Top 10 Gaming Trends 2000 - 2009, Top 10 predictions for next 10 years

So it's the last day of the first decade of the millennium. Er...wait. The millennium actually started Jan 1, 2001 so the last day of the first decade would be Dec 31, 2010, but since we like years that end in 0, why not do a top 10 gaming trends of the past 10 years. In the 1990's, the biggest development in gaming was the advent of 3D (not the James Cameron presents James Cameron's Avatar...by James Cameron kind of 3D but the Doom/Quake 3D graphics kind). So what were the big trends and developments in the gaming industry from 2000 to 2009?

Here they are in no particular order:

1) Microsoft formally enters console gaming market (Nov 2001)
With the launch of the original Xbox by the largest business software publisher, video games increasingly got the attention of mainstream and business news outlets such as the NYT, WSJ and Forbes. While gaming still had the (mis)perception of being a teen male anti-social basement activity, Wall Street's sudden increased interest in the gaming business contributed to the blossoming of the industry in the first half of the decade. And when the industry maintained its growth through the 2001/2002 recession, the industry was dubiously dubbed "recession resistant."

2) Grand Theft Auto III (Launched Oct 2001)
A month before Microsoft unzipped the fly on the Xbox, Sony and Rockstar launched the biggest brand re-invention in the history of gaming. While GTA I and II had a good following, GTA III was the start of the action/driving hybrid genre and to this day is the genre's dominant brand. For a long time any other game that tried to copy its gameplay was dubbed a "GTA clone." Comparatively, early first person shooters after Doom were dubbed "Doom clones," though the genre grew so fast that new brands were considered new FPS games, not just clones. In the action/driving genre however, the "GTA clone" label stuck for a very long time since no other brand has been able to surpass it. GTA III set the bar for M-rated controversy, depth of story telling and cinematic writing and acting, particularly with 2008's GTA IV. The brand's impact on popular culture is clear, even if that impact has been portrayed as largely villainous and corrupting of youth. It has a huge global following today, though it does face challenges in terms of development costs and consistent revenue capture.

3) Sony's PlayStation 2 (Launched Oct 2000)
Unlike the Xbox launch in 2001, Sony's launch of the original PlayStation in 1995 didn't get quite as much mainstream media attention, though it probably should have since the PS1 was obviously in the top 10 gaming developments of the 1990s. But the PS2 was another huge force in the rising of gaming the last 10 years, and a major reason had nothing to with games. The machine played DVDs right out of the box. You didn't need to buy an extra remote (though many people did) as was required with the Xbox DVD player. Many people even used the PS2 as their first and primary DVD player. But the other thing Sony got right was games. Lots of games. Lots of good games. While the Xbox was mainly about the Halo franchise and some other shooters, the PS2 had huge successes in many genres. It was a truly mass-market platform and it established Sony as the king of gaming as well as provided the bulk of the corporate profits to the massive Sony empire.

4) World of Warcraft (Launched Nov 2004)
Back in 1999 when I worked in the CPG-food business as a financial database developer, one of my more senior colleagues was able to get two extra PCs in his secluded cubicle for "systems development." The I.T. guys didn't know one was outfitted with a high end Voodoo card so he could play games. The reason he did this was so he could play EverQuest as much as possible. I didn't understand why he was so addicted to it, as I was strictly a Half-Life / QuakeIII / Unreal Tournament gamer and the concept of role playing that didn't require fast reflexes and 3D spacial reasoning in the same way as a shooter did was about as interesting to me as Lord of the Rings is to my wife. But World of Warcraft changed all that. Its completeness of vision, depth, open ended story and beautiful art design finally snagged me some time in 2007, years after it launched. Today I have a level 80 toon who is now in semi-retirement.

Before WoW, a leading MMO (such as EQ) could sustain perhaps 400,000 subscribers, with a monthly subscription curve featuring a growth period that lasted roughly a 12 to 18 months, then stabilized for a few years, then slowly declined. After WoW cemented itself in the MMO landscape by late 2005, no other game could come close to its numbers and the typical MMO subscription curve fundamentally changed to (a) very rapid uptake as users flocked to the free trial followed by (b) very rapid drop off as a large portion of the users went back to playing WoW and (c) a long plateau period that had a gradual decline, ultimately leading to (d) closure of the game. WoW didn't just sustain more than a million subscribers, it sustained multi-millions in each of North America, Europe and Asia. Popular belief is that it peaked at around 12 to 12.5 million worldwide users, however the 2009 operator changeover in China led to a months long outage that definitely impacted the total. Even so, because subscribers in China pay only a small fraction of what NA and EU users pay, the profitability of the game for Activision-Blizzard hasn't been hugely impacted. In short, WoW redefined what an MMO could be and will probably be the permanent gold standard in MMO execution.

