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Players will be "sucked into Steam Machine" as digital swells - IDC

Players will be "sucked into Steam Machine" as digital swells - IDC

Mon 13 Jan 2014 9:56pm GMT / 4:56pm EST / 1:56pm PST
BusinessOnline

IDC's Lewis Ward says that Valve has a "significant opportunity" in the living room; PC/Mac digital game sales to top $24 billion by 2017

IDC has shared with GamesIndustry International portions of its Worldwide Digital PC and Mac Gaming 2013-2017 Forecast, which estimates that PC and Mac gamer spending combined with banner/video ad outlays across all digital channels will grow to over $24 billion worldwide by 2017.

Worldwide spending on digital PC/Mac gaming is expected to grow at a rate of about four percent per year, although North American digital PC/Mac gaming revenue is forecast to "slip at the margins" thanks largely to "the cannibalization of casual-leaning, browser-centric games (typified by Zynga's Farmville 2) by smartphones and tablets, compounded by a steady drop in hardcore subscription revenue (typified by Blizzard Entertainment's World of Warcraft)."

The market growth, IDC says, is shifting quickly to countries outside of North America, particularly in BRIC (Brazil, Russia, India and China) regions. Digital PC/Mac gaming revenue outside of North America should grow at better than five percent a year through 2017.

"If Valve can actually get some exclusive freemium games like Dota 2 working great with its controller I think that would be the best possible calling card"

Lewis Ward

The big growth opportunity for much of the world continues to be hardcore freemium (see chart below), as exemplified by League of Legends, World of Tanks and numerous MMORPGs across China. While freemium doesn't always work as well in the West, IDC Research Director Lewis Ward explained to us that the lines are blurring between business models and we're going to see more and more hybrids (like what we've witnessed on Xbox One with Forza 5, for example).

"It's really all about China here. Hardcore freemium games on PCs are crushing it there and to a lesser extent in the other BRIC countries. From a total spending perspective, this tipping point has already come and gone. I think in the West we'll begin to see more $20, $30 and $40 digital downloads that are really starter packs that have freemium payment options baked in. It's going to be an increasingly hybrid monetization model," he said.

1

Not only will business models start to blend, but the lines separating "PC gaming" from consoles or other platforms will start to be erased as well. "The difference between what PCs, consoles, microconsoles, and perhaps even smart TVs will be able to deliver three years from now will be largely semantic. Relative platform success will boil down to delivering a great overall experience that in turn rests on having the right games, the right business model mix, big data-driven analytics insights, and outstanding social features," added Ward.

In this increasingly digital gaming world, IDC also believes Valve's popular Steam service has a "significant opportunity" to cement its place in North American and Western European living rooms. That assumes, of course, that Valve's Steam Machines initiative turns out to be a success.

Ward doesn't see Valve suddenly wrestling the living room away from Microsoft, Sony and Nintendo, however. "No, I don't have consoles becoming niche. Global console game software and service revenue is shifting from packaged toward digital channels at a rate of about five percent per year. The PC games space is overwhelmingly digital now, but the bottom line is that I have Sony, Nintendo and Microsoft still dominating AAA games in the living room in 2017. Valve and its partners have a real growth opportunity here but they're ramping up from zero," he noted.

So how does Valve ultimately get a piece of the living room? Ward thinks that more and more PC players will look to purchase a Steam Machine the next time they want to upgrade.

"I think a portion of avid PC gamers that don't mind a controller interface and like the big screen audiovisual experience will pick up a Steam Machine instead of a standard PC in their next upgrade cycle," he said. "As long as Valve and its partners keep ramping up their Big Picture games catalog, a portion of those tens of millions of regular Steam users will eventually get sucked into the Steam Machine (clever, I know). If Valve can actually get some exclusive freemium games like Dota 2 working great with its controller I think that would be the best possible calling card."

