11
Video
Games
More than
just a game
Summary
The video games market in the Netherlands rose by
23.2 percent in 2007, an improvement from the 21.6 percent
rise in 2006. Except for 2005 when growth moderated to a
still healthy 13.3 percent, annual increases during the past
years have exceeded 20 percent. The market was fueled
in 2007 by a full year of the Wii platform and the introduction
of the Sony PlayStation 3 platform. Console hardware sales
jumped by 60 percent in 2007 and games associated
with the new consoles, as well as strong sales for games
that play on the existing consoles, contributed to the
32.7 percent rise in console game sales in 2007. Console
games have become very popular in the Netherlands.
During the past five years 3.2 million consoles were purchased
and console game sales more than doubled. Console
games accounted for 48 percent of total video game
spending in 2007 and generated 63 percent of the growth.
Online games are the second largest category at 33 percent
of total spending. The Netherlands has one of the most
active online game markets in Europe. High broadband
penetration in the Netherlands fuels demand for online video
games. Massive multiplayer online games (MMOGs) are also
very popular in the Netherlands and are driving spending.
MMOGs allow thousands of people worldwide to play the
same game simultaneously. The World of Warcraft (WoW)
franchise, the most popular online game in the world, is a
major seller in the Netherlands. As many online games such
as WoW are PC games, initial sales of these games are
supporting the PC game market. Despite the continued
surge in console games in 2007, PC game spending was
steady. There also is a small wireless game market in the
Netherlands that is posting double-digit annual increases.
While most titles sold in the Netherlands come from the
major international video game publishers, there is an active
local video game industry with more than 70 companies
in the Netherlands involved in developing and producing
150
PricewaterhouseCoopers
At the dawn of new traditions
video games. Streamline Studios, Playlogic, W! games,
Triumph Studios, Game Entertainment Europe and Khaeon
are among the local game developers. The Killzone, Age of
Wonders, and Worms franchises are among the popular video
game series developed in the Netherlands. Early 2008,
Engine Software was licensed to develop games for the
Wii console.
The violent content of video games is an issue of concern
in the Netherlands. Germany, the United Kingdom, and
other countries in Europe ban games that receive an Adults
Only rating from the Entertainment Software Ratings Board
(ESRB). In the Netherlands, however, while the government
can restrict sales of certain games to minors, the law does
not allow for an outright ban of a videogame. Consequently,
a game such as Manhunt 2 from Rockstar Games can be
sold in the Netherlands although it is banned in most countries.
Games tied to marketing campaigns are a relatively new
development in the Netherlands. Nivea, for example,
introduced an advergame in 2007 where players on the
metro have to push the brake at the right time to stop the
train exactly at the station. Volkswagen also introduced
an advergame in the Netherlands to celebrate its 60th
anniversary. Players match songs with the decade in which
they were released, which in turn is keyed to the Volkwagen
models popular during that period. Advergames attract users
and provide an appealing platform to promote a brand.
The huge popularity of the Wii console from Nintendo and a
full-year of sales of the PlayStation 3 (PS3) from Sony should
continue to generate double-digit growth in console games
during the next two years. We expect these new platforms
to mature by 2010, leading to a drop to single-digit growth.
We expect an additional year of double-digit growth in online
games, but with broadband penetration already high in the
Netherlands, further broadband household growth will
drop to mid-to-low single-digit rates and spending on online
games will also moderate to single-digit increases.
151
11 Video Games
The expansion of online games will continue to support the
PC game market because MMOGs typically are PC titles
that must first be purchased in that format in order to play
them online. We expect the PC game market to be relatively
stable during the next five years.
The overall video games market will expand from
€ 472 million in 2007 to € 703 million in 2012, growing at
an 8.3 percent compound annual rate. The Netherlands
share of video game spending in EMEA was 5.2 percent
in 2007. We expect this share to fall to 4.8 percent in 2012
principally because of a drop in share for online games.
The Netherlands currently has one of the largest online
game markets in EMEA. As other countries begin to catch
up, the Netherlands’ share will decline, which will offset
share gains in console and PC games.
