DECONSTRUCTING DOWNLOADABLE CONTENT 2011 EEDAR Report - Market Overview & Barriers to Growth

Electronic Entertainment Design and Research 2075 Corte Del Nogal, Suite B Carlsbad, CA, USA 92011

T: +1.877.883.3327 ext. 131 E: [email protected] W: www.eedar.com Deconstructing Downloadable Content AVAILABLE NOW 2011 ANALYSIS

EEDAR is proud to present the newest report in their annual DLC series that explores consumer behaviors and historical data related to downloadable content for the current generation of console based video games.

The report consists of two complementary products; a 120 page Analysis and a dynamic data-viewing tool in EEDAR’s business intelligence service GamePulse®.

New for 2011

• Dynamic Data Integration in GamePulse • Updated 2011 consumer survey with sample size of over 3500 participants • Year over year analysis on DLC market growth • Pricing/Release timing/Value proposition trends • Analysis on the effectiveness of Project $10/Online pass business models • Strategies to implement emerging business models, such as the Season Pass • Effect of privacy/hacking on non-engagement • Transmedia (Mobile, Social) opportunities

FOR PRICING AND INFORMATION Jimmy Mullen | Account Manager T: +1.760.579.7122 E: [email protected] DECONSTRUCTING DOWNLOADABLE CONTENT 2011

Deconstructing Downloadable Content 2011 Key Takeaways EEDAR is proud to present Deconstructing Downloadable Content 2011, MARKET OVERVIEW & BARRIERS TO GROWTH EEDAR’s newest report in an annual series that explores consumer • 51% of HD console owners have purchased DLC in the last 12 months; behaviors and historical data related to downloadable content for the this compares to 40% in 2010 and 34% in 2009. current generation of console based video games. • EEDAR estimates that DLC will generate over $875 million in revenue Deconstructing Downloadable Content 2011 is comprised of two in North America in 2011. complementary products; a dynamic data-viewing tool presented through EEDAR’s GamePulse tool, which is utilized by 90% of the publishers and • EEDAR estimates that North American DLC revenue will surpass $1 billion developers in the industry, and a 120 page Executive Analysis. in 2012. The executive analysis examines the specific DLC business models used by publishers, analyze trends over time, group differences, and specific case • Proper release timing, broadband speeds, and an increase in marketing studies to provide recommended practices for publishers, developers, and (both viral and direct media) are the primary drivers for DLC growth in 2011. marketers to optimize DLC business models. • Privacy concerns remain the most endorsed barrier among consumers unwilling to purchase DLC (47%). Survey Overview • A low percentage of DLC Non-Purchasers endorse low quality of DLC as Date Conducted: 04/20/2011 – 05/03/2011 a reason they are unwilling to purchase DLC (only 11%). Number of Respondents: 3,500 Regions: United States and Canada • Other major barriers hindering DLC growth include No Return Policy, Too Expensive, Enough Free DLC, and No Demo. Additions for 2011: Year over Year Market Growth Pricing and Release Timing Trends • Factors slowing the growth of DLC are an industry wide problem Emerging Business Models and overcoming these barriers should be a collaborative effort by Reasons for Non-Engagement publishers, developers, and the console manufacturers. Transmedia (Social/Mobile) Opportunities • EEDAR estimates that converting the remaining 49% of consumers that Lead Analyst: Patrick Walker, Senior Analyst do not download DLC into Active DLC Purchasers would generate an Customer Support: James Mullen, Account Manager additional $600 million in DLC revenue in North America per year. [email protected], +1 760.579.7122

Active DLC Purchasers Grow 43% in 2011 The Other 49% - Barriers to DLC Purchase Based upon EEDAR’s 2011 Deconstructing DLC Survey, 51% of respondents According to consumer survey results, privacy concerns remain the major who own an HD console have purchased downloadable content (DLC) in reason (47%) consumers refrain from purchasing DLC. Online security is the past 12 months (referred to as Active DLC Purchasers). The percentage currently a hot topic as many major video game companies and services, of Active DLC Purchasers has grown considerably from 40% in 2010 and including the PlayStation Network (PSN), have been the target of recent 34% in 2009. security breaches.