13 Comments

Ruud Van De Moosdijk
VP of Development

40 45 1.1
There are so many things here that I disagree with I don't know where to start. I am sure there is a place for the Steambox, but I sincerely doubt it will become mainstream, or a serious consideration when upgrading your home computer. A computer has a very special place, and is used for much more than gaming. Most people that buy consoles now (and a Steambox *is* a console imho) have one (or more) console(s) *and* a computer. The console is never the upgrade for the computer, or a replacement, and I don't see a Steambox being that either.

There is very little to debate about digital making giant leaps, and that will continue to grow, but it has very little relation as far as I am concerned to the success or failure of the Steambox. Any system now can do digital, so there is nothing there to hold over your competition. The argument that subscription-based models are a thing of the past based on the dwindling numbers of WoW has no base in reality either. WoW is 10 years old, it has ran its course, past its peak. It is to be expected that after 10 years the number of players would start to fall. FFXI, WoW's "competing" MMO has seen the same drop in numbers in the last 3 years. The interest in Elder Scrolls Online (which will have a subscription service) shows me people are not turning their back on the model. Sure freemium models are working for some games, like World of Tanks, but it rather that seeing it as the future, it is one of many models to be considered. Every model can and will still work, but it is much more related to the product than "a standard". There are hundreds freemium games out there and don't make a dime (literally).

Posted:3 months ago

#1

Morville O'Driscoll
Games Blogger & Journalist

1,374 1,020 0.7
Any system now can do digital, so there is nothing there to hold over your competition.
I think that broadly speaking, you're right. But I also think that where Steam will compete (and force competitive behaviour from rivals) is in its pricing, near-constant sales, and to a lesser extent gifting. Steam needs a massive marketing push to gain initial traction against its rivals for customer dollars, but once there's a proper awareness of how cheap games can be, it could become the dominant factor in decision-making. Valve are getting there with the brand-awareness, but only slowly - Game in the UK are selling Steam Wallet vouchers. What is desperately needed is a Valve sponsored Top 20 Games On Steam (with prices) next to all the Steam Wallet adverts, and then awareness of prices will rocket.

Posted:3 months ago

#2

Donald Dalley
Freelance writer

47 26 0.6
Good luck with that Valve. Until the console exclusive that I play is available only on a PC or Steambox, you won't be getting any of my money.

Edited 1 times. Last edit by Donald Dalley on 14th January 2014 5:52pm

Posted:3 months ago

#3

Greg Wilcox
Creator, Destroy All Fanboys!

1,993 902 0.5
All this talk of sucking in and swelling is a bit... racy, don't you think? Anyway, Steam will be fine without the boxes, but I think this experiment will have its ups and downs as the more diehard PC-building skeptics and console fans who have no need for a gaming rig because they want first-party releases NOT on PC slowly discover a friend who shelled out for a Steam box who's getting the most out of it and maybe shows it off a little.

As usual... We. Shall. See...

Posted:3 months ago

#4

Steve Wetz
Reviewer/Assistant Editor

98 132 1.3
I think Steam will be fine no matter what - and any success the Steam Box has will only increase their revenue. This is really a no-brainer for Valve. They have no real investment in hardware other than the controller, which is a hit they can afford to take since the Steam Box manufacturers will be buying Steam Controllers from Valve to bundle with their hardware. From there, any Steam Box owner who wasn't already privy to Steam pricing will be, and word of mouth can do the rest. They are maximizing their exposure while minimizing their fiscal risk. It's just smart business.

Posted:3 months ago

#5

Nick Wofford
Hobbyist

92 61 0.7
@Steve
But there is a bit of risk involved. It's just not financial.

The Valve console has been long-awaited, and has tons of support theoretically. But when the Steam Boxes were announced, they tripped right out of the gate. They won't be cheap, and they can't run most games. (Some will be cheap, but they'll also be worthless as they won't be able to do what a console can do). The budget models will be ignored by console gamers and the high-end models will be ignored by PC gamers.

This means that Valve wasted their chance to dominate the console space. They're risking that chance with these boxes. I just feel like Valve doesn't really understand why people buy consoles.