The roll-out of high-speed wireless networks and the
introduction of new wireless handsets that are designed
to facilitate video games will allow more sophisticated
wireless games to be downloaded, which should continue
to fuel growth. We look for three additional years of doubledigit gains. The wireless subscriber base in the Netherlands
is saturated, which limits growth in the wireless universe,
which in turn will begin to slow growth in wireless game
spending during the latter part of the forecast period.
Console Game Market
Each of the three main console manufacturers introduced
new platforms during the past two years. The Xbox 360 from
Microsoft was launched in the Netherlands in late 2005, Wii
from Nintendo entered the market in late 2006, and PS3 from
Sony was introduced in March 2007. These introductions
followed the launch in March 2005 of the Nintendo Dual
Screen (DS) platform that provides two screens and two
views of a game. Manufacturing delays associated with the
Blu-ray high definition disc player, delayed the launch of the
PS3, which originally was scheduled for 2006. Console
hardware unit sales in the Netherlands rose 11.5 percent in
2006 to 620,000 and then surged by 60 percent to 990,000
in 2007, fueled principally by the huge popularity of the Wii.
This figure would have been even higher were it not for the
fact that there were shortages of the Wii console. The Wii
was often sold out, limiting overall sales of both hardware
and software in 2007. We expect that pent-up demand for
the Wii will fuel growth in 2008.
The PS3 got off to a slow start, in part because of its high
price point of € 599 for the 60 GB model. Thisprice was
reduced to € 499 in October 2007 and a 40 GB model was
introduced for € 399. These more moderately priced
consoles helped boost sales. The introduction of the lower
priced 40 GB model was an attempt to broaden its market
beyond the hard core gamers but the 40 GB model lacks the
capability to play the PS2 games. It is anticipated that Sony
will introduce an 80 GB model in EMEA in 2008. Sony
announced that it will no longer produce the 60 GB model.
The introduction of new hardware platforms is accompanied
by the introduction of new games that incorporate the new
hardware features. In 2007, for example, three of the top-10
console titles were games that play on the Wii platform.
While new platforms provide a boost to the market, most
purchasers have legacy platforms and continue to buy games
for those platforms. For example, the top-two selling console
titles in 2007 were Nintendo DS titles and that platform
accounted for four of the top-six sellers. There is still a strong
Video Game Market (€ Millions)
Netherlands
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Console Games
100
119
128
171
227
283
325
343
355
360
% Change
14.9
19.0
7.6
33.6
32.7
24.7
14.8
5.5
3.5
1.4
PC Games
67
68
58
57
57
57
58
59
60
59
% Change
8.1
1.5
–14.7
–1.7
0.0
0.0
1.8
1.7
1.7
–1.7
Online Games
27
78
108
130
156
179
193
208
219
229
145.5
188.9
38.5
20.4
20.0
14.7
7.8
7.8
5.3
4.6
% Change
Wireless Games
8
13
21
25
32
37
44
50
53
55
100.0
62.5
61.5
19.0
28.0
15.6
18.9
13.6
6.0
3.8
Total
202
278
315
383
472
556
620
660
687
703
% Change
23.2
37.6
13.3
21.6
23.2
17.8
11.5
6.5
4.1
2.3
% Change
Netherlands as a %
of EMEA
20082012
CAGR
Title
1100
990
0.7
8.0
11.4
Nintendo DS
900
More Brain Training
Nintendo DS
800
Wii Play + Remote Controller
700
620
600
556
500
427
4.7
5.0
5.3
5.2
5.3
5.4
5.2
5.0
FIFA 2007
556
488
400
Wii
PS2
Pokemon Diamond
Nintendo DS
New Super Mario Bros.
