So I was asked by a few people to explain a slide I put up at the recent Serious Games Summit about the size of various markets which might be customers for serious games. It took about an hour to recompile the anecdotal or factual evidence I used and I posted it to the Wiki.
Google is a great resource for any researcher, but it's amazing how any major time spent with it makes you realize how piss poor the organization of information is. It took me a long time to find anything resembling an answer on how much the Army spends annually on training each year (~$7 Billion it seems) and it just doesn't seem like a) it should take this long, and B) that I should have to use the source I used (a resume of a former manager of that budget) for what seems like not that rare of a question.
I don't think this information has to do with the quality of search engines either - the engines are getting better, but the quality of the information we're publishing seems to be getting worse. This is more of a vibe thing but I google enough to feel this way.
Market Size of Serious Games
In terms of the overall market size for Serious Games it's something I'm going to spend more time on as it's a recurring question.
Nick Dekanter asked me for my opinion a few months ago and I arbitrarily put the market at about $20M annually right now. This was based on an idea that right now there are probably 20-60 projects of some type going ranging in size from an average of $300K - $1M in budget. It's a very arbitrary number but I've easily found 40 projects going right now and some aren't trivial (there are a few with $3m-$5m budgets over the next 2-3 years).
The $20M number is assuming a very strict definition of serious games and it's also not including COTS (commercial off-the-shelf) titles that are repurposed in schools, colleges, and corporations. It also I think is poised to grow pretty exceptionally over the next few years and may even be bigger now if we just had the means to track and identify everything going on.
This absolutely means though that we need to find a way to build a better market size number for the space and it's something I intend to work on. I'd like to (and I think we can) be able to define this area as a $100M market inside of the next five years, and I think we can define it as a $1B market inside 10. It may even prove much bigger. As I showed in my slide you can reach out to just a half-dozen or more areas and find spending that exceeds $100B in areas ripe for the use of game-based solutions. If we could just capture 1% of that with what we think is a better solution (games or game technology) it shouldn't be all that difficult.
For now though I think we need to build a better bottom up analysis to go with my more pie-in-the-sky top down analysis. If we can, I think we can better define the opportunity.
$20M vs. $20B
My $20M number also raises comparisons to the $8B or $20B numbers used to define the computer and videogame markets in North America and Worldwide. The comparison would at first seem to trivialize the so-called Serious Games Market but don't be so fast.
First off the billion dollar market numbers for videogames usually involve retail sales and also include hardware, accessories and more. So the actual numbers spent on software are less and since the numbers usually involve retail sales (to equate it with Box Office of movies) the number is definitely inflated because it retailers (unlike Box Office) don't send as much of their receipts to the publishers. Retail market up is anywhere from 50% to 20% of the cost-of-goods. Development studios then get anywhere from 10%-20% of that total (I saw a slide once that said 25% not likely unless it's an affiliated label deal).
So lets reverse my $20M number and put it in the eyes of a traditional publishing model. Since almost all of that number is work-for-hire style contracting we can multiply it up to represent "the take" from a traditional commercial piece of work. Here is $20M worked that way...
$20M "earned" by studios for development
$20M is 20% (I'll take high-end here) of $100M in publisher revenues.
$100M is 65% of $154M of retail revenue.
It could be as much as $200M if you're willing to believe a 50% markup which is typical on some PC titles and is certainly is for books. On the downside if we looked at the $20M figure in a self publishing situation the multiple is just 2 or less since you're cutting out the publisher. It's still a multiple though and the majority of studio revenue in the games industry is of the model I used above.
This means that for development studios to earn $20M in revenue their work would have to do nearly 7 times that amount at retail under traditional retail markup and developer royalty models.
So if we can reach $100M in revenue for serious game development work it will be closing in on a $1B retail equivalent in the commercial space.
So the moral of this story is next time you think $20 or $100M is trivial multiply it by seven.