Wonacott Communications

The Continued Rise of Social and Mobile Gaming: A Look Back at 2011

The video games industry is predicted to close the year with $74 billion in revenue, according to a Gartner report. Thanks to the rise of tablets and smartphones, mobile gaming is becoming an increasingly viable platform, accounting for nearly 20 percent of revenues in 2011.  Adding to that, with more than 118 million people playing social games once a week, major developers finally accepted social gaming as an opportune market to enter as well. Electronic Arts led the way by purchasing major social games developer PopCap for $750 million, and releasing The Sims Social. Other developers such as Square Enix also moved into these platforms with many more looking for ways to enter. Even Nintendo’s stockholders demanded the company begin producing mobile games after poor sales of its new handheld device, the Nintendo 3DS.

But perhaps the best indication that the rise of social and mobile gaming is the year’s biggest story, Zynga and Nexon both filed for initial public offerings (IPOs), valuing the companies at $7 billion and $1.2 billion, respectively. Both companies rose to dominance through social and mobile gaming, and these IPOs show just how powerful these sectors have become, especially given that virtual currency is their primary revenue basis and a mere 10 percent of their players actually pay to play.

In the midst of all this forward momentum, the video games industry did have its troubles as well. Once again the industry saw declining sales, especially in product shipped as consumers switched to digital downloads and became more selective in their gaming purchases. This isn’t to say the industry did poorly, but growth in console revenues slipped and many developers such as L.A. Noire’s Team Bondi closed their doors. Part of this is due to gamers moving to online, social and mobile gaming, but also to the poor economy. With console games costing upwards of $60, gamers are increasingly selective in what they purchase. But in the end great games will always sell, and this was evident in the past couple of months with the successful launches of a slew of major titles, including Batman: Arkham City, The Elder Scrolls V: Skyrim and Call of Duty: Modern Warfare 3, which surpassed $1 billion in sales after 16 days.

So what’s next for the video game industry? Well, for one: new consoles. Nintendo has announced the Wii U and rumors are swirling around Microsoft’s next console; surely Sony can’t be far behind. Doesn’t it seem like only yesterday that the PlayStation 3 and Xbox 360 came out? (It was more than five years ago.) And what about the next great platform? Mobile and social have already taken their place in the industry and shown consumers are willing to spend money on casual games, so it’s possible that 2012 will be the year cloud gaming takes off. Companies like OnLive already provide the service, but cloud computing in general has yet to explode. Who knows, maybe the next great thing isn’t a platform, but a product like the contact lens scientists created to wirelessly display a one-pixel image.

These are exciting times in the video games industry and it’s only going to get better.