Though 2007 was another strong year for video game makers, the gaming console hardware business is costly, reports In-Stat. Therefore, the three main vendors have turned to online gaming either to generate additional revenue streams or to promote brand loyalty, the high-tech market research firm says.

"The primary differences among Nintendo’s, Sony’s, and Microsoft’s online efforts are mainly of scope,” says Stephanie Ethier, In-Stat analyst. “Microsoft is looking to create a number of revenue streams through its Live service, including its subscription service, paid casual games, and additional paid content. Sony is following a model similar to that of Microsoft’s, except for the subscription service. Nintendo is limiting its revenue to paid downloads for Nintendo and partner games.”

Recent research by In-Stat found the following:

• From 2004 to 2011, annualized growth of console subscribers will be 42.7%, and growth of handheld subscribers will be 37.1%.
• Of the respondents to an In-Stat gaming survey who currently own and use an Xbox or Xbox 360, 32% subscribe to Xbox Live.
• Another potential revenue generator is in-game advertising, particularly dynamic advertising.

About this study

The In-Stat report, “Online Gaming: Worldwide Subscriber Growth Expected for Both Free and Subscription-Based Online Services” (#IN0703460CM), covers the worldwide market for online gaming. It contains forecasts for online game subscribers annually through 2011 -- for online-capable game console and handheld consoles. Forecasts for each console include an annual console installed base, the number of subscribers (free or paid), subscription revenue, paid download revenue, and online advertising revenue. This research does not forecast PC online gaming or casual gaming. Analyses are provided for the online console strategies of Microsoft, Nintendo, and Sony, as well as the online handheld strategies of Nintendo and Sony. New to this year’s report are survey results regarding US consumers’ attitudes towards both video game console ownership and online gaming.

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