Nintendo DS
300
FIFA 2008
PS2
200
Grand Theft Auto San Andreas
PS2
Mario Party 8
Wii
Super Mario Galaxy
Wii
2002
2003
8.3
Source: NVPI
4.0
Platform
Brain Training
1000
9.7
Top-10 Console Titles: 2007
Console Hardware Unit Sale (Thousands)
4.8
2004
2005
2006
2007
Source: NVPI
Sources: NVPI, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates
152
PricewaterhouseCoopers
At the dawn of new traditions
153
11 Video Games
market for the older PS2 platform, which accounted for three
of the top-10 sellers in 2007.
start to age, prices will stabilize and then come down again.
We project the average price to rise from € 32.90 in 2007 to
€ 35.25 in 2012, a 1.4 percent compound annual increase.
While video games are generally viewed as targeted at young
people, they actually appeal to wide spectrum of ages.
In fact, the top-two titles— Brain Training and More Brain
Training—are based on neuroscience and studies of the
impact of reading and mathematical exercises that stimulate
the brain, and are generally purchased by older people.
The introduction of new games also drives unit sales.
Unit sales jumped 52.8 percent in 2006 and an additional
25.5 percent in 2007. We expect two more years of doubledigit growth, buoyed in the near term by pent-up demand for
the Wii console and associated Wii games. We then expect
unit sales growth to moderate as the current platforms age.
By 2012, unit sales will total a projected 10.2 million, an
8.1 percent compound annual increase.
New games for the new platforms typically sell at higher
prices than games for older platforms, which are often
discounted. With each manufacturer having new platforms
in 2007, there were many new games introduced in 2007
and the average price rose 5.8 percent, the first gain during
the past five years. With new games expected to comprise
a larger percentage of sales during the next few years, we
expect the average price to continue to increase during the
next two years. By 2010, as the current generation platforms
We project spending on console games to increase to
€ 360 million in 2012, a 9.7 percent compound annual increase.
The Netherlands’ share of the console game market has
increased steadily during the past five years, from 2.7 percent
in 2003 to 4.1 percent in 2007. We expect it will rise to
4.6 percent in 2008 to average 5.0 percent during 2009–2012.
Console Game Market
Netherlands
2003
2004
2005
2006
2007
2008
Unit Sales (Millions)
2.2
2.95
3.6
5.5
6.9
8.2
% Change
18.9
34.1
22.0
52.8
25.5
18.8
Average Price (€)
45.45
40.34
35.56
31.09
32.90
34.50
% Change
–3.4
–11.2
–11.8
–12.6
5.8
4.9
Aggregate Spending
(€ Millions)
100
119
128
171
227
% Change
14.9
19.0
7.6
33.6
Netherlands as a %
of EMEA
2.7
2.8
3.2
4.0
2009
2010
2011
2012
9.1
9.6
10.0
10.2
11.0
5.5
4.2
2.0
35.75
35.75
35.50
35.25
3.6
0.0
–0.7
–0.7
283
325
343
355
360
32.7
24.7
14.8
5.5
3.5
1.4
4.1
4.6
5.0
5.1
5.0
5.0
20082012
CAGR
8.1
1.4
9.7
Sources: NVPI, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates
154
PricewaterhouseCoopers
Online Games
Online games enable video gamers to play against each
other over the Internet. The online game market is composed
of several segments. The segment that is potentially the
most lucrative is the MMOG market. These games are
usually role-playing games that take place in fantasy or
medieval worlds and can be played over long periods of
time. Players pay a monthly fee to participate. Providers
also generate incremental revenues by selling in-game
accessories to enhance the gaming experience. Dynamic
advertising in online games, where ads can be updated in
the online versions, represents another revenue stream.
In some cases, games are provided for free and revenues
are generated through advertising or sponsorships. Sponsored
online advergames are yet another revenue stream. Our online
figures consist only of subscription spending. Currently,
online games are primarily played on PCs.
An online console market is emerging with the new generation
of consoles, each of which emphasizes the online experience.
Each of the three manufacturers has established an online
environment where consumers can buy additional content
and interact with each other through online chat sessions
and direct competition. A third segment consists of casual
gamers who go to a Web site and play strategy or puzzle
games. Of the female gamers in the Netherlands, 86 percent
play online games, most of which are casual games.
