Digital Games for Empowerment & Inclusion (DGEI)

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IPTS, Seville, Spain, 23-24 January 2012 1 Digital Games for Empowerment & Inclusion (DGEI) Experts

evolving industry and a changing landscape: market analysis, future prospects and key challenges

1 IPTS, Seville, Spain, January Digital Games for Empowerment & Inclusion (DGEI) Experts Workshop, JRC-IPTS, Seville, January 2012 Background Paper - Digital 'meaningful' games An evolving industry and a changing landscape: market analysis, future prospects and key challenges Gianluca Misuraca JRC-IPTS, Information Society Unit The views expressed by the author are not necessarily those of the EC

2 Outline IPTS, Seville, Spain, January Digital Games: a fast growing industry and a promising innovation lab Overview of the state of the Digital Games industry Emerging Trends: New Handhelds and Mobile Gaming & Online Gaming Digital 'meaningful' Games: an evolving sector and a changing landscape Digital 'serious' Games: current state and prospective trends Digital 'meaningful' play: challenges ahead and future directions Open issues for discussion

3 Digital Games Industry: structure and trends IPTS, Seville, Spain, January industry characterized by an oligopolistic market with high entry barriers two main global players: Nintendo and Sony, with Microsoft as third player in the console market young industry rapidly growing worth about 55 billion US$ in 2010 it is foreseen to have a global turnover of more than 82 billion US$ by 2015 The expectation is that online and wireless video games will increase most A related disruptive trend is the emergence of new actors coming from different businesses, or the short-cutting of existing actors in oligopolistic position with emerging opportunities, new companies might become essential intermediaries in the value chain (e.g. online portals; Internet service providers or even Telecom Services or Telecom equipment manufacturers companies) Source: JRC-IPTS Report 'Born digital / Grown Digital (2010)

4 Evolution of the global Digital Games market IPTS, Seville, Spain, January Source PWC, 2011)

5 Europe within the global Digital Games market IPTS, Seville, Spain, January The EMEA region was the biggest market for Digital Games in 2009 the console game segment was the biggest component of the EU market in 2010 the EMEA region has been overcome by the Asia-Pacific 22 billion US$ comparing to 16,9 billion US$ of EMEA In Europe, France, Germany, Italy, Spain and the UK, altogether accounted for 15.2 billion US$ in 2009 These markets provide a total of nearly 30% of the global market France and UK are leading with a turnover of 5.1 billion US$ and 4 billion US$ respectively, followed by Germany with 2.9 billion US$, Spain, 1.8 billion US$ and Italy, 1.4 billion US$

6 Evolution of the European Digital Games market size IPTS, Seville, Spain, January Source PWC, 2011)

7 Digital Games Ecosystem IPTS, Seville, Spain, January In today s industry, developers and publishers work together to make available a wide range of DG Growth is taking advantage of opportunities to offer user-friendly, intuitive services on a large scale progressively invading other areas in the sector such as casual games, advergames or edutainement, multiplying the supply-side actors Source: JRC-IPTS, 2010, inspired by C. Feijoo Potential audiences have grown, worldwide communities have been reached, and access platforms have been added one might expect these quasiexperiments to offer essential core lessons to sectors such as egovernement, ehealth, eculture and eeducation Since Digital natives will lead the growth of the entertainment market, Digital Games may become a 'living lab' of the digital economy with spillover effects to other sectors, while creating a favourable environment for the development of the cultural and creative industry

8 Key Players: Developers IPTS, Seville, Spain, January The production is characterised by high fixed costs and low marginal costs Need for early investment which affects the power relation in the value chain Developers are usually studios, with multidisciplinary teams In Europe, a large population of highly creative small development studios is found in the UK, France, Germany, the Nordic countries and to a lesser extent in Spain Being small and often young, such companies are confronted with a variety of additional managerial issues, typical of SMEs Europe is rather well represented among the top developer companies worldwide in the "Develop 100" list there are 27 European companies while the USA leads with 32 companies, and Japan and Canada follow with 26 and 11 respectively Within Europe, the UK is the absolute leader with 23 out of the 27 European top ranking companies

9 Key Players: Publishers & Distributors IPTS, Seville, Spain, January Publisher are responsible for licensing the rights and the concept of the game the gatekeeper role is played by several hardware platform owners, publishers rarely specialise in only one platform and opt for platform diversification US and Japanese companies hold the lead in the publishing stage Among the world top 20 publishers, there are only two European firms: Ubisoft and Atari Distributors handle the marketing and distribution of products Together with the retailers, they cover the physical logistics of the distribution chain usually specialised distributors independent game companies find small specialised distributors for their titles Retailers are usually electronic chains, multimedia shops and specialist shops but nowadays digital games can be easily found in ordinary distribution stores such as FNAC, Wal-Mart, the Metro group or even Carrefour

