1 the power of an integrated media partner An In-Depth Analysis of the Next Generation Consoles and...

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the power of an integrated media partner

An In-Depth Analysis of the Next Generation Consoles and the Gamers Behind Them

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IDG Entertainment Research Presentation

IDG Entertainment Research Presentation

• IDC Research Worldwide Videogame Console Hardware 2007-2011 Forecast, 2/07

• 2007 U.S Gamer Segmentation Study, conducted by Boston Research, 4/07

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North American Game Hardware Installed Base

0.0

10.0

20.0

30.0

40.0

50.0

60.0

SONY PS2 6.2 14.7 21.1 25.7 34.1 42.7 45.2 47.2 47.8 47.9

MS Xbox 1.4 4.6 7.8 11.9 15.5 16.1 16.1 16.1 16.1 16.1

Nintendo Game Cube 1.2 3.5 6.8 9.1 10.9 11.6 11.6 11.6 11.6 11.6

MS Xbox 360 1.0 5.6 10.0 16.0 22.9 26.1

SONY PS3 0.9 4.6 9.2 15.2 21.1

Nintendo Wii 1.2 8.0 16.3 24.3 27.0

Nintendo GBA/GBA SP 4.7 11.7 19.8 27.4 31.7 36.4 39.0 40.6 40.9 41.0

Nintendo DS/DS Lite 1.2 4.4 9.0 16.2 24.7 31.1 35.0

SONY PSP 4.8 8.5 13.1 17.6 21.7 24.0

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: IDC Research

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2007 U.S. GamerSegmentation Study

2007 U.S. GamerSegmentation Study

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U.S. Gamer Segmentation Study

Methodology

U.S. Gamer Segmentation Study

Methodology

• Online survey among U.S. consumers. Sample provided by e-RewardsTM. an online panel provider with more than one million members in its consumer panel.

• Respondents were recruited by email invitation and cookies were utilized to ensure one response per respondent.

• Screening criteria included: age 13 years or older; game 1 or more hours per week (on PC, console, handheld or mobile device).

• Conducted between 3/15/07 and 4/01/07.• A total of 600 individuals completed the survey:

– 240 teens ages 13-17 360 adults ages 18 or older

• The results from this study were weighted to be representative of the teen and adult U.S. population of gamers.

• At the 95% confidence level the margin of error for a sample size of 600 is +/- 4 percentage points.

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Five Key Gamer Segments

Five Key Gamer Segments

CoreGamers

StatusGamers

SocialGamers

ActiveGamers

CasualGamers

Source: US Gamer Segmentation Study

• As a form of entertainment, I prefer gaming over watching TV.

• I want to spend more time gaming.

• As a form of entertainment, I prefer gaming over going to the movies.

• I am proud of gaming skills.

• I enjoy being the first to try a new game.

• I discuss my gaming experiences with other people at school or work.

• Gaming is a social experience.

• Gaming provides links to people I care about.

• Gaming is a great group activity.

• I like games where movements are reflected in the game.

• I like games that get me out of my chair.

• I use gaming as an physical release.

• I use gaming as an emotional release.

• Gaming allows me to play different roles.

• I prefer going out to dinner than gaming.

• I don’t need to be the first to try a new game.

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Segment BreakoutSegment Breakout

Avg $ spent

Core Gamers $208.50

Status Gamers $296.20

Social Gamers $98.50

Active Gamers $181.40

Casual Gamers $82.20

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Who are theNext Gen system owners?