A broadband connection is crucial to online gaming because
speed is a crucial element in the video game experience.
With the highest broadband penetration rate in EMEA, the
Netherlands has one of the largest online game markets.
Between 2003 and 2007, the broadband universe in the
Netherlands nearly quadrupled, leading to explosive growth
in the number of online video game subscribers. There were
1.28 million online video game subscribers in the
Netherlands in 2007, up 23.1 percent from 2006.
At the dawn of new traditions
With 87 percent of Internet households already on
broadband, growth in the broadband universe will
necessarily slow. We expect only one more year of
double-digit growth. Thereafter, growth in the broadband
household universe will drop to mid-to-low single-digit
advances. During the five-year forecast period as a whole,
the number of broadband households will expand at a
5.3 percent compound annual rate to 7 million in 2012.
In 2007, 23.7 percent of broadband subscribers were online
video game subscribers, well above the 10.1 percent average
for EMEA as a whole. After reaching 20 percent in 2004,
online video game penetration growth slowed during the
past three years, averaging a 1.0 percentage-point gain per
year. We anticipate a comparable increase during the next
five years. By 2012, an estimated 28.6 percent of broadband
subscribers will subscribe to an online game service,
a 4.9 percent advance over five years. The number of
online video game subscribers will rise to 2 million by 2012,
a 9.3 percent compound annual gain.
Average monthly subscription spending has declined
during the past five years, a trend that we expect to continue.
By 2012, the average online video game subscription will
cost an estimated € 9.55 per month, down 1.2 percent on
a compound annual basis from € 10.15 in 2007. Aggregate
spending on online games will increase from € 156 million
in 2007 to an estimated € 229 million in 2012, an 8.0 percent
compound annual increase.
The Netherlands share of the online market in EMEA peaked
at 22.0 percent in 2004 and has declined to 11.9 percent
by 2007, the result of broadband growth slowing in the
Netherlands while the rest of EMEA was catching up.
We expect the online video games market to continue to
grow much faster in other countries than in the Netherlands
during the next five years. The Netherlands’ share of this
market will fall to 6.0 percent in 2012.
155
11 Video Games
PC Games
Online Game Market
Netherlands
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Broadband
Subscribers
(Millions)
1.40
2.90
3.95
4.60
5.40
6.00
6.35
6.60
6.80
7.00
% Change
75.0
107.1
36.2
16.5
17.4
11.1
5.8
3.9
3.0
2.9
Online Video
Game Subscribers
(Millions)
0.20
0.60
0.85
1.04
1.28
1.50
1.65
1.80
1.90
2.00
% Change
150.0
200.0
41.7
22.4
23.1
17.2
10.0
9.1
5.6
5.3
Online Video
Game Penetration
of Broadband
Households (%)
14.3
20.7
21.5
22.6
23.7
25.0
26.0
27.3
27.9
28.6
Average Monthly
Subscription Fee (€)
11.15
10.80
10.60
10.40
10.15
9.95
9.75
9.65
9.60
9.55
% Change
–3.5
–3.1
–1.9
–1.9
–2.4
–2.0
–2.0
–1.0
–0.5
–0.5
Annual Subscription
Spending (€ Millions)
27
78
108
130
156
179
193
208
219
229
% Change
145.5
188.9
38.5
20.4
20.0
14.7
7.8
7.8
5.3
4.6
Netherlands as a %
of EMEA
14.4
22.0
16.2
13.8
11.9
10.6
9.1
7.9
6.8
6.0
20082012
CAGR
5.3
9.3
–1.2
The expansion in the console market has, to some degree,
come at the expense of the PC market, as most of the
interest in video games has centered on the new console
platforms. Nevertheless the PC game market has held up,
in large part because of the growing popularity of MMOGs,
most of which require the purchase of a PC game. In 2007,
World of Warcraft: The Burning Crusade, a new MMOG
in the WoW franchise, was the leading PC game title and
World of Warcraft ranked third in 2007 as it did in 2006.
