Tuesday, April 08, 2008

Reconciling Serious Games Market Size Different Estimates

Serious Games Market Size ranging between $ 1 - 11 billion in 2008?


I've been receiving quite a few inquiries regarding the apparently conflicting figures for the Serious Games market size short term.

The recurring issues would be: a) Could you advice me on the components of this calculation? b) Do you know the criteria utilized for PricewaterhouseCoopers’ report? c) Even if I feel that the article on your website is the closer to reality : $ 1 - 2 billion in 2008, recent reports circulating in US and Europe are talking about $ 9 -11 billion.

Here Are Some Background Presumptions

PricewaterhouseCoopers' report "Global Entertainment and Media Outlook: 2007-2011", in its Video Games segment, reflects consumer spending on console games (including handheld games), personal computer games, online games (including all games delivered over the Internet, including massive multiplayer online games [MMOGs]), downloadable games (whether to computers or to consoles), on-demand games streamed through a Web site, and wireless games played on mobile phones. In the United States, spending also includes advertising on video games. The category excludes spending on the hardware and accessories used to play the games.

The PwC 2007 report sets the best estimate for the overall video game market and is a traditional one, but so far, no specific forecast for the Serious Games field has been developed.


I did publish an update to my original post at Serious Games: A Sizeable Market - Update , in June 2007. At that point, I stated that my conservative estimate was $ 1.5 -2 billion for 2008.

My departing points for the above estimate were as follows:

a) Presentations at the SG Summit DC 2006


The market is 37B for modeling and sim, 10B in games, 10.3 billion corporate training, and 9.6B in healthcare. From this data they discerned that $ 150-200 million were moving to the Serious Games market.

b) Leveraging on collective intelligence

For the Serious Games segment, I have leveraged on collective intelligence to produce, what in my view, is still a conservative forecast. The reason for risking a higher figure was two-fold: 1) the incredible amount of Non-Disclosure Agreements imposed by the predominant "work-for-hire" business model for the segment, which artificially "downsizes" the market and 2) a possible step change introduced by the emergent supply chain for Corporate and Healthcare training games, with the following breakdown:


  • The Serious Games market would be around 400 million per year only in US, in 2007 (mostly Educational and Military)

  • There is now an emergent supply chain for Corporate Serious Games, with a number of corporations taking the first steps and commissioning Serious Games development, which could easily make available additional $ 600 million per year.

  • The same applies to Healthcare providers (e.g., training for surgery, for emergency medical response, and for managing surgical teams), bringing the overall figure for the Serious Games market close to $ 1.5 billion in 2008, in US only.

  • As Serious Games are Gaining Solid Traction in Europe and the video game industry is finding more and more business outside the entertainment sector, this figure could rise to $ 2 billion.
At that point the essence of my $ 1.5 - 2 billion dollar estimate for 2008, derived from the predominant "work-for-hire" business model for the segment, as opposed to a large scale distribution.

Late December 2007, however, following my prior post Microsoft Shaping The Serious Games Movement Into A Multi-Billion Dollar Market, where I state that "by no means would Microsoft join either a current $ 150 million dollar market or a to-be $ 1 billion market only in 2011" (as projected by a few sources), BusinessWeek has published an article where David Boker, senior director of the Business Development Group at Microsoft's Aces Studio, one of Microsoft's game studios where ESP was developed, says Microsoft conservatively estimates this market at $9 billion.

c) Reconciling The Above Figures


With regards to the different figures for the SG market size, the following considerations might be of help, aligned with Ben Sawyer's 2004 article Gaming Our Way to Our Better Future:


  • As most of the SG market has followed a work-for-hire model to-date, my conservative forecast of $ 1.5-2.0 billion in 2008 refers to the amount earned by the studios for SG development;

  • Moving away from the-work-for-hire model to a large-scale-distribution model, enabled by COTS hardware and software, could lead to exponential growth for this segment;

  • Therefore, we should translate the SG development figures into sales revenues, as follows:

    $ 1.5 billion "earned" by studios for development
    $ 1.5 billion would be (at the high-end) 20% of $ $ 7.5 billion in publisher revenues
    $ 7.5 billion would be 65% of $ 11.5 billion in retail revenue
Dear all, please do not hesitate to challenge me back!