AgePS3 Own Wii Own PS2 Own PSP Own

Xbox 360 Own

13-17 51.9% 35.3% 46.5% 52.4% 48.5%18-24 15.4% 35.8% 26.0% 16.9% 25.2%25-34 (NET) 18.7% 17.3% 15.8% 12.1% 15.7% 25-29 9.7% 16.5% 7.4% 9.5% 14.0% 30-34 9.0% 0.8% 8.4% 2.5% 1.7%35+ (NET) 14.1% 11.6% 11.7% 18.6% 10.6% 35-39 2.5% 0.7% 3.3% 4.5% 2.7% 40-44 2.7% 0.0% 1.8% 1.5% 1.8% 45-49 4.0% 1.3% 2.7% 4.9% 2.7% 50 or older 5.0% 9.6% 3.9% 7.7% 3.4%Mean 23.1 23.7 22.5 23.6 21.8Median 16.9 20.5 18.8 16.8 18.4

Source: 2007 U.S. Gamer Segmentation Study, Boston Research, 3/07

Age

Next GenOwners

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PS3 Own Wii Own PS2 Own PSP OwnXbox 360

OwnWhite 66.2% 75.8% 73.2% 80.6% 75.8%Hispanic/Latino/Spanish 5.0% 5.4% 6.9% 6.5% 6.4%Asian 9.0% 12.0% 8.0% 1.8% 3.3%African-American/Black 6.6% 5.9% 7.0% 8.2% 9.2%Some other heritage 0.6% 0.0% 0.6% 0.6% 1.0%Decline 12.7% 0.8% 4.3% 2.4% 4.4%



Race

Next GenOwners


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What other systemsdo they own?



OwnPC 68.0% 62.4% 71.6% 72.9% 62.4%Sony Playstation 2 55.9% 47.5% 100.0% 81.7% 42.8%Game Boy Advance 44.0% 45.0% 34.1% 41.2% 30.4%Nintendo GameCube 26.1% 36.0% 26.2% 25.9% 27.9%Microsoft Xbox 360 37.2% 38.8% 19.4% 27.0% 100.0%Microsoft Xbox 27.5% 22.2% 24.2% 33.4% 40.3%Game Boy Advance SP 18.9% 37.7% 23.4% 41.0% 20.5%Playstation Portable/PSP (handheld) 18.1% 31.6% 22.3% 100.0% 18.9%Sony Playstation 3 100.0% 30.2% 14.2% 17.9% 22.0%Nintendo DS/Lite 17.4% 33.7% 16.0% 24.2% 15.0%Nintendo Wii 21.8% 100.0% 8.8% 22.0% 17.0%Other 8.7% 5.2% 11.5% 10.3% 6.6%

Systems currently owned


Next GenOwners

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OwnGaming system 53.9% 82.8% 62.4% 61.6% 63.8%An entertainment system (all 3 combined) 45.4% 17.2% 33.8% 34.7% 36.2%Movie system 0.6% 0.0% 3.7% 3.0% 0.0%Music system 0.0% 0.0% 0.0% 0.6% 0.0%

Next GenOwners

Primary Value Proposition for

Next Gen system

Primary Value Proposition for

Next Gen system


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How often do they gamewith friends?

How often do they gamewith friends?


Own0% 10.5% 11.0% 20.6% 19.5% 12.4%ANY (NET) 89.5% 89.0% 79.4% 80.5% 87.6% 1-9% 0.0% 2.4% 4.3% 3.7% 1.0% 10-19% 14.0% 9.3% 12.6% 16.6% 8.2% 20-29% 16.6% 9.1% 21.9% 25.0% 14.1% 30-39% 7.4% 17.6% 5.9% 7.8% 7.9% 40-49% 8.3% 5.4% 5.5% 6.1% 10.4% 50-59% 20.3% 16.5% 10.9% 6.1% 20.9% 60-69% 2.8% 2.2% 5.5% 3.9% 3.6% 70-79% 7.4% 1.3% 3.8% 3.1% 4.4% 80-89% 6.1% 9.3% 3.7% 3.9% 7.3% 90-99% 5.1% 9.3% 3.9% 2.8% 5.1% 100% 1.5% 6.8% 1.4% 1.5% 4.6%Mean 38.0% 44.0% 29.0% 27.0% 41.0%Median 40.0% 40.0% 20.0% 20.0% 40.0%

Percentage of time spent gaming with a friend

Next GenOwners


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Next GenOwners

What type of games doNext Gen system owners

play?