10 Platforms IPTS, Seville, Spain, January Video game market by platform (million US $, at 2008 prices) Supply of DG concentrated in a very small number of producers Consoles and dedicated handheld game platforms are the best known set of products in the DG industry, with console products such as the Playstation (Sony), the Xbox (Microsoft), the Wii (Nintendo) and handheld devices 0 such as the Nintendo Ds and PlayStation Portable PC Console/Handheld Online Wireless Total Today, the PC platform dominates the fast-growing online game segment despite the adaptation of dedicated consoles and handhelds, and general purpose wireless handheld platforms such as smart-phones

11 Emerging trends IPTS, Seville, Spain, January The past two decades have seen the mass production and rapid distribution for retail sale of DG for use on PC, advanced games consoles, including portable devices, and mobile phones 20% 18% 16% 14% 12% 10% 8% 6% 4% Online & wireless video games share in the total video games market Online and mobile games are emerging as two major disruptive phenomena enabling innovative business models within the broader realm of the emerging online services domain 2% 0% Online Wireless The emergence of on-line and mobile games is likely to shift the current market structure

12 New Handhelds and Mobile Gaming IPTS, Seville, Spain, January The mobile-phone centred gaming market started emerging around 2002 operators began commercialising phones capable of downloading games Until 2007, the market was characterised by relatively simple games Possibilities for mobile gaming changed enormously with the introduction of the first wave of smart-phones and the availability of broadband with flat data fees The years 2007 and 2008 brought significant innovations in business UK operators T-Mobile and Blykbegan with advertising-supported games Greystripe and Glu Mobile offering users free playing in exchange for advertising Blurring boundaries across media, use of Facebook to distribute games Since 2008, the model has become stable Browsing from mobile devices and downloading from application stores are becoming the standard way to consume mobile games The mobile gaming scenario is no longer that of a modest extension of console or PC games: it is a distinct user experience with a number of unexplored avenues Source: Feijoo et al., 2012 forthcoming

13 The Mobile Gaming Ecosystem IPTS, Seville, Spain, January Source: JRC-IPTS, 2010, Feijoo Creation development - production Delivery - distribution - access Engine / middleware software developers Marketing User data / profiling Near field communications and sensors Development studios Game publishers Advertising / other business models Mobile gaming enabling platforms / application server Aggregation platforms / applications stores Payment / billing New mobile games studios New mobile games publishers Mobile communication and broadcasting networks (UMTS, HSPA, LTE, WiMax, DVB-H, ) Other media / content industries IPR management Context-aware services Internet in the mobile domain, the market relevance of game publishers is counter balanced by the relevance of mobile operators, handset suppliers and application store providers Internet mobile users Use consumption - interaction Batteries memories displays interfaces cameras suppliers Client mobile software game Software platforms Mobile devices operating system suppliers Mobile devices suppliers Other mobile device applications Hardware / software for ambient interaction Mobile game users

14 Reshaping Delivery Platforms & Business Models IPTS, Seville, Spain, January From walled gardens : vertical integration with key role of mobile operators to platforms within the mobile ecosystem: Two contrasted examples The success story of the Apple App Store: the true mobile game changer Nokia, then pioneers and now trailing behind Innovation potential: Technology: sensors in and around the mobile device / bridging real and virtual worlds Business: traditional BM complemented with advertising and value-added applications Opportunities: leverage of context and the social network new roles of users in service delivery as creator of content and source of innovation Challenges: heterogeneity and current fragmentation, absence of standards, proliferation of small mobile game software developers due to lower entry barriers

15 Online Gaming IPTS, Seville, Spain, January Exploiting the Internet itself as a gaming platform A key feature of all online games is a shift away from a product based business model to a service based business model games are no longer run on a player's hardware but on the servers of the game provider revenues can be earned from customers during game play, through the purchase of in-game goods and services, rather than upfront sales of game SW and HW this has opened up employment and entrepreneurial opportunities for 'golddiggers', players who can earn in-game goods with their time and skill and sell them for real money This collapses the business value chain that exist in other parts of the gaming industry This requires new technical and business competence, thus creating new opportunities

16 Serious games IPTS, Seville, Spain, January Aim at simulating real-life for planning and problem-solving by providing an environment in which people can experiment with different strategies emphasizes on abstract knowledge to best possible deal with problems involves people to simulate social processes and to let them participate in decisionmaking playing the game several times help to analyze and understand the problem scope and to experience possible outcomes Serious Games potential improve and sharpen the knowledge and awareness of certain issues and their impact on related topics of interest raise civic awareness about collective policy challenges, or address specific educational or social purposes through simulating real-life situation, etc. We will see more in details in the IBBT presentation

