Online Gaming Companies Are Evolving Their Business Models According to the Changing Gaming Landscape, IDC Says

FRAMINGHAM, MA – FEBRUARY 7, 2001 – The online gaming industry is changing. According to IDC, improved Internet capabilities, next-generation videogame consoles, and nontraditional gaming platforms will lure 40 million households into online gaming by 2004, up from 25 million in 2000. To keep pace with the industry's growth, companies with a vested stake in online gaming will need to evolve their business models.


"To succeed in this competitive space, companies must formulate a profitable revenue model, extend the reach of online games beyond the PC, and ensure that gamers remain loyal," said Schelley Olhava, senior analyst for IDC's Consumer Devices program.

According to IDC, building a diversified revenue base is one of the biggest challenges facing online gaming companies. "Because advertising revenue, which most business models are currently built upon, could dry up in the future, many sites are looking to create more attractive advertisement opportunities beyond banner ads through sponsorship and targeted ads and are trying to migrate free subscribers to paid subscribers," Olhava said. Other activities, such as licensing technology and cobranding games, could also open up revenue opportunities.

IDC believes companies will also evolve their business models around the unique, appealing, and increasingly popular nontraditional gaming devices. Although the PC will remain the dominant device through which households obtain Internet access, next-generation videogame consoles, PDAs, cell phones, and interactive TV (iTV) platforms will become viable online gaming platforms. However, succeeding in this space will require several logistical developments. "Game design, partnerships, development of an infrastructure for supporting online operations, and a coherent business plan will be important," Olhava said.

IDC recently published From Fantasy Worlds to Backgammon: U.S. Online Gaming Forecast and Analysis, 1999-2004 (IDC #B23744). This report examines the online gaming market, including business model evolution, the online gaming audience, and initial steps taken toward online gaming beyond the PC platform. It analyzes present and future platforms for online gaming, such as the PC, videogame console, cell phone, personal digital assistant (PDA), and iTV. Several gaming company profiles are provided. U.S. online gaming market forecasts regarding the online gaming audience from a household, individual, and revenue perspective are detailed through 2004. To purchase this report, contact Patrick Steeves at 1-800-343-4952, extension 6787, or at

About IDC

IDC is the foremost global market intelligence and advisory firm helping clients gain insight into technology and ebusiness trends to develop sound business strategies. Using a combination of rigorous primary research, in-depth analysis, and client interaction, IDC forecasts worldwide markets and trends to deliver dependable service and client advice. More than 700 analysts in 43 countries provide global research with local content. IDC's customers comprise the world's leading IT suppliers, IT organizations, ebusiness companies and the financial community. Additional information can be found at

IDC is a division of IDG, the world's leading IT media, research and exposition company.

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