What type of games doNext Gen system owners

play?PS3 Own Wii Own PS2 Own PSP Own

Xbox 360 Own

Sports 65.0% 65.6% 50.3% 52.7% 58.3%Puzzle/Board 36.4% 34.3% 34.9% 38.0% 22.9%Action adventure 55.2% 46.0% 50.5% 63.9% 49.3%Driving/racing 60.4% 51.9% 44.9% 56.8% 42.5%Action combat 53.5% 33.8% 44.3% 46.4% 50.0%Fighting 41.9% 47.2% 42.2% 40.7% 41.0%Fantasy/Role-playing 28.9% 41.6% 38.2% 28.7% 29.3%First-Person Shooter 45.7% 35.1% 35.8% 35.6% 37.9%Real-time Strategy 30.4% 34.6% 25.4% 28.5% 29.6%Simulation/Building 26.1% 22.0% 22.7% 34.9% 17.6%Mascot 22.0% 27.8% 22.7% 22.3% 19.4%Music/Rhythm 26.7% 24.5% 20.2% 18.5% 16.5%MMORPG 37.3% 19.1% 19.4% 17.4% 25.2%Air combat 33.3% 15.8% 16.1% 12.6% 21.2%

Genre of games played


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Next GenOwners & ShoppersWhy did/will Next Gen system

owners/shoppers buy their systems?

Why did/will Next Gen system owners/shoppers buy their

systems?Primary factors that influence purchase of PS3

PS3 Own PS3 Plan

Appeal of leading edge technology 52.6% 63.9%High definition images 59.0% 57.6%Future potential of system 50.8% 48.7%Realism of game play 41.0% 51.8%Online game playing 33.3% 15.4%Other 20.1% 10.4%


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Next GenOwners & ShoppersWhy did/will Next Gen system

owners/shoppers buy their systems?


systems?Primary factors that influence purchase of Xbox 360

Xbox 360 Own

Xbox 360 Plan

Appeal of leading edge technology 63.0% 47.8%High definition images 45.5% 50.2%Availability of games/titles 38.9% 52.6%Realism of game play 42.4% 44.0%Future potential of system 35.7% 49.2%Online game playing 39.7% 22.8%Price point 18.4% 27.5%Other 4.0% 7.6%


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Next GenOwners & Shoppers


systems?


systems?Primary factors that influence purchase of Wii

Wii Own Wii Plan

Physically interactive nature of system 66.5% 53.0%Price point 58.4% 45.5%Appeal of leading edge technology 44.6% 30.0%Friendly/Accessible interface 42.1% 27.5%Action-oriented games 34.6% 29.5%Availability of family-oriented games 32.7% 29.1%Other 5.0% 12.5%


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PS3 Plan Wii Plan PS2 Plan PSP PlanXbox 360

PlanPC 68.7% 60.2% 87.7% 68.1% 80.4%Sony Playstation 2 88.8% 64.5% 50.3% 73.6% 63.2%Game Boy Advance 28.4% 44.2% 38.0% 42.6% 31.2%Nintendo GameCube 29.8% 44.8% 49.3% 28.5% 24.5%Microsoft Xbox 360 18.5% 28.9% 24.0% 48.2% 15.4%Microsoft Xbox 26.4% 37.1% 38.0% 35.1% 37.7%Game Boy Advance SP 27.1% 29.1% 38.0% 27.5% 28.6%Playstation Portable/PSP (handheld) 27.9% 18.6% 32.9% 47.9% 11.2%Sony Playstation 3 10.1% 17.0% 24.0% 31.2% 24.4%Nintendo DS/Lite 13.6% 23.1% 15.1% 18.5% 16.8%Nintendo Wii 9.7% 7.1% 15.1% 18.0% 12.9%Other 12.8% 16.0% 0.0% 10.3% 19.9%



Systems currently owned

Next GenShoppers


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The dynamics of this console generation are very different from those of past cycles because Microsoft, Sony, and Nintendo have clearly differentiated hardware and strategies.

