On the Cover

Gaming is serious business Long perceived to be the domain of overweight, pimply, unsociable teenage boys, video gaming is anything but child`s play.

Research suggests that the gaming public is stratified. Sixty-two percent of hardcore gamers are males, between the ages of 25 and 55, whereas the `casual` gaming space – games that are easy to learn and easy to play – is dominated by female gamers between the ages 34 and 55.

According to the organisers of the local rAge gaming expo, over 25% of the South African youth spend more than three hours a day either watching TV or playing video games. They report that in addition to being wooed by female-targeted games like `s SingStar, 60% of Sims Online players are women. Illustrating the growth of local gaming popularity, rAge attracts more visitors every year. Last year more than 15 000 visitors attended the event and over 1 200 gamers took part in the NAG BYOC (Bring Your Own Computer) LAN @ rage.

Sales figures bunted about in the industry confirm that video gaming is serious business. The worldwide gaming industry is poised to break the $58.4 billion mark this year, according to predictions by research firm Informa.

Forecasts from JupiterResearch say that the US console market alone will hit $12.8 billion this year and $68 billion by 2012.

Clive Jandrell, CEO of Megarom Interactive, importer and distributor of PC, PlayStation 2, PlayStation 3, PSP and Xbox360 games in SA, points out that gaming has also taken off in this country.

He calculates that in the last financial year, the total software value was estimated at R420 million, with an annual growth of around 25%. Total console hardware value was estimated at R370 million.

"This financial year, sales are expected to be around R600 million as there is a full year`s sales of PS3 and Xbox. This is taking into account that the Nintendo Wii and NDS will hopefully release this year, accounting for R180 million," he notes.


Johann von Backström, founder of the Amateur Gaming Association of South Africa (AGASA), says an "astronomical" number of people are gamers. He says: "At this year`s World Cyber Games, 1.3 million participants from 74 different countries will compete. Only 700 will be chosen to represent their countries."

, CEO of Trafficonomy, an online gaming company that provides games to South African Web portals, says more than 217 million internet users around the world play casual games each month.

Tuong Huy Nguyen, senior research analyst at , predicts that the mobile phone gaming platform will surpass traditional PC and console gaming.


Research house Gartner reports that gaming is booming. It predicts worldwide mobile gaming revenue will grow by 50% in 2007.

Gartner has also found that, as consumer awareness grows and publishers release more content, worldwide mobile gaming end-user revenue will grow from $2.9 billion in 2006 to $9.6 billion in 2011. Worldwide mobile gaming revenue is on pace to total $4.3 billion in 2007, a 49.9% increase from 2006, says the research house.

"This will catapult mobile gaming revenue beyond that of mobile TV and adult content," notes Huy Nguyen. "But we still expect it to lag behind mobile music, since music is a more familiar form of entertainment," he says.


AGASA`s Von Backström attributes the gaming craze to the fact that people want to be entertained. "Today`s consumers are more educated and knowledgeable than a decade ago and would rather be part of, or determine the outcome of, the character`s destiny."

He says some gamers game for a living. "Professional gamers like Korean player Lim Yo-Hwan make $300 000 from fees and commercials.

"Johnathan "Fatal1ty" Wendel made up to $50 000 in 2004 through prize money alone. This excluded his lucrative endorsement deals." Others, he says, like to compete and test their ability against the best in the world, while some simply enjoy the gaming culture.


There are a number of companies benefiting from this boom in the South African market. "The gaming industry works in a series of value chains," says distributor Megarom`s PR manager, Candice Gersun. "The developers develop the interactive video game, which is then purchased by a specific publisher." "The publishers purchase the rights and licences to distribute the developer`s specific game both locally and internationally. The publishers then distribute and export the games to distributors in countries worldwide."

Other distributors in SA are EA, which also develops and publishes its own games, MI Digital, WWE/Greenhouse and Ster-Kinekor games, she adds.

Megarom in SA represents two publishers, Ubisoft and Activision. Ubisoft`s 2007/08 first quarter sales came to €134 million, up 90.5% on last year`s first quarter. The group`s 2007/08 sales target is now approximately €825 million. Activision posted net revenues of $1.5 billion for the fiscal year ended March 31, 2007.

Ster-Kinekor Games, distributor of Sony PlayStation products in SA, also represents multinational game publisher THQ. Last fiscal year the company broke the $1 billion mark in global sales, up from $842 million in the previous year.


One of the spin-offs of video gaming is in-game advertising. "Gaming has long threatened to supplant television as the pastime of choice, and this is now becoming a reality," Van Diggelen notes.

Illustrating how games reach a massive target audience, `Halo 2` generated a record-setting $125 million in sales within the first 24 hours of its release in November 2004. Seven million copies have been sold to date.

"It doesn`t take a marketing genius to realise that advertising needs to follow," says Van Diggelen.

"Research firm Yankee Group estimates that in-game advertising revenues in the US alone will reach $732 million by 2010," he says. "Findings show that the primary demographic audience is women over 30. This demographic, according to the study, holds 80% of decision-making buying power in the US, making advertising in the medium all the more lucrative."


Despite the growth figures and the vast number of gamers worldwide, AGASA`s Von Backström believes there is room for more growth. "The industry in this country has been stunted by lack of development. Though it is growing, it could grow so much more," he says.

"We have a development plan that we presented to government in 2006," he says. Hoping to see computer gaming introduced as a sport at schools, he says this could grow the local gaming industry still further.

Von Backström maintains that the gaming industry will make more money if it creates more structured s. "When there is a structured international body that governs competitions, people will buy games so that they can compete in the leagues."

AGASA has created an official online gaming league. "No one can compete in our league unless they have legally bought the games, effectively curbing pirated ware in our league. So where structures are created the industry will be more lucrative," says Von Backström.


AGASA has ambitions of turning gaming into a major national sport. "We see gaming becoming the next Olympic sport. There`s just nothing that compares to the sheer size of people that game."

The non-profit organisation`s league is already fully endorsed by Mind Sport South Africa, the national federation responsible for administrating mind sports in the country.

"Last year the team sent to the Asia-Pacific finals was given SA colours. This was a global first in the gaming industry," says Von Backström.

"When we canvassed schools to join our league we got hundreds of responses from learners wanting to join our league. The biggest concern voiced by some of the educators, however, was that this was quickly becoming the leading sport in schools," he adds.

"Even though gaming has been blamed for some of the social ills in SA - namely school violence - it`s clear that most games that are played are not violent, states Von Backström. "What`s more, in developed nations such as the US the average gamer is 33 years old, 67% of heads of households play computer or video games, 38% are now female and 47% online game players are female."

He stresses that we need to change the perception of how gaming is viewed here in SA if we want to benefit from this booming industry.

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