, multiplayer synchronized
system, Facebook Home

18. 18
8KeyTrends
Source: AppData – June of 2013

19. 19
8 Key Trends
2/ The 2012-2016 period confirms the success of Free2Play business model
which could cross the Rubicon and will tease consoles, handheld consoles and
connected TVs.
3/ Intense competition in the segment of mobile games. Even if the game
experience is quite different, Smartphones are getting to compete with
handheld consoles… and home consoles.
4/ The tablets game features fit gamer expectations.
5/ Social Gaming Act 2. Better graphics, more virality, multiplayer synchronized
system, Facebook Home
6/ Gamers need ubiquitous games. The multiplicity of connectable media
allows access to play through different screens, but the experience is too often
interrupted from one screen to another. Ubiquity is a continuous experience
whatever screen or device.

20. 20
8 Key Trends
7/ Games and Smart TV: an irreversible convergence, in the context of cloud gaming
spread. Beyond streamed game, this convergence will operate through a new form of
interactivity which has to be designed by audiovisual players, TV channels and
producers.

21. 21
8 Key Trends
0
100
200
300
400
500
600
700
800
2013 2014 2015 2016 2017
North America
Europe
Asia Pacifique
Latin Amrerica
Total
2013 2014 2015 2016 2017
USA 46,5 60,8 75,2 89,6 108,6
France 7,8 11,6 15,6 19,7 25,0
Germany 12,4 16,8 20,9 24,8 30,0
Italy 7,1 10,3 13,3 16,3 20,0
Spain 4,7 6,6 8,7 11,1 14,4
United Kingdom 11,3 15,0 19,0 22,8 27,2
Japan 21,8 26,0 33,0 41,1 50,6
China 21,4 36,6 57,2 82,7 119,4
Connectable TV Set Installed Base (Million Units)
Source: IDATE - janvier 2013

22. 22
8 Key Trends
7/ Games and Smart TV: an irreversible convergence, in the context of cloud gaming
spread. Beyond streamed game, this convergence will operate through a new form of
interactivity which has to be designed by audiovisual players, TV channels and
producers.
8/ Crowdfunding: a new way to finance games and especially independent studios games
and industry veterans games. Few games have been developed by this way and wouldn't
have not been otherwise.
• The New York-based Kickstarter hosted amazing industry veteran fund projects:
- 3.9 millions USD on Project Eternity d’Obsidian Entertainment, (Feargus Urquhart, Chris Parker, Darren
Monahan, Chris Avellone Et Chris Jones) from Black Isle Studios, Blizzard Entertainment, Electronic Arts
and Neversoft.
- 3.3 millions USD on Double Fine Adventure from Tim Schafer (Day of Tentacle, la série Monkey Island)
studio.
- 2.9 millions USD on Wasteland 2 from Brian Fargo inXile entertainment, founder of Interplay.
- 2.2 millions USD on Planetary Annihilation from Uber Entertainment created by Steve Thompson, Bob
Berry, Jon Mavor.
- 1.8 million USD on Shadowrun Returns from Harebrained Schemes studio , founded by Jordan
Weisman (Mech Warrior, Battletech, Mech Commander, Shadowrun)….

23. What Synergy between video game and
cinema/animation?

24. What Synergy between video game and cinema/animation?
• Cinema/Animation studio are more and more committed in video game
industry, but synergies are heterogeneous
- They can sell to publisher the rights to operate their licenses
- They can link a partnership with a publisher so as to make possible porting of
their best licenses
- They can engage themselves in a publishing activity
• When Cinema/Animation studios are video game publisher as well, they
operate like video game publishers
- To spread out first party, second party or third party agreements.
- To invest to cross platform titles
- To deal with retail issues through their distribution subsidiary…
• Cross development and marketing raised through 4 stages
- First stage: collaborations addressed the possibility for a developer to create a
game based on the cinema/animation studio license
o The cinema/animation studio sell its licenses rights to a game publisher or a developer
o The Game company developed the game being conscience that the game should be marketed in the same time of the
film.
o It often happened deadline was not respected and cross marketing was a failure.

25. What Synergy between video game and cinema/animation?
- Second stage: collaborations became effective
o Conditions of license sale are more robust and lead game studio to give more attention to the game
development.
o Cinema/animation studio to be deeper involved in the publishing stage.
o The film and the game are commercialized simultaneously.
- Third stage: the era of co-creation
o Film director are attracted by game creation capability,
o Thanks to the interaction used in video games, film director have certainly find a new way to express
their art
- Fourth stage: time for upstream cooperation and cross iterated
production
o Both production are prepared in the same time
o Assets are shared between game studios
• Prospective on their strategy
- Media groups will integrate video game activities to develop cross media
cross platform strategies

26. Thank you for your
attention