5) Transformation of PC gaming
This is a bit of a misleading trend because PC gaming has always been under constant flux given the constant growth of underlying hardware capabilities combined with its open architecture for indy, underground, mod, exploratory and experimental game design. It is also directly connected to a few of the other trends listed here. The biggest PC gaming sub-trend of late is the frequent squabbling about whether PC gaming is dying. Certainly retail game sales of box PC gaming product has been on the decline due to (1) growth of consoles in general, (2) more specifically the acceptance of shooters on consoles (thank you, Halo), (3) piracy and (4) digital distribution. But the decline of retail PC games sales does not mean PC gaming as a business is declining. World of Warcraft and most other MMOs are played exclusively on PCs and they generate huge collective revenues. Major PC brands like Half-Life now generate more revenues from sales on Steam than they do at retail stores. Downloadble PC gaming content provide more revenues, as well as virtual item purchases. Let's also not forget black market MMO gold farming; it doesn't contribute to publisher/developer revenues, but certainly it is a cottage industry on the fringe of gaming. See trend #10 below for more...

6) Nintendo's Wii (Launched Nov 2006)
By now it's clear that major gaming trends are often tied to platforms, which should make sense because what do we picture when someone says "video games?" We often think of the physical hardware we actually use. The Wii was the biggest transformation in terms of how we play and who played. It is not the first gaming system to feature motion sensing (remember the Nintendo PowerGlove?), it's just the first to matter. Perhaps it didn't exactly inspire Microsoft's idea for Natal, but it certainly proved you don't need to have ordinary controls to have extraordinary platform success. As for the content itself on the Wii, that's a different problem and as of now, Nintendo is per usual the strongest publisher on its own platform.


7) Rising Costs of Traditional Game Development
While blockbuster games like Halo 3, Modern Warfare 2 and GTA IV generated hundreds of millions (even billions) of dollars of cumulative global sales, they also cost up to $100 million each produce. And then there is the marketing cost. For MW2, the global launch budget was said to be over $200 million. The problem in the industry, particularly in the era of the PS3 and Xbox 360, is that the minimum quality bar for creating content for these platforms for traditional shooter, action, RPG and most other major gaming genres is now so high that an ever increasing number of games will not be profitable. They simply can't sell enough units to cover their fixed costs. Team sizes have grown, research and development has become more in depth, technology and infrastructure costs have grown accordingly, and then there are the licensing fees that so many publishers have to pay to get all those movie, music, TV and sports games made... There is a reason why there has been so much consolidation and publisher/developer closures. Back in the 80s a few people in a garage could build a complete game in a couple months. Now typical PS3 or Xbox 360 games take two years and a team of over 100 developers, and that's if everything goes smoothly which rarely ever happens.

8) Death of mobile phone gaming and birth of iPhone gaming
Early this decade when mobile phones in the US started getting color screens, big research firms made the tour through the mobile phone service providers with those graphs that said how mobile gaming would generate $186 billion per second per user and grow at 50% per year up through 2015. Okay, maybe not that much but all the arrows on the charts shown to industry executives pointed up, figuring that mobile phones would eventually saturate teens and everyone from Wall Street traders to soccer moms to high school druggies would play games on their devices. But what they didn't understand was that the devices were way behind the curve compared to devices in Europe and Japan where they were seeing higher mobile gaming penetration rates. And oversees much of mobile gaming occurred on trains and buses where commuters were actually able to play, whereas we're too busy driving and talking or texting rather than playing. Finally, there were too many phones with different operating systems, screen formats, keypad interfaces and other differences to make porting a game feasible. In fact, porting a game to a plethora of platforms (which were constantly changing anyway) cost more than actually producing games. Despite the problems, publishers like Electronic Arts made major moves in the space such as acquiring Los Angeles based mobile publisher Jamdat for $680 million in 2006. But mobile consumers simply weren't playing, much less buying, for all the reasons stated above. So much for the charts.

The mobile game industry transformed when in June of 2007 Apple released the iPhone. With a revolutionary touch screen interface that was actually easy to use, connected to iTunes and very slick marketing, the product delivered and essentially fixed every single issue of the fractionalized mobile handset market. By the end of 2009 roughly 130,000 iPhone apps have been released to be sold to over 30 million iPhones. Roughly one third of the apps are games with many more classified as entertainment apps with high crossover between them.

The iPhone will have a huge long term impact on gaming, though it may not necessarily compete direct with DSi and PSP gamers, or so the thinking goes. Initially most analysts believed the iPhone would be a separate market from traditional gaming handhelds which were mostly targeted at kids and teens. A sophisticated mobile device like an iPhone with Internet capabilities would be more than most parents would spend on their children. As a gamer and iPhone owner since Nov 2008, I believe I have personally spent at least $50 on a variety of iPhone games, some only 99 cents, some up to $6.99, and many that were free. Has it cannibalized my gaming on other platforms? Probably a little, though I don't know if it has yet cannibalized my spending on those other platforms. But there is data that suggests the download volume on iPod Touches was significantly higher than on iPhones on Christmas day and the day after, implying that the iPod Touch was a very popular gift this year. The buzz I have heard is that every kid now wants an iPod Touch (or in fact, an iPhone) mainly for the gaming capabilities. That alone implies the platform is an increasing threat to the DS and PSP markets. There is much more to discuss about what the iPhone has done and how it will continue to shape the market, but let's leave it at that for now.

