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Virtual Worlds; Real Revenues

New research from Screen Digest has found that the market value for virtual online worlds outside Asia hit $1bn for the first time in 2006.

New research from Screen Digest - reported here by the BBC - has found that the market value for virtual online worlds outside Asia hit $1bn for the first time in 2006. While 87% of this market relies on subscriptions for revenue, new business models like virtual item sales and in-game advertising have also started to become significant.

The report entitled Western World MMOG Market: 2006 Review and Forecasts to 2011 examines the current commercial climate for MMOG (Massively Multiplayer Online Games), sizes the market by current and new business models, and provides subscription revenue forecasts to 2011 for the key country markets in both Europe and North America. In 2006, the North American subscription market was worth $576m, while Europe was worth $299m having risen from just $74m in 2004.

The report suggests that much of the recent explosive subscription growth in Europe can be attributed to the popularity of one game: World of Warcraft. Its success has been central to transforming the European region from a niche to a mass market proposition, more in line with North America.

In the markets studied for this report, World of Warcraft is by far the most popular subscription game, accounting for 54% of the subscription market in 2006, generating revenue of $471m. Its next nearest competitor was the independent UK title Runescape. Interestingly, the social media pundit's favourite, Second Life, does not appear on the top five, despite the large turnovers reported on a daily basis on trades between players.

The top five earners are:

1. World of Warcraft
2. RuneScape
3. Final Fantasy Online
4. Everquest
5. City of Heroes/Villains

In total, subscription revenues were worth $875m in 2006. However, the emerging models of virtual item purchase and in-game advertising are already making an impact and are expected to become increasingly important during the next few years.

Games Analyst at Screen Digest, Piers Harding-Rolls, says: "During the past few years the Western landscape for MMOGs has become increasingly fragmented following the introduction of new genres of game including social networking, virtual pet rearing and virtual world building titles. These new games and platforms have brought with them many new gamers and also new business models that are generating revenue that is largely incremental to the incumbent subscription business.'

The report forecasts that by 2011, over 10 million subscription accounts will generate $1.5bn in revenue, with European growth exceeding that in the US. There is stronger potential for subscription growth in Europe than in the more established North American market due to less market saturation and stronger broadband growth. Over the next five years, Germany will remain the largest subscription market in Europe, followed by the UK.