PS3 and Wii are polar opposites PS3 built for the long term, targeted at hardcore enthusiast gamer and future proofed

with high-performance specifications. PS3 designed for the gamer, but delivers ahead of the curve to early adopters Despite the PS3’s high retail price, but the hard core gamers who will purchase the

console first are not price sensitive. For the early adopter, the price is a bargain

Wii is targeting a new audience while maintaining the fan base Wii’s technology less impressive

Strategies: PS3 vs. WiiStrategies: PS3 vs. Wii

Source: IDC Research Worldwide Videogame Console Hardware 2007-2011 Forecast, 2/07

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Of the three consoles, the Wii is in the best position for the front half of this hardware cycle

Nintendo appeals to a broader market as well as its fans at launch Sony and Microsoft must target their established fan bases for the quick

ramp-up

Xbox 360 has the potential to increase market share by continuing to publish first-party software and promote online experience

In late 2008 and 2009, Wii and Xbox 360 will approach peak shipments Their new next-gen console announcements in 2010, release date 2011

PS3 will have a longer life cycle, shipments peaking in 2011 PS3 could surpass Wii and Xbox 360 in 2012 Sony’s best replacement strategy for the PS4, announce it in 2011, launch in

2013

Next-Gen Console Forecast2005 - 2011

Next-Gen Console Forecast2005 - 2011


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Handheld games continue to diversify the games industry Sony’s PSP is the first non-Nintendo handheld to achieve a respectable

installed base Sony has expanded the market by bringing its core 18 – 34 yr old male

demographic to handheld gaming PSP may now be competing with the PS2 for time share among the same

demographic PSP’s multimedia functionality is a draw, but also a time-share issue

DS is cutting a wider demographic, skewing more female than previous handhelds

DS Lite is a fashion accessory with its iPod-style makeover

Handheld Games Forecast

Handheld Games Forecast


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Videogame SoftwareShipments by Platform, 2005 - 2011


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• Videogame hardware and software revenue to grow 31.4% to a

total of $38.85 billion in 2007• Factors contributing to growth:

• Wii’s penetration into markets beyond the traditional hardcore and enthusiast gamers

• Increasing the total accessible industry market• Uptake of PS3• Further penetration of the Xbox 360

Industry Revenue Projections

Industry Revenue Projections


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ConclusionsConclusions

Wii will remain strong through this cycle due to:

Increasing consumption by hardcore and enthusiast gamers Nintendo’s console and handheld success in growing the total accessible

market with lapsed and new gamers Manufacturers’ efforts to expand into markets outside North America and

Japan

Multiplatform titles should be developed as discretely as possible to take advantage of the differences in control, processing performance and user preferences specific to each console.

Stronger performance by the DS in the handheld sector due to lower development costs and the large installed base including new gamers.

Xbox Live remains the best user experience for online consoles. Sony must quickly deliver titles that prove the PS3 is an evolutionary step

forward not available on competing platforms. Like Nintendo and Microsoft, Sony’s first party titles are likely the only console

exclusives that will serve to differentiate the platform


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Looking AheadLooking Ahead

• There will be a decrease in high end titles targeted at the hardcore market due to the rising costs of development and evolving publisher strategy backing mass market titles with relatively lower development costs. The result will be a positive for hardcore gamers: there will be fewer mediocre hardcore titles and better differentiation.

• Publishers with the foresight to invest in developing core and enthusiast titles for the PS3 and the Xbox 360 will reap high returns in the midterm as the installed bases for these consoles build to double-digit regional penetration.

• Online features and, preferably, business models for console titles should be addressed in the initial design and development phase. Aftermarket paid downloadable content, subscription and advertising fees should be designed to maximize profit per title and to lengthen titles' lifecycles.

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