Serious games Taxonomy IPTS, Seville, Spain, 23-24 January 2012 17 Source: Serious

17 Serious games Taxonomy IPTS, Seville, Spain, January Source: Serious Games Taxonomy, Ben Sawyer and Peter Smith, February 2008,

18 Digital serious games market 1/2 IPTS, Seville, Spain, January Defence: one of the most important areas in terms of client investment and orders Teaching and training: serious gaming has a key role to play in this market Advertising: advergames allow clients to promote a particular brand or product In the US alone, the advergaming industry was worth about 262 million USD in 2008 Information and communications: advertising-related communications (edumarket games) are playing an increasingly significant role in in-game advertising, an industry worth 205 million USD in the USA in 2008 Health: Nintendo has enjoyed considerable success with applications dedicated to brain training and fitness (Wii-Fit) this market rose from 100 million USD to 225 million USD between 2005 and 2007, in the USA Culture: this sector only accounts for a minor part of the serious gaming industry at present, strong growth is possible, particularly in cultural and industrial tourism Activism: this sector is unique in that it does not follow traditional economic models titles are produced with little or no financial backing and have the sole objective of putting across a particular message Source: IDATE Market Reports, 2008, 2009, 2011

19 Digital serious games market 2/2 IPTS, Seville, Spain, January Digital serious games can widely be divided into three categories: Message-based serious games: to deliver specific messages in an educational, informative or persuasive fashion Training serious games: to improve users cognitive/motor skills Simulation or serious play serious games: offer a wide variety of potential uses It is estimated that there are between 600 million & 1 billion potential users worldwide (confounding both purchasers and non-purchasers of entertainment titles) Users under 25 represent the most important target market, but wide age range of users: Under 15: the presence of an adult or suitable framework is required Between 15 and 24: this group expects the highest quality in terms of video games, and uses big budget titles as a benchmark. Casual games should be employed to encourage use Over 24: within the age group, the amount of time spent playing gradually reduces with age. Above 55 the gaming audience starts to grow again: more free time available, and wish to form a bond with their grandchildren Source: IDATE Market Reports, 2008, 2009, 2011

20 DSG Industry Structure IPTS, Seville, Spain, January Polymorphous industry as it groups together all the niche areas and markets that employ Digital Games for objectives other than pure entertainment Similarly to the Digital Games industry, the value chain is made up of three groups: Developers: produce the content of serious games, or tailor them according to the B2B, B2C or B2B2C segments Currently, in the US and Europe, these tend to be SMEs or freelancers and are generally serious game "pure players They do not usually have a video game background, but have worked in the promotion, development or publishing of professional software Publishers: cover the costs involved in publishing, marketing and packaging serious games, both for physical and electronic sales This group also includes developers/publishers that produce their own titles internally There are currently no serious game pure player publishers Distributors: often do not follow traditional retailer-based distribution models the American army and NSA for example distribute their product directly to the public Most titles are distributed via the internet, with electronic sales of serious games far more common than in other video game sectors

21 Key Players IPTS, Seville, Spain, January Source: IDATE

22 DSG Business & Delivery Models IPTS, Seville, Spain, January Business models B2B: order-based model: a client contracts a business to design and develop a serious game. This is then used exclusively by the client licence-based model: titles produced by any publisher, company, independent, association or public or private institution are made available for a fee consulting/training model: a public or private institution s designers/developers are trained in all the different stages of serious game development on-site B2C: publisher/developer model: a publisher, company, independent, association or public or private institution designs and develops a title, then offers it for sale directly, without any prior demand or order B2B2C: made up of the three B2B business models, with the difference that the backer acts as an intermediary between the developer and the user Delivery models Free-of-charge distribution: essentially based on web marketing Semi-free-of-charge distribution: characterized by bonus products, demoware, shareware and trialware, and virtual communities Commercial distribution: electronic and physical sales / use in restricted areas

Digital serious games ecosystem(s) IPTS, Seville, Spain, 23-24 January 2012 23 USA: Army & government are the two main serious game backers, largely as a result of the Small Business Act industry and

23 Digital serious games ecosystem(s) IPTS, Seville, Spain, January USA: Army & government are the two main serious game backers, largely as a result of the Small Business Act industry and private institutions also commission serious games major DG companies have not positioned themselves yet Publisher/developer business model not widely supported in Europe Order-based model seems to show increasing development in the spheres of e-learning, industrial training, and advergaming Europe: younger market than USA, principally driven by UK, Scandinavia, Germany, France No real policy support to help develop the market But some local initiatives aimed at accelerating progress e.g. the Pacte PME, the French "equivalent" of the Small Business Act, into force since 1 August 2006

