TERRITORY REPORT: EASTERN EUROPE
MARKET OVERVIEW by Chris Stanton-Jones
This region’s games market is driven by the largest territory, Poland, which has shown good growth in previous years.
2010 saw a distinct market shift from PC to consoles. The PC market is not declining – just losing share. It has around a 70/30 share of unit sales. But from a value point of view, due to higher priced titles, console software is now around 60/40 (still, just in PC’s favour) and moving closer every year to becoming equal.
The PS3 is asserting itself as the most dynamic format whilst Xbox 360 is also growing. Key PS3 titles are selling well and some have surpassed 30,000 units sales (in Poland alone). Sales of multiformat titles are between three to five times higher on PS3 than on Xbox 360, due largely to piracy on Microsoft’s console. PSP is still alive and kicking but PS2 is now sadly dead whilst Nintendo formats still have limited impact in the market. The market is still being driven by big brands, such as FIFAand Call of Dutyare selling more than ever. Even when advertised, new IP is not guaranteed success. As such, retailers are very cautious about taking the kind of quantities seen in previous years. Also big brand kids movie titles often under-perform even after good box office success.
Chris Stanton-Jones is the head of emerging market specialists Catapult Business Solutions.
www.catapultbusiness.co.uk
“They always ask for better margin, fearing they’ll lose money if they don’t sell their entire stock. Many of them to not want to buy games. They just offer shelves and pay for the goods that is sold to end users. The unsold merchandise is returned to the distributor.” But all is not lost. The last year has seen a significant rise in console sales (see ‘Market Overview’, left), especially in terms of software. The strong performance of the PS3 and Xbox 360 is slowly but surely instilling local firms with the confidence they once had to fully embrace the market. “On a more positive note, we have seen growth in console sales,” says Nicholls. “It’s still far from what we would wish for. It’s too small to base all of your business upon, but it’s certainly going in the right direction.”
CONSOLE COMFORTS
The other benefit of stronger console sales is that it lures consumers away from the piracy-stricken PC. Illegal downloads have wreaked havoc on the format, especially given that it was the dominant games platform for so many years. “For historical reasons the Polish gaming market is still mostly PC- based, which enables easy access to illegal copies of games,” says localisation firm Testronic’s site manager Michal Ferlas.
“This is partially why some of the major publishers are still not directly present and active in the Polish market, which keeps the pricing high, thus discouraging players from spending money on legal copies.” That’s not to say the region plans to abandon the PC. Internet penetration is rapidly improving and with it comes more opportunities for new business models. MMOs have already taken hold in the region – with digital distributor TripleACodes bringing titles such as RuneScapeto these markets.
EASTERN EUROPE: AT A GLANCE
Call of Juarezseries. The studio also grabbed headlines last month with the debut trailer for its upcoming zombie title Dead Island.
The City Interactive sales triumph that was Sniper: Ghost Warriorwas also developed in Poland, as was the People Can Fly FPS Bulletstorm, which was created with Epic Games.
48 March 4th 2011
Going forwards, consumers can look forward to The Witcher 2, the sequel to the acclaimed 2007 RPG from Polish developer CD Projekt Red.
DIGITAL DISTRIBUTION
The increase in broadband penetration has opened up new opportunities in the digital marketplace.
“More developers are opening start-up companies which target new digital distribution channels, such as XBLA, PSN and the App Store,” says Testronic’s Michal Felas.
“By eschewing the traditional ‘food
chain’ model they are managing to avoid high entry costs. Time will tell if this is the right strategy.”
MMOs are also becoming increasingly big business, thanks largely to digital distributors such as TripleACodes. The firm’s Marcus Whitney: “It’s a lesser known fact that some MMOs have a larger userbase in Eastern Europe than in the West. More publishers are seeing the numbers and things are changing.”
www.mcvuk.com
INSTALLED BASES (000s UNITS) (November 2010, estimated. For Poland, Czech, Hungary and Slovakia)
1.5 1.2 0.9
470k PSP 450k
0.6 0.3 0.0 PS3
340k 360
75k Wii
40k DS
1.5m PS2
2.875m
Total console and handheld installed base
Source: Catapult Business Solutions
Poland is the largest territory in the region by some way – its games market is over twice the size of the second largest, the Czech Republic. PlayStation formats have traditionally dominated the Eastern European markets thanks to their long-standing distribution presence. This in itself is due in part to the local presence of SCEE.
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However, Microsoft has been more active locally in the last three years, which has boosted the Xbox 360’s market share. The platform holder has a good presence and has narrowed the gap with Sony. Nintendo’s installed bases are harder to estimate due to many years of grey imports, but Wii and DS generally have little presence.
The rise in console sales is far from what we hoped, but it’s going in the right direction.
Paul Nicholls, Koch Media
“In the last 12 months, our partners have been asking for more free-to- play products like RuneScapeand Nexon– it’s going to be an important area,” said Whitney. “Broadband and disposable incomes are growing in territories like Romania and Ukraine. We are hoping these will be ‘another Poland’ in a couple of years.” With both sales and opportunities growing in the past year, Eastern Europe is set for a more hopeful 2011. It is up to local firms to fortify their positions, strengthen their market and attract more attention from the rest of the continent.
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