Changes in video games prompt optimism for 2011

Video game makers leave behind a year of slow sales in 2010, but are hopeful that a new generation of games for tablet computers, mobile phones and Web social networks will spur a return to growth in 2011.

The explosion of mobile games like "Infinity Blade" on iPhone and "Angry Birds" on Android smartphones has lured new consumers into playing games.

At the same time, video game company Zynga has turned social network Facebook into a hugely successful platform with hits like "Farmville" (55 million monthly players) and "CityVille" (44 million and counting).

"Before we were figuring out how to make social games, now we are mastering the art of making social games," said Mark Skaggs, vice-president of product development at Zynga.

He said the next generation of Facebook games will have "deeper gameplay, more polish, and be much more and better social experiences."

North American sales of video game hardware, software and accessories are expected to reach $20.9 billion for 2010 by the time all sales are totaled after the holidays. That figure is down four percent from 2009, according to Jesse Divnich, vice-president of Electronic Entertainment Design and Research.

Yet, despite the economic slump that continues to impact gamers' disposable income, industry players expect 2011 to bring a wave of new revenue from items such as downloadable content, mobile games, and in-game micro-transactions.

Adding the new sources of revenue, Arvind Bhatia, senior research analyst at Sterne Agee, sees US and European game sales up 5 percent for 2010 and another 5% for 2011.

At January's giant International Consumer Electronics Show (CES) in Las Vegas, companies such as Samsung and Verizon will unveil new smartphones and tablet devices to extend the reach of games to more consumers.

Michael Cai, the head of video game research at Interpret, said over half of tablet owners today (52 percent) are playing games on their devices. Gaming is the second most popular activity on iPads and other tablets, behind surfing the Web.

"I think one of the big trends of 2011 is cross-platform gameplay, that is, game experiences that are continuous across mobile, television, PC, social media, console and interactive toys,"  said Jesse Schell, assistant professor of entertainment technology at Carnegie Mellon University.

As these technologies get more and more ingrained in our lives, game experiences across them will become more connected and more continuous," he added.

One reason for optimism is the performance of game sales at the end of 2010. "Call of Duty: Black Ops," for example, sold 8.4 million copies in the US alone in November. Last week, its maker Activision Blizzard Inc said the game accounted for more than $1 billion in sales.

"Black Ops" is one of a growing number of titles shown in stereoscopic 3D, which should appeal to buyers of new 3D TVs that will be promoted heavily at the winter CES by companies such as Sony, Vizio and Panasonic who cater to gamers.

At CES, which runs from January 6-9, Sony will showcase stereoscopic 3D games like "MLB 11: The Show," "Killzone 3D," and "Motorstorm: Apocalypse." Nintendo will promote its Nintendo 3DS autostereoscopic (glasses-free 3D) portable device, which will launch February 26 in Japan and in other territories shortly thereafter.

Sony and Microsoft jumped into the motion controlled game this fall with PlayStation Move and Kinect for Xbox 360, and both are selling strongly and helping the bottom line for the game industry late in 2010.

"There had been doubts on whether the casual consumer, who ballooned industry sales in 2008 and 2009, would return given the plethora of much cheaper entertainment options such as mobile and social networking games," said Divnich. "With November 2010 sales being up across the board, it is clear that the casual and mainstream base is still willing to make significant video game purchases."