CHICAGO -- Revenues from interactive entertainment products -- including video games and compact disc products for personal computers -- will double by 1998, said a speaker at the Video Software Dealers Association's first Videogame and New Technology Conference here recently.
Interactive hardware and software is a $12.2 billion business today and it will grow to $24.9 billion by 1998, said Patrick Ferrell, president of Infotainment World, San Mateo, Calif., a research and publishing company. Interactive software alone will be an $11 billion category four years from now, he added.
"The future of interactive entertainment products is both exciting and terrifying," said Ferrell.
For the rest of this year, revenues from 16-bit systems, like Sega Genesis and the Super Nintendo Entertainment System, will continue to be strong, he said. "After 1994, the 16-bit market begins its descent into oblivion. But the fall and landing of 16-bit will be more gradual than the 8-bit demise due to pricing strategies and consumer confusion in 1995 and 1996," said Ferrell.
That confusion will result from an intense market share battle that will take place among companies selling new-technology platforms, he said. Among the companies that will be slugging it out will be Sega, Nintendo, Sony, Philips, 3DO, Atari, Commodore and Pioneer. Most will use compact discs, although the Atari Jaguar system and Nintendo's "Project Reality" will use cartridges.
But surprisingly, the panelists at the VSDA conference did not shy from picking the winners out of this crowded field. Besides compact disc read-only memories for computers, "there will most probably be only three survivors," said Ferrell. These will be Nintendo, Sega and Sony, he said.
Other panelists agreed. "The industry can support three platforms very successfully," said Joe Morici, senior vice president of sales and marketing at Capcom U.S.A., Sunnyvale, Calif.
"Sega and Nintendo have built a franchise in their names. Sony has a lot of consumer recognition and their technology is very good," said Morici.
Game developers like Capcom have to decide early which platforms to back, and the new platforms' success will be determined in large part by the amount and quality of the software available for them. "It's a gamble. We will support the ones that we think are going to be successful," said Morici.
Capcom is betting that the current success of Nintendo and Sega will carry over to new systems. "Sony will back its system with substantial amounts of money," he said. Big money must be spent to promote a new platform, "or else nothing is going to happen," he said.
"I don't think the other platforms are going to have the success that Nintendo, Sega and Sony will have. They will face a really difficult job convincing consumers that their systems are better," said Morici.
As for CD-ROM products for computers, "that's going to be a gigantic market," he said.
"The prognosis for personal computer CDs is very strong," said Ferrell. He predicted "dramatic" growth for these products through 1998. Total sales for PC CD hardware and software will be $5.1 billion this year and $13.45 billion in 1998, he said.
CDs for computers are "very conducive to education and information products with entertainment flair. Although it is a secondary entertainment vehicle, the revenue and profit potential is solid and growing," he said.
"We do notice some mass market companies that wouldn't think of carrying computer software are carrying PC CD entertainment products," he said.
Until the markets for these products grow to significantly higher levels, 16-bit video games will continue to be a sound investment for retailers, the panelists agreed.
"Today it is a cartridge-based technology, leading into some CD platforms that are showing success," said Barry Taylor, vice president of sales at Acclaim Entertainment, Oyster Bay, N.Y. "I believe it will continue to be a cartridge-based business for the next two or three years, until we see the next generation of products coming from Nintendo and Sega," he said.