Authored by Matt Hulett
We are witnessing rapid growth in the technology industry, which has triggered fears of a tech bubble similar to the dot-com bust of 2000. These fears taint important decisions about everything from investments to innovations, and many have begun to question if valuations of recent financial investments in the gaming market signal that the bubble will burst.
After surviving the dot-com era over a decade ago, I believe these five reasons indicate that the industry is actually experiencing a capitalistic evolution, and not an industry bubble.
1. “Show me the money!” – The tech industry may have finally listened to the infamous words of Jerry McGuire played by Tom Cruise in the 1996 Hollywood movie. Companies of the dot-com 1.0 era failed to show any money, but today, the tech industry has several viable businesses that show real revenues and earnings. And even Zynga, Twitter and Facebook, which are valuated up to twenty times higher than revenues, still hit profitability and continue to track growth.
2. Freedom to pursue happiness – For many years, console makers had a stronghold on game development, but now, that has all changed. The gaming industry has gone through a major transformation fueled by social networks and connected mobile devices. These advances have given game studios the newfound freedom to produce a variety of games, tap into new revenue streams and make financially sound decisions about development, distribution and pricing.
3. Gaming goes mainstream – Now you might not play the same games as your mom, but the industry has finally expanded beyond the “core” gamer – males between 18-35 years old – to reach the masses. The Electronic Software Association (ESA) reported that 42 percent of all gamers are women, and they are one of the industry’s fastest growing demographics. This growth is attributed to the rising popularity of casual games that are free-to-play, created for the masses and offer social experiences.
4. Free games boost industry revenues – Consumer spending on casual games is on the rise resulting from micro-transactions, and this mega-trend is just heating up. In fact, free social games are expected to generate nearly $1.6 billion by 2014, reports eMarketer, which is twice that of today’s total revenues. Women seem to be leading the charge here, literally, and tend to spend more real money on virtual currency than men.
5. Next-gen gaming experiences – Free games on social and mobile networks, even in ”core gaming” genres previously dominated by consoles, will dominate next-gen gaming. Facebook and Google continue to put their weight behind gaming experiences is strong evidence that very real, fundamental trends are driving growth in the games sector. With this kind of mass distribution focus, free-to-play games may soon attract a highly engaged and socially charged audience that may soon rival prime time TV, I believe.
So, fear not my friend, the market, the money, and the masses are all on our side. Keep playing.