24 Market Value & Potential IPTS, Seville, Spain, January Inflexion of about 33% experienced by the sector in the period effects of the financial and economic crisis 'stabilisation' of the sector (and especially in the area of health and vocational training) search for increased quality Forecasts estimate that the worldwide turnover of the Digital Serious Games sector is expected to reach 2.35 billion all segments combined for 2011 potential for growth is even more significant, since the reference markets (health, training, education...) are a combined worldwide turnover of about 5,000 billion

25 Prospective developments IPTS, Seville, Spain, January IDATE estimates that in 2010 the DSG sector generated a total 1.5 billion EUR in revenue worldwide Expected to grow significantly in the medium term By 2015 sales ware expected to be 10.2 billion EUR (almost seven times what they are in 2010) average expected annual growth rate of 47% between 2010 and 2015 From this outlook it can be expected to see the business world s interest in serious games increase around 2013 especially that of SMEs whose awareness of these tools is still quite limited

26 DSG market by region: outlook IPTS, Seville, Spain, January US alone accounts for more than 70% of the income generated at global level Europe has still a limited position France is one of the most dynamic European players driven by a promising economic landscape in the domain specific funding for DSG projects, at regional and national level The overall revenue of the DSG sector in France was estimated in 47 million in 2011 and achieve the amount of 84 million by Source: IDATE, 2011

27 Challenges ahead IPTS, Seville, Spain, January Reshaping the gameplay for meaningful purposes and broaden the audience Innovating business models Automating a portion of the production process, particularly the integration of sector-specific elements Structuring serious games by target sector and persuading reluctant users Investing in all connected platforms Source: IDATE

28 Playing harder : moving beyond Video Games IPTS, Seville, Spain, January The technological issues surrounding serious games will involve innovations that the video game sector has managed to incorporate fully into its environment Accelerometer, gyroscope, gesture recognition, 3D all of these innovations will easily find their application in serious games Movement and gesture recognition are highly coveted applications amongst today s console makers Serious games should be able to capture a player s movements and their facial features, to interpret them and, depending on the results, trigger an action in the game, opening up a broad field of potential applications in the area of inter-personal skills, etc. But the serious game sector will need to go beyond what video games have achieved in the way it makes use of technological innovations Serious games need to offer a more iterative and adaptive approach in virtual real time, and so be based on more complex profiles This is how Digital Serious Games could break away from regular video games, and become a sector itself

29 Open Issues for discussion 1/2 IPTS, Seville, Spain, January Scope: a primary issue to be defined regards the boundaries of what we consider Digital 'meaningful' play / within the context of the Digital Games Industry and with specific respect to Digital Games for Empowerment & Inclusion Market: understanding if there is a market for Digital Games for Empowerment and Inclusion, and how to support it is required Value Chain and Network: there is a constant change in the value network due to the introduction of on-line and mobile platforms (new actors emerge) of development, distribution, funding, adoption roles. There is a need to map the different actors involved, including their interests and role in the overall value chain Innovation processes: how to unleash innovation potential in the domain? developing relationships mediated by networks, institutions, or markets involving the intermediaries who set up these connections gathering evidence to convince both potential end and intermediate users sharing practices among developers to create useable, relevant new products and services

30 Open Issues for discussion 2/2 IPTS, Seville, Spain, January Multidisciplinary approaches: DSG industry is at the crossroads of several disciplines (e-learning, computing, engineering, game interactive design, communication and experts domains. e.g. health, energy, training, education...) how to make collaborative work combining the skills of these disciplines to achieve a successful experience? how to incorporate in the production chain - Design and Development - other (new) actors (team of mixed competences such as ergonomists, artists, painters, music, psychologists, sociologists, pedagogists and ICT experts)? learning from the current challenges identified by research on e-learning Exploring the online and mobile gaming promises for empowerment and inclusion Making sense of the cross-platform gaming potential a main concept behind the next generation of portable digital consoles for gaming

31 Is there a role for Policy? IPTS, Seville, Spain, January Digital Games industry at large, and the specific 'meaningful' play sector, are clearly positioned to be a growing industry with the potential to create value added and jobs In addition to being a promising activity, there are additional reasons to justify public support of digital 'meaningful' gaming The rationale for potential policy intervention could fall into three broad categories: The positive consequences for employment and growth derived from attracting, rewarding and sustaining innovation in the digital gaming field in general The cultural and consumer aspects of digital 'meaningful' games, especially in terms of users' empowerment and social inclusion; and The contributions from digital gaming to the provision of public services, such as education, health and social welfare

32 IPTS, Seville, Spain, January

Joint Research Centre. The European Commission s in-house science service

Joint Research Centre. The European Commission s in-house science service Joint Research Centre The European Commission s in-house science service 1 Digital Games for Empowerment & Inclusion (DGEI) DGEI Policy Workshop, 24 September 2012, Brussels Shaping DGEI: video games,