Analyst Predictions For 2012

The games industry had an interesting year.

Some highlights from 2011 include the release of motion controllers from Sony and Microsoft - Kinect and Move - and Nintendo revealed it's upcoming console, the Wii U, due out sometime after this coming E3. The 3DS saw a massive price cut from $249 to $169 in less than six months after launch. In the digital space, EA launched Origin, its online retail store to compete with Valve's Steam. Sony launched PlayStation Vita, a new, powerful handheld. And Grand Theft Auto V was finally revealed by Rockstar Games.

As this year comes to a close, we spoke to several industry analysts to get their take on what could happen in 2012. Their predictions are published below:

Jesse Divnich - EEDAR

1. Pricing for Paid Mobile Apps Will Increase in 2012

With free-to-play emerging as a successful business model, a lot of industry insiders are beginning to claim the race to the bottom has initiated.  I disagree.

I believe there will always exist a market for the pay-to-play model and I would go as far to say that prices for paid apps are likely to increase slightly in 2012.

As the budgets for mobile and tablet games continue to increase, developers will be forced to command a higher price to ensure profitability.  Of course, if the average pay-to-play app goes from $.99 cents to $1.20 (again averaged out), I don't see anyone complaining too much.

2. Layoffs to hit Emerging Markets

Over the last 5 years a lot of money has been poured into the emerging social and mobile markets.  Now it is time for all these new developers that were once flushed with Wall Street cash to finally start producing a profit.  Unfortunately, as with any business, some won't hit their projections and funding will be cut off--investors rarely chase defeats.  I predict that we'll begin to see an abnormal amount of layoffs and studio closures in these emerging markets in 2012.  This is not a prediction that these markets are unhealthy, but rather it will be the year that market forces thin the heard and investment begins to shift to studios who have proven themselves.

Simply saying "The mobile market is growing 50% a year…now give us money" will no longer cut it.

3. No New Hardware - So Stop Asking

Rumors continue to circulate about Microsoft or Sony releasing a new home console in 2012.  Unfortunately, you can apply as much pressure to this thought as you want, but it won't turn into a diamond.  The Vita and Wii-U will launch in 2012, but that is it.

Both the Xbox 360 and PlayStation 3 continue to deliver incredible profits to publishers, and given our industry's difficulty in transitioning to new hardware I don't believe Microsoft nor Sony are under any pressure to release new platforms.

I would even go as far to say that I wouldn't even expect any official announcements of new hardware in 2012.  Maybe we witness some credible rumors, but I wouldn't expect a company driven announcement to be made.

4. Less People Will Dance

Early this year I made a prediction that we may have seen the peak of the Dance genre.  As it turns out, I was wrong and people are still dancing as if the local Reverend issued a city wide ban on it.  For 2012, however, I am going with the same prediction, I think 2011 is the peak year in the Dance genre.  Yes, sales will continue and some of us will still be shaking it, but as a whole, I expect less people to dance in front of their consoles in 2012 than we did in 2011.  It is safe to assume this is my prediction for next year if I am wrong--eventually I'll be right.

Mike Hickey - National Alliance Capital Markets

We expect Rockstar Games will release GTA V in early 2012 to enormous consumer demand, with an enhanced online multi-player and accelerated episodic content drops; generating +$1,000 and +$100 million in packaged good and digital sales, respectively. Despite gargled media commentary over the death of consoles as a gaming medium, Rockstar Games will remind us that there is an investable entertainment software opportunity beyond the Facebook generic generation.

In spite of an elegant gamer centric design and large slate of launch titles, we suspect Sony’s upcoming Vita US / Europe launch will languish under a high price point, non-season launch period and competitive mobile platform offerings.

We are expecting Apple to release an iTV in 2012, igniting a next generation casual game market and challenging the market relevance of Nintendo’s upcoming Wii U console, and ultimately pushing Nintendo to consider software opportunities beyond their own hardware.

After some initial success in early 2012, we suspect Zynga will go on an acquisition frenzy, as current games fail to meaningfully monetize mobile platforms and international markets.

We anticipate Microsoft will take significant market share from Sony and Nintendo in 2012, as they aggressively compete with Apple and Google for the enabled TV market and cord cutting movement, by releasing a new version of their current generation Xbox 360 Kinect platform with an increased emphasis on multi-media functionality for an app centric consumer.

Doug Creutz - Cowen Group

1. Neither Microsoft or Sony will have any announcements about new console platforms as their current consoles continue to sell near cycle-peak levels.

2. Handheld software sales will continue to decline as smartphone and tablet penetration increases.

3. There will be at least one initial public offering (IPO) and at least one $500M mergers and acquisitions (M&A) transaction in the casual digital gaming space.

4. EA will finish the year with a higher market cap than Zynga.