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In This Issue - May 2009

+ Building Online Games for the Console Generation
+ E3 2009 in Los Angeles
+ Excerpts from available Pearl Research studies

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- Digital Music

- Taiwan, India and other emerging markets

- Online Games Market

- Casual Games

Building Online Games for the Console Generation

Below are excerpts from the Login Conference session, “Building Online Games for the Console Generation: Challenges and Opportunities” from Turbine that might be of interest.

MMOs are a PC gaming genre that are making the transition to the console platform.
The console market (an estimated $15 billion) is 3 to 5 times larger than the PC segment. Demand for RPGs remains high based on the success of Mass Effect, Fallout 3 and Fable 2 which sold 3 million units. In addition, console online service Xbox Live serves more than 12 million members.

The console can deliver these advantages:
- Living room is king, as family members and friends congregate socially
- User friendly, intuitive design of consoles
- Large user base, with an estimated 102 million console units sold worldwide

There are numerous challenges to building a console MMO that developers have been working to overcome including:
- Different demographic, not having a keyboard, and different consumer expectations in terms of ease of use.
- Users are 15" inches away from 60" inch-screen
- Favorite show is a click away
- MMOGs have very text rich, and must be simplified for TV
- Grind is non-existent in most console games, but is a large part of PC MMOGs
- Patches and new content updates are required for MMOGs, which are a foreign concept on consoles. Providing stable service is a continuous operation for console MMOGs operators.

Technical issues related to reduced hard drive space pose a challenge. Many consoles have a limit of 160GB of hard drive space, which can be an inhibitor as MMOGs require significant GBs of space.

From a management and business perspective, developers must take the addition of a new partner into consideration (the console platform holder) that will handle network operations, billing and customer service.

In conclusion, there are distinct challenges to operating online console MMOGs but with the right planning, publishers can capitalize on these opportunities.

Games Market in China up 63% to $2.8 billion

Pearl Research forecasts the online games market in China will exceed $5.5 billion in 2012. The market grew more than 63% to reach $2.8 billion in 2008. These findings are contained in Pearl Research’s new 140-page “Games Market in China” study, with an excerpt below.

Table of contents: http://www.pearlresearch.com/files/PearlResearch_2009_Chinareport_TOC.pdf

Many Chinese game operators continue to be optimistic in 2009, stating that the
worldwide economic downturn has had little effect on their business. Games constitute a
small-ticket item and users have not cut back as much on this type of discretionary
spending.

Pearl Research’s findings:
- China’s most popular online game, Netease’s “Fantasy Westward Journey”
achieved 1.8 million peak concurrent users, followed by Giant’s “Zhengtu
Online” with 1.5 million users, Tencent’s “Dungeon and Fighter” at 1.2 million
users, and Blizzard’s “World of Warcraft” at 1 million. Average concurrent user numbers are also available in the report.

- Game operators in China experienced strong revenue growth in 2008. Six game
operators, Tencent, Changyou (CYOU), The9 (NASDAQ: NCTY), Netease
(NASDAQ: NTES), Shanda (SNDA: NTES) and Giant (NYSE: GA) crossed the
$200 million revenue mark.

- Approximately 70% of China’s 298 million Internet users are under the age of 30.
This group is most likely to seek out online entertainment, including games,
music, and chatting, which Pearl Research believes will drive revenues for the
online gaming market.

The report contains 2006 to 2013 forecasts; inhibitors and drivers to growth; deep marketplace analysis; profiles of key market players; and strategic conclusions. Please call (+1) 415-738-7660 or email research (at) pearlresearch.com to purchase this report. Table of contents: http://www.pearlresearch.com/files/PearlResearch_2009_Chinareport_TOC.pdf

Studies and Updates

i. Emerging Markets: Online Games Market in Vietnam and Korea Available Now

Click here for a table of contents of our Korean digital entertainment study, available now. This study tracks emerging trends, identifies any opportunities for international companies and examine lessons learned from the world’s most dynamic digital entertainment market.

This comprehensive study contains an executive summary, market forecasts up to 2011, deep marketplace analysis, company profiles and strategic recommendations. Visit this link for more information: http://www.pearlresearch.com/newsl/GamesMarketKorea_0808_PearlResearch.pdf

For the Vietnam table of contents, visit this link: http://www.pearlresearch.com/files/Sample_PearlResearch_OnlineGamesVietnam_0811_TOC.pdf

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