Alan O'Dea

By 2011, Sales of virtual goods will amount to 20% of U.S. game software revenues.

This forecast is predicated on the expectation that virtual goods will grow faster than overall gaming software industry. In 2009, U.S. retail sales of console, portable and PC game software generated revenues of $10.5 billion, an 11% decline over the $11.7 billion generated in 2008. While figures from virtual goods were not included in these data, Inside Virtual Goods reported that virtual goods generated $1.04 billion in U.S. revenue. When considered in total, virtual goods represented 9% of overall game software revenues in 2009.

In the next 12 to 18 months, we believe that the sales decline seen in 2009 will likely stabilize and, as the economy recovers, sales will return to 2008 levels. In contrast, the virtual goods industry is expected to remain resilient during bad economic times and, according to Inside Virtual Goods, is predicted to grow by 51% in 2010. Assuming two years of relatively flat software sales and 51% YoY growth in virtual goods, the industry will see virtual goods increase their share of overall game software revenues, increasing from 9% in 2009, to 14% in 2010, and reaching 20% by 2011.

This rapid growth of virtual goods will have a number of industry-wide consequences, particularly the maturation of the social games distribution model. Developers seeking technology that helps them expand distribution beyond Facebook, will be able to partner with Viximo and benefit from a single distribution platform that allows them to aggregate audiences across multiple mid-tier social networks and manage their games efficiently.