Taking owners of multiple consoles and replaced consoles into account, However, EEDAR’s survey data does not suggest that the PSN incident had a EEDAR estimates over 20 million North American consumers have purchased major impact on consumer privacy concerns. EEDAR’s survey was conducted a piece of DLC content in the past 12 months. This is 43% growth from before and after the official announcement of the breach. When comparing 2010, in which an estimated 14 million North American consumers were the responses prior to and after the breach, the results were within 4 points Active DLC Purchasers, and 126% growth from 2009, in which an estimated of the overall average (47%). In addition, privacy concerns of Xbox 360 9 million North American Consumers were Active DLC Purchasers. owners and PlayStation 3 owners remained within 5 percentage points of each other after the breach. Incorporating average annual spend per Active DLC Purchaser, EEDAR estimates that in 2011 the total DLC market will generate $875 million in While privacy is the most endorsed reason for not purchasing DLC, consumers North America on the HD consoles. In 2012, with the addition of the Wii-U endorsed many reasons, including DLC expense and lack of a return policy, and its more robust online service (compared to the Wii) and the continued for why they do not purchase DLC. EEDAR believes that for the DLC market penetration rates of HD consoles, EEDAR estimates that the DLC market will to continue to grow in 2012, publishers, developers, and the console generate over $1 billion in North American revenue and nearly $2 billion in manufacturers must continue to address these concerns, collectively. worldwide revenue. EEDAR estimates the total market revenue potential from the remaining EEDAR data suggests that release timing (releasing content earlier), 49% of consumers who refrain from purchasing DLC in North America is marketing (increase in awareness of DLC), and lower wait times (increase $600 million for 2011. in broadband speeds) are the primary drivers of growth in the DLC market.

Percentage of HD Console Owners That Have Purchased DLC in the Last 12 Months Reasons Why HD Console Owners Do Not Purchase DLC [By Year] [EEDAR’s Deconstructing DLC Survey] DLC Non-Purchasers

PRIVACY 47% NO RETURN POLICY 38% TOO EXPENSIVE 32% ENOUGH FREE DLC 24% NO DEMO 24% 49% NO REVIEWS 21% have not NONE FOR INTERESTED GAMES 20% purchased 34% NOT ADEQUATE DESCRIPTION 20% in NOT ENOUGH GAMEPLAY 18% 2009 ONLY ONLINE MULTIPLAYER AVAILABLE 18% ONLY SINGLEPLAYER AVAILABLE 15%

PROCESS TAKES TOO LONG 15% 51% COMPLICATED STOREFRONT 15% 40% in in 2011 NOT RELEASED WHEN WANTED 12% 2010 NOT HIGH ENOUGH QUALITY 11%

0% 20% 40% 60%

Source: EEDAR’s Deconstructing DLC Survey 2011

Methodology About EEDAR Electronic Entertainment Design and Research (EEDAR) gathers its information EEDAR is a research firm founded by a team of interactive entertainment veterans from a variety of sources. EEDAR goes to great lengths to verify the accuracy of its in 2006. The company’s mission is to increase the profitability and creativity of the information, as detailed below. video game industry by allowing publishers, developers and investors to make more strategic decisions based on objective, accessible and meaningful data. Where information is publicly available from an authoritative source, such as the issuer or the responsible industry agency, that data is used as authoritative. All EEDAR supplies the industry’s two leading analytical and information services: authoritative information is then double checked by an EEDAR researcher through DesignMetrics® provides fact-based comprehensive analysis for proposed game direct observation or by cross referencing the data with other authoritative sources. titles detailing projected sales and competitive landscapes. GamePulse® is the only Where possible, the data that is visible to the consumer is used: this includes information service that delivers crucial sales, marketing and demographic insights information printed on the retail boxed product or displayed on the manufacturer on the video game industry via a “real time” accessible website. website. When discrepancies arise between authoritative sources, additional sources are checked until a clear consensus emerges. In addition to DesignMetrics® and GamePulse®, EEDAR delivers custom research and Where information is not publicly available, EEDAR’s internal staff performs directed industry publications critical to understanding and navigating the highly competitive studies to gather the appropriate data. Our researchers work using custom-built electronic entertainment and videogame market. data collection and analysis applications. Each researched fact has an objective observation system which ensures that researcher bias is eliminated. Our data EEDAR’s products and services are built upon on its proprietary game feature research is performed by multiple researchers simultaneously to ensure that database, the world’s largest dataset of game features, allowing the company to individual facts are cross-checked before being input into the classification system produce highly accurate analysis at even the most granular levels. established for that fact. Once information has been entered in the EEDAR Games Database, quality assurance staff reviews the data using boundary analysis tools EEDAR is based in Carlsbad, California. to identify errors and pinpoint difficulties in the classification systems. Our quality assurance team maintains rigorous performance metrics and ensures that each report is validated to the highest quality standards.

EEDAR attempts to use standard industry vernacular and information classification whenever possible. Where industry standard vernacular or classification structures are not available, EEDAR uses its own vernacular and/or classification systems. This would occur in areas where no industry recognized authoritative body exists, or in areas where multiple authoritative sources use different classification systems. All of the classifications systems created for these reports by EEDAR researchers are detailed in the appendix sections of EEDAR documents.

All data from sources other than the EEDAR Games Database are clearly cited.