9) Guitar Hero (Launched Nov 2005)
Top line gaming industry revenues grew significantly from 2007, even more so in 2008. On the hardward side, the majority of that growth came from sales of the Wii and DS. On the software side, almost all of the growth came from the Music/Dance games. The genre saw the single biggest two year growth of any genre in the decade going from less than $100 million in the US in 2003 to nearly $2 billion in 2008. Once dominated by the niche DDR games, Guitar Hero ushered in a new way to experience music that made simulated guitar accessible and enjoyable. Now everyone could get a taste of what it is like to be a rock star even if they had no musical talent whatsoever. Trust me, I fall into that category. While Guitar Hero's growth exploded and enticed a very worthy competitor in the Rock Band franchise, it was the original brand that tapped into the hidden rock fantasies of millions of gamers that created the phenomenon. I find it more interesting that it gave non-gamers a reason to take notice of gaming as medium to become something they are not likely to become in real life. This is the same thing "core" gamers experience in an RPG or shooter or a sports game or a racing sim and so forth. In essence, Guitar Hero helped to grow gaming by bring in more gamers who would have never touched a controller.

10) Digital Distribution
This trend was covered a bit already in #5 above. As stated, Steam (launched in Sep 2003) had a huge impact on PC gaming drawing the vast majority of digital distribution dollars. Developers that have published their games on Steam that are not Valve have suggested that Valve has such a stranglehold on the PC digital distribution market that Steam should really be divested from it to prevent a conflict of interest. While that may be debatable, the significance of Steam and other digital distribution platforms is not. PC gaming shelf space at retail has shrunk to very small levels. The big question is when and how this will impact the console market. Already you can buy arcade games, older catalog games or otherwise "small" games on Xbox Live, PSN or the Wii store...and even the DSi and now the PSPGo. Sure, only Xbox Live has had any significant success and it's possible the PSPGo may even "fail" as a platform. The problem with digital distribution on consoles is bandwidth and local storage size. With high end games consuming as much as 10 gigs or more (and maybe beyond the capacity of a single BluRay disc) storing all that data on console hard drives is a huge concern, not to mention the time it takes to download and the fact that not all consoles are connected to the internet. But multi-gig games such as Half-Life 2 or World of Warcraft are available in download only form on the PC with clever "background" download capabilities via Steam etc., so we know that it is possible on a console assuming the space issue is solved. The next decade is poised to see a viable hybrid model between retail and digital distribution for all platforms. And if we go back the iPhone, it is a defacto gaming platform with exclusive digital distribution because the bandwidth and storage issues were solved before the platform was even released.

And now to the predictions for 2010 through 2019. These will be brief:

1) On the heals of #10 above, digital distribution will take off on console, aided by not only ever increasing roll out of broadband, but the advent of terabyte sized solid state hard drives for gaming consoles. This won't really happen until around 2014.

2) By 2011, on-demand gaming (Gaikai, OnLine, Otoy, etc) will deliver what it promises (at least for simpler games) but business models will be tough. Things like WoW and Call of Duty will face big technical hurdles that won't get resolved until a few yeas later, if at all.

3) In 2010 the iPhone will get accessories that make console like controls for FPS and Action games feasible. True cannibalization of traditional console gaming will follow though it won't be as crushing as some people fear.

4) More standardized development tools will emerge to help drive down costs and contribute to a true indy games movement akin to what happened to indy films in the last decade. This will be a slow process but necessary if the industry is to survive.

5) Natal will be very popular when it hits in late 2010, but it won't be as amazing as everyone thinks it will be. Sure it will be fun and offer new gameplay, but people will still want to play games using their existing controller. Take a lesson from Tony Hawk: Ride on that one.

6) Brazil and India will become huge mobile gaming markets once the iPhone and Google phones take off there.

7) HTC will become a strong second tier mobile platform behind iPhone by mid 2011. There will be a few solid games but iPhone will still be the mobile gaming platform of choice.

8) A movie based on a video game property will will a technical Oscar and at least a nomination for writing, acting or directing by 2017. (Wow, did I just predict that?)

9) World of Warcraft will slip to a mere 8 million global users by late 2012 and go flat at 6 million until 2014 when Blizzard has its next MMO ready.

10) A major presidential candidate in 2016 will have a history of playing online shooter and MMO games in the 1990s.