The Sims franchise was represented by two titles. There
were also two Command & Conquer titles in the top-10 in
2007 and two Rollercoaster Tycoon titles. Grand Theft Auto
San Andreas was the only title to appear in both the top-10
console and top-10 PC lists.
Top-10 PC Titles: 2007
Unit sales have followed a volatile up-and-down pattern during
the past four years, with a double-digit decrease in 2005
interspersed between two double-digit advances. In 2007,
unit sales edged down 2.6 percent to 3.7 million. A 2.7 percent
rise in the average price, however, offset that decrease and
spending remained stable at € 57 million. PC games are
much less expensive than console games. The average
PC game in 2007 cost €15.41, less than half the € 32.90
for the average console game.
We expect unit sales to continue to be supported by the
growing MMOG market, helping to offset the ongoing
migration to console games. We project unit sales to remain
at 3.7 million annually through 2011 and then dip to 3.6 million
in 2012 as the next generation of consoles is introduced and
attracts attention from the PC market. MMOGs tend not to
be discounted and we project the average price to increase
at a 1.4 percent compound annual rate to € 16.50 in 2012.
Spending will total an estimated € 59 million in 2012,
a 0.7 percent compound annual increase from 2007.
Title
8.0
World of Warcraft: The Burning Crusade
Command & Conquer 3: Tiberium Wars
World of Warcraft
Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates
Best of Rollercoaster Tycoon 3
Call of Duty 4: Modern Warfare
The Netherlands comprised 5.8 percent of the PC game
market in EMEA in 2007, down from a five-year peak of
7.5 percent in 2004. We expect this share to increase to
6.2 percent by 2011–2012, reflecting the relatively large
online game market in the Netherlands that in turn fuels
sales of PC titles.
Rollercoaster Tycoon 2
The Sims 2: Seasons
The Sims Deluxe
Command & Conquer General
Grand Theft Auto San Andreas
Source: NVPI
156
PricewaterhouseCoopers
At the dawn of new traditions
157
11 Video Games
Wireless Game Market
PC Game Market
Netherlands
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Unit Sales (Millions)
3.05
3.7
3.2
3.8
3.7
3.7
3.7
3.7
3.7
3.6
% Change
11.3
21.3
–13.5
18.8
–2.6
0.0
0.0
0.0
0.0
–2.7
Average Price (€)
21.97
18.38
18.13
15.00
15.41
15.50
15.75
16.00
16.25
16.50
% Change
–2.9
–16.3
–1.4
–17.3
2.7
0.6
1.6
1.6
1.6
1.5
Aggregate Spending
(€ Millions)
67
68
58
57
57
57
58
59
60
59
% Change
8.1
1.5
–14.7
–1.7
0.0
0.0
1.8
1.7
1.7
–1.7
Netherlands as a %
of EMEA
7.0
7.5
5.9
5.7
5.8
5.8
5.9
6.1
6.2
20082012
CAGR
–0.5
Wireless games are games played on mobile phones or other
wireless devices. In contrast with online games that use PC
and/or console game titles, wireless games have been generally
distinct from PC and console games, although some PC
and console games can be downloaded on mobile phones.
Because of the limited capacity of mobile phones compared
to consoles or PCs, wireless games have fewer graphics, are
slower than other platforms, and are generally less elaborate.
Mobile operators typically include free games with their
handsets to stimulate interest and to induce mobile
subscribers to pay incremental fees to download additional
games.
In contrast with its online game market, the Netherlands has
a relatively small wireless video game market, accounting for
only 2.5 percent of spending in EMEA in 2007. Nevertheless,
at 1.3 million in 2007, there were actually more wireless video
game players than online video game subscribers. Spending,
158
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Wireless Telephone
Subscribers
(Millions)
13.2
14.8
15.8
16.5
16.7
16.9
17.0
17.1
17.2
17.3
9.1
12.1
6.8
4.4
1.2
1.2
0.6
0.6
0.6
0.6
Percent Using
Wireless Games (%)
2.0
3.5
5.0
6.0
7.5
9.0
10.5
12.0
13.5
14.5
Number of Users
0.3
0.5
0.8
1.0
1.3
1.5
1.8
2.1
2.3
2.5
% Change
1.4
0.7
6.2
Sources: NVPI, PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates
Wireless Games
Netherlands
however, was only € 32 million, just 20 percent that of online
games. The reason is that wireless games are relatively
inexpensive compared to online monthly subscriptions,
costing an average of only € 3.65 in 2007.