Posted:3 months ago

#6
With the blow to net neutrality today, it is now up in the air as to who may or may not control "the tubes" of the internet.

Posted:3 months ago

#7

Christian Keichel
Journalist

416 561 1.3
I think a portion of avid PC gamers that don't mind a controller interface and like the big screen audiovisual experience will pick up a Steam Machine instead of a standard PC in their next upgrade cycle
I doubt this will happen, most PC gamers don't buy complete PCs every four or five years, they only upgrade the mainboard and CPU or the GPU to get more performance, why should they instead invest in a Steambox and pay for a whole device, when changing certain parts is cheaper and the money can be invested in more powerful components?

Posted:3 months ago

#8

Alex O'Dwyer
Animator

162 155 1.0
most PC gamers don't buy complete PCs every four or five years, they only upgrade the mainboard and CPU or the GPU to get more performance, why should they instead invest in a Steambox and pay for a whole device
Exactly. My PC is 5 years old. My next upgrade will be a new graphics card, which is all I will need to play the latest games. $200 max. Can't see myself ever spending $499 to $6000 dollars, no matter how old my PC is.

Edited 1 times. Last edit by Alex O'Dwyer on 15th January 2014 1:41pm

Posted:3 months ago

#9

Alfonso Sexto
Lead Tester

714 495 0.7
The thing is: I am a multy-sistem gamer. Currently I have a X360, a PS3, PS VITA, a Quite powerful gaming PC and soon a Xbox One.

With all that stuff in my home I have little to no interest in having a console&PC hybrid. For console gaming I have consoles; for upgradeable platform gaming I already have a PC.

My personal case.

Edited 1 times. Last edit by Alfonso Sexto on 16th January 2014 7:47am

Posted:3 months ago

#10

Nick Parker
Consultant

264 124 0.5
A couple of questions I need to get my head around?

Some of these boxes are super high spec (32 GB RAM, up to 6 TB storage) - is the hard core gaming experience so much better with these or is Valve encouraging future proofing?

If I had a 1080p LED screen wired up to my 8GB RAM, 1TB hard drive with latest GPU in my bedroom/study, would I want to invest in higher spec kit (a Steam box) to go downstairs or across to my living room which has a similar screen?

Posted:3 months ago

#11

Morville O'Driscoll
Games Blogger & Journalist

1,374 1,020 0.7
Some of these boxes are super high spec (32 GB RAM, up to 6 TB storage) - is the hard core gaming experience so much better with these or is Valve encouraging future proofing?
Mostly future-proofing, but the costs to do so are so little (relatively speaking), that they may as well. For Windows gaming, 8gb is pretty much the recommended RAM nowadays, but another 8gb is only 50-60. If you're already spending 900 (figure pulled out of thin air), then another 60 is a drop in the ocean. Hard drives are the same, but even more useful - I've got a 1tb drive just for gaming, so I can have lots of games installed at once. Then I've got another 1tb as media/comics/music. And then I've got a 128gb SSD as system drive. If you consider the Steam Machines are meant to be living room based, having 6tb of space is a good idea considering TV episodes, music downloads, etc - saves having to constantly delete items.
If I had a 1080p LED screen wired up to my 8GB RAM, 1TB hard drive with latest GPU in my bedroom/study, would I want to invest in higher spec kit (a Steam box) to go downstairs or across to my living room which has a similar screen?
This is... unknown right now, and a little subjective, but probably not a higher-spec kit, no. The people who have used the Streaming Beta say that it's already pretty good, though there are definite lag spikes and some weird compatibility issues. If it improves as much as it should, then you could use a lower specced machine (a decent laptop, say) and stream games through to your living room, using the power of your study PC to render them. Or you could just buy a Steam Machine and not bother with the streaming.

(Not sure if that made things clearer? The Official Steam Group for Streaming is here: http://steamcommunity.com/groups/homestream :) )

Posted:3 months ago

#12

Nick Parker
Consultant

264 124 0.5
Very helpful Morville, may thanks.

Posted:3 months ago

#13

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