Online gaming revenues will overtake the revenues from selling gaming hardware in four years, according ot the latest forecast from Gartner.

The IT market research firm released its latest assessment cum forecast for the gaming industry, showing a 10% increase in its revenue this year over 2010.

Total revenues for 2011 will be $74.4 billion, compared to for example, the global business software market of $268 billion.

Out of this $74 billion, 60% is gaming software (titles) while around 24% is hardware such as consoles, controllers etc. The remaining 15% is comprised of revenues of online gaming providers — such as those who offer games on Facebook and Yahoo Games.

This is set to change as consumers show a higher for online games in the future, Gartner pointed out.

The gaming scenario is in a state of flux thanks to the emergence of social networks such as Facebook. These networks offer a powerful platform for vendors of online games, such as Farmville, which are much less powerful in terms of immersive graphics, but compensate by not only being easily accessible, but also widely played.

Most online games are played on the computer and most of these are played simply using the web-browser, resulting a low-power experience. In contrast, gaming consoles and dedicated gaming software tend to recreate a real-world experience through excellent, resource-intensive graphics and accessories such as the Kinect.

However, even console-based games are increasingly moving towards the online gaming model, with gamers competing against each other through the Internet.

According to Gartner’s forecast, online gaming will increase its revenues from 16% of the market to over 25% in four years (2015.) Hardware will continue to account for just under 25%.

Gartner predicted an annual growth rate of 27 percent for online gaming.

The gaming software vendors, who create software meant for purchase and deployment over consoles and PCs for individual use, will see their share of the market go from 60% to 50%.

But the overall market would continue to grow 50% in four years, ensuring that even the gaming software market would see a growth of 25%.

“Within the gaming software market, mobile gaming will experience the largest growth opportunity with its share growing from 15 percent in 2010 to 20 percent in 2015,” Gartner said.

The trend is in line with overall trend in IT where packaged software which is either bought on CDs or downloaded and installed on users’ machines are getting replaced by remote-access or cloud computing models.

Under the remote-access or SaaS model, software is not installed locally, but is accessed by the user from a remove data center every time he or she needs it. The strong growth of online gaming too seems to point in that direction.

Many experts believe that people, who currently spend hours on social networking sites like Facebook, will start spending as much time living out their virtual lives inside virtual worlds created by game designers — working, playing, competing and socializing.

The expected commercialization of ‘virtual reality’ technology is expected to further augment this trend. Virtual reality accessories — such as 3D goggles that cover the entire area of vision in front of the human eyes and give real-life depth to images — are expected to become common place in another 2 to 3 years.

Like headphones, VR glasses will allow people to immerse in their own World without the need for expensive recreations and increasing the ‘believablity’ factor of games. They will then be able to ‘roam around’ in a world of their own where they interact with others on the Internet as if they were meeting them in person in the jungle or on a beach.

Interestingly, instead of fees, gaming providers will be getting more and more of their revenues as commissions from those who “sell” virtual goods in these games. Many gamers shell out real cash to buy houses, guns, cars and other items in their games from those who “manufacture” and sell them.

“The subscription fees are giving way to ‘freemium’ models, in which the game is provided for free to gamers but is monetized through advertising (both in-game advertising and display advertising) and in-game microtransactions,” pointed out Brian Blau, research director at Gartner.


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