Wireless carriers have a strong motivation to provide
incremental services such as games because they will
no longer be able to generate revenue growth through
subscriber gains as the wireless telephone market is
saturated. The number of wireless telephone subscribers
in the Netherlands rose by only 1.2 percent in 2007 and we
expect growth to average only 0.7 percent on a compound
annual basis during the next five years.
Leading wireless telephone operators upgraded their
networks to 3G early in the decade. More recently,
wireless networks have been further upgraded to High
Speed Downlink Packet Access (HSDPA) that delivers
download speeds up to 1.8 Mbps. HSDPA is now available to
90 percent of the population. We expect the rollout of high-
PricewaterhouseCoopers
% Change
150.0
66.7
60.0
25.0
30.0
15.4
20.0
16.7
9.5
8.7
Annual Downloads
Per User
8.00
7.50
7.25
7.00
6.75
6.50
6.25
6.00
5.75
5.50
% Change
–5.9
–6.3
–3.3
–3.4
–3.6
–3.7
–3.8
–4.0
–4.2
–4.3
Aggregate Number
of Downloads
2.4
3.8
5.8
7.0
8.8
9.8
11.3
12.6
13.2
13.8
% Change
140.0
58.3
52.6
20.7
25.7
11.4
15.3
11.5
4.8
4.5
Average Price (€)
3.50
3.50
3.55
3.60
3.65
3.75
3.85
4.00
4.00
4.00
% Change
–2.8
0.0
1.4
1.4
1.4
2.7
2.7
3.9
0.0
0.0
Aggregate Annual
Spending (€ Millions)
% Change
Netherlands as a %
of EMEA
8
13
21
25
32
37
44
50
53
55
100.0
62.5
61.5
19.0
28.0
15.6
18.9
13.6
6.0
3.8
4.9
3.4
3.1
2.6
2.5
2.3
2.3
2.3
2.1
2.1
20082012
CAGR
0.7
14.0
–4.0
9.4
1.8
11.4
Sources: PricewaterhouseCoopers LLP, Wilkofsky Gruen Associates
speed wireless networks and the introduction of sophisticated handsets designed to play video games to fuel the
wireless video game market during the next five years. They
will enable the development of more sophisticated wireless
games, which should spur demand. In 2007, an estimated
7.5 percent of wireless telephone subscribers downloaded
wireless games. We project that share to more than double to
14.5 percent by 2012. This will translate into 2.5 million wireless game users in 2012, a 14.0 percent compound annual
increase from 2007.
At the dawn of new traditions
159
The average number of downloads per user has declined
during the past four years, the typical pattern of developing
markets. Users initially download a large number of games
as the service is a novelty. Over time, the novelty wears off
and users download at a lower but sustainable rate. In 2007,
downloads per user averaged 6.75 compared to 8 in 2003.
We expect that figure to continue to trend down as penetration
increases and new users represent a declining proportion
of the overall user base. By 2012, the average wireless
game user will download 5.5 games annually.
Growing sophistication in wireless networks will allow for
more elaborate wireless games, which will put upward
pressure on pricing. We expect the average price to rise from
e 3.60 in 2006 to e 4.00 in 2010 where we expect it will
plateau. Growth will average 1.8 percent on a compound
annual basis. Spending on wireless games will increase to
e 55 million by 2012, growing by 11.4 percent compounded
annually. The Netherlands’ share of the wireless video games
market fell from 4.9 percent in 2003 to 2.5 percent in 2007.
We expect that share to continue to decline, falling to
2.1 percent by 2011–2012.
160
PricewaterhouseCoopers