The 2009 Virtual Goods Investment Report presents a line item report of $1.38 billion dollars invested globally in 2009 in virtual goods related companies.

Topping the list was Facebook receiving $200,000,000; Zynga at $180,000,000; Playdom at $43,000,000 and RockYou at $50,o00,000.

A detailed chart showing investors, investees, and investment amounts can be found at the link below:

http://www.engagedigitalmedia.com/research/2009/vg2009invest.html

The game’s official website gets 6 million monthly users.  To date over 100 million downloads of user created virtual items have taken place on The Sims Exchange.

http://www.gamasutra.com/view/news/26922/EA_The_Sims_3_TopSelling_PC_Game_Worldwide_In_2009.php

DGSpy’s Take

EA’s clever community building project is working not only to build longevity and loyalty to its franchise, but effectively draws in new players as well via word of mouth.  Expect to see many more virtual exchanges and digital goods strategies from publishers in the future.

Justin Smith, co-author of the report states:

“I don’t know anyone who expected it to grow this fast. The Facebook platform went from zero to hundreds of millions of dollars in two and a half years. It reflects a broader shift in society where people are spending more time on casual games.”

Sales of virtual goods could hit $1.6 billion in 2010 as Facebook social and free to play games monetized with these microtransactions continue continue to skyrocket in popularity.

http://games.venturebeat.com/2009/10/14/virtual-goods-sales-to-hit-1-billion-in-2009-as-social-games-pay-off-big/

http://www.insidevirtualgoods.com/us-virtual-goods/

Additionally, 79% of games for portable, PC/Mac, and mobile were physical.

NPD analyst Anita Frazier – “While physical retail product remains the driving force behind industry sales, the role of digital distribution in the games ecosystem continues to climb. Publishers and retailers must keep an eye on the current state of the marketplace and must map ahead for future strategies.”

http://www.npd.com/press/releases/press_100112.html

DGSpy’s Take

We find these numbers to be a bit skewed due to the fact that many major digital distribution vendors like Steam and Direct2Drive do not report sales.  However, the numbers do show how much growth potential there is in the digital market in the years to come.

NPD estimates that retail console sales will top out around $20 billion for 2009.  That’s a lot of money to shift to digital.  We are waiting on PC retail sales numbers from NPD.

The revelation follows a $43 million venture capital deal and pre money company valuation of $260 million according to a November 11, 2009 Techcrunch report.

Other Playdom notables:

• 28 million users monthly (60% MySpace, 40% Facebook)
• 14 million Mobsters players on MySpace
• the company has 12 MySpace apps, 6 on Facebook
• estimated $60 million in revenue for the company
• 70% of revenue from direct payments, 10% advertising, 20% offers

Techcrunch Report:

http://www.techcrunch.com/2009/11/11/exclusive-playdom-raises-a-huge-round-at-a-huge-valuation/

From mobile gaming to social gaming to PC gaming, digital has a much greater reach than all consoles combined (200 million).  Sources for the numbers were not given.

Other interesting notables from the interview:

• 40% of game business is now digitial
• EA has experienced 30% year over year growth from digital
• Dragon Age Origins has delivered 1 million pieces of downloadable content since release (specifics were not given)
• EA Sports Online has hosted over 1 billion game sessions
• Play first, pay later gaming model (i.e. Playfish) is a great way to bring in new game players and get them familiar with a brand

Watch the full 18 minute interview online at the Nightly Business Report web site:

http://www.pbs.org/nbr/site/research/learnmore/john_riccitiello_video_091208/

According a December 2, 2009 press release, NPD reveals data from a Kids and Gaming survey conducted in September 2009:

• 82% of US kids ages 2-17 are gamers (a total of 55.7 million)
• Ages 2-5 are the smallest group making up 9.7 million
• Ages 9-11 are the largest group making up 12.4 million
• Ages 12-14 play the most at 10.6 hours/wk
• Kids game on an average of 2.5 systems
• Over 51% of these kids play games online

NPD also interestingly stated that video game use in teens declined probably due to school work, parent imposed time limits, and other interests.

The survey was conducted online of 5,000 participants.

http://www.npd.com/press/releases/press_091202.html

According to Gamesindustry.biz, Riccitiello “added that if the publisher’s digital business was a stand alone company, it would be seen as the “darling of Wall Street”,”

He also stated that digital distribution will overtake console and packaged goods sales next year and all online services combined (i.e. social networks, game downloads, subscriptions, microtransactions) now make up 40-45 percent of the entire industry.

Other interesting bits in the article:

• Playfish, EA’s recent $300 million social gaming acquisition, reaches 60 million people a month

• Any new EA acquisitions will likely be in the digital market

DGSpy’s Take

We are particularly interested in EA’s acquisition statement focusing entirely on digital businesses.  Coming from the industry’s top dog, this is just more proof that publishers and established players in the industry see online as the number one growth & investment domain.

Ubisoft has recently stated that aggressive price cutting has led to an overall decline in profits for them.  Contrast this with Steam’s recent announcement that aggressive price cuts for their digitally delivered games actually grow profits in the long run.  Steam has stated that moving prices back up after temporary (i.e. weekend) discounts do not affect sales negatively nor buyer perception.

More from GamaSutra

DGSpy’s Take

So what is the difference between price cutting offline at retail vs online?  Retail cuts tend to be more permanent and longer lasting due to the hassle of changing price, advertising costs, etc.  Online has much lower overhead in advertising and distribution costs leaving much greater margins of profitability for publishers to enjoy despite aggressive cutting.

Just one more financial reason publishers will embrace digital distribution wholeheartedly from here on out.

Revealed in a client report, Gamasutra states:

“Even more interestingly, he [Pachter] revealed that PC game retail software sales in the U.S. were down 38 percent year on year to $27 million for October 2009, a previously undisclosed number.”

More -

http://www.gamasutra.com/view/news/26306/Pachter_Annus_Horribilis_For_Publishers_As_US_PC_Game_Retail_Plummets.php

DGSpy’s Take

As the retail market continues to get hammered the online market will continue to accelerate.  It is no wonder that game retail giant GameStop declared it’s intentions to become the #1 supplier of downloadable games recently.  Tis the sign of the times.