IND EPENDENT TECHNOLOGY RESEARCH
Sector Update HOW REAL CAN WE MAKE GAMES AND VIRTUAL WORLDS?
July 2009 Imaging Technologies
Digital entertainment is growing at breakneck speed We are spending more and more time in front of screens consuming more and more digital entertainment. In fact each year approximately 16 billion square meters of screens is added to the market. This is the equivalent of over two A4-sized screens for every person on Earth. And we are hungry for more. Broadband internet access is approaching 100% penetration in developed economies and wireless broadband usage is growing fast in the developing world. This has allowed for ever more realistic entertainment to be delivered to a screen near you – from computer games and animated films to virtual worlds and mobile communities. The consumer is pushing the boundaries of what can be delivered using current business models and existing software and hardware.
Demand creates profitability problems for incumbents As the consumer demands more realistic entertainment environments so production costs, using traditional methods, have skyrocketed. Reality is not cheap to replicate. It requires more manpower as well as 3D imaging and animation technology. Whilst unit sales in the computer games industry are holding up in the recession, the share prices of the large computer games vendors are off over 50% versus 12 months ago and off 30% versus the S&P 500.
New online business models popular with consumers New business models and techniques are required to provide the consumer with digital entertainment in a sustainable and ultimately profitable way. In fact, within the computer games industry, for those companies that look at the world differently, there are huge profits to be made. Take ActivisionBlizzard. Its most popular game, World of Warcraft, is marketed, distributed and played online. In addition, it is charged at $15 per month. This is no “one hit wonder.” In Europe, CCP Games has adopted a similar model with EVE Online a space simulation game.
Animation software may hold the key Hugh Campbell
However, the whole film and computer games industry is not going online. To reduce time-
hugh@gpbullhound.com
to-market and to drive cost out of these traditional industries, we believe that a new
London: +44 207 101 7566
generation of animation software may hold the key. Companies such as Natural Motion, Image Metrics and Illuminate Labs allow studios to save costs without sacrificing integrity.
Alec Dafferner alec@gpbullhound.com
Now it is possible to create more realistic and controllable characters, in many cases without the need for actors, motion capture, set pieces or props.
San Francisco: +1415 986 0168 Remy Valette
Whenever a traditional industry comes under pressure, investment opportunities exist.
remy@gpbullhound.com
This report also touches on the advances in hardware, computer peripherals, holography
London: +44 207 101 7565
and 3D systems – all of which help make our digital lives more realistic.
Important disclosures appear at the back of this report. GP Bullhound Ltd. is authorised and regulated by the Financial Services Authority in the United Kingdom