Health e-Games Market Report

Health e-Games Market Report:
Status and Opportunities
BY Andy Donner, Douglas Goldstein
and Julia Loughran
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Article Contents
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I.
Introduction
58
II.
Executive Briefing
The Health e-Games Market
Product and Services
Key Conclusions
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III. History of Health e-Games
Exergames
Brain Games
Healthy Eating Games
Condition Management Games
Professional Training Games
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IV.
Market Drivers
Social Media Drivers
Health and Wellness Market Drivers
Video Game Market Drivers
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V.
Health e-Games Market Profile
Market Size Snapshot – Video Game Industry
Market Size Snapshot – Health e-Games
Health e-Games Categories
Exergaming: $6.4 Billion Market
Brain Fitness: $225 Million Market
Healthy Eating
Condition Management
New Revenue Models for Healthy Eating and Condition Management
Technology Platforms
Market Profile Summary
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VI. Investment Opportunities
Venture Capital – Health e-Games
Venture Capital – Casual Games
Health 2.0 – Active Venture Investment and M&A Activity
Specialized Health Management – a Rapid Growth Adjacent Sector
Consumer Product, Media and Electronics Companies
Health Plans – Driving Adoption and Development of Health e-Games
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VII. Conclusion
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VIII.Questions for Further Consideration
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About the Authors
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References
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I. Introduction
Video games have gained mass acceptance across all age
demographics through the popularity of the Nintendo
Wii, Konami’s Dance Dance Revolution, Nintendo’s Brain
Age, casual games such as Sudoku, Diner Dash and
many others. “Health e-games,” while a new term, have
actually been on the market for more than 25 years,
starting with the 1982 release of the Atari Joyboard,
a precursor to the Wii Fit. Today, health e-games have
captured the interest and attention of mainstream consumers, government agencies and various multi-national
corporations outside of the gaming industry including
Johnson & Johnson, McDonald’s, Unilever, Nobel Biocare,
Nike and Apple.
Healthcare companies are also becoming active in the
health e-games market. Humana launched HumanaGames.com and Kaiser Permanente offers a series of
health e-games like The Amazing Food Detective, which
has won numerous awards for teaching children to eat
healthier foods and increase physical activity. HopeLab,
together with CIGNA, has distributed a cancer fighting
game, Re-Mission, for teens worldwide, and it has been
demonstrated to empower teens in their battles with
cancer. Archimage, with a $9 million grant from the National Institutes of Health (NIH), has developed Escape
From Diab and other games to help prevent obesity and
manage childhood diabetes. These examples are just a
sample of the more than 300 health e-games which are
available across consoles (Wii, XBox, PlayStation), online,
and increasingly on mobile devices.
To qualify as a health e-game, the multimedia gaming
experience must be fun and deliver health benefits.
Health e-games are beyond simple entertainment
because they involve health literacy, physical fitness,
cognitive fitness, skills development and condition
management. Above all else, health e-games are tools for
behavioral change. For consumers, a change in behavior
could mean regular exercise, stress reduction, smoking
cessation, adherence to doctor-recommended medicine
usage, weight management, healthy eating habits, or
other positive lifestyle changes.
Health e-games have been called many things in the
past, including “games for health,” “active games,”
“health games,” “exergames” and other variations. For
the purposes of this report, we feel that “health e-games”
best describes this multimedia gaming industry segment
for several reasons. First, health e-games cover a broad
spectrum, from casual brain games like Nintendo’s Brain
Age to serious games like Pulse!!, a PC-based virtual
training simulation for medical students. Second, the
most effective games in this genre are simultaneously
fun and healthy. Third, all games in this market segment
have electronic elements and the “e” in front of e-games
serves to clearly identify the multimedia electronic nature
of these games. Non-electronic games, such as soccer, basketball or ultimate Frisbee, could be considered
“games for health” but not “e-games.” The term “health
e-games” communicates the key product attributes:
electronic, interactive, fun and beneficial (i.e. healthy).
II. Executive Briefing
The Health e-Games Market
Worldwide video gaming is a growth business with sales
(hardware and software) of $42 billion in 2007, and estimated to eclipse $68 billion by the year 2012 according
to a PriceWaterhouseCoopers industry report. Health
e-games are a new and rapidly expanding market
segment of video gaming that incorporates elements
of three markets: casual games, serious games and
exergames. According to the Casual Games Association,
casual gaming is a $2.2 billion market composed of fun
and easy to learn video games that can be played across
mobile, PC, Mac and console platforms. The serious gaming market is estimated to be between $1.5 and $2.0
billion according to serious games expert Elaine Alhadeff.
This market is focused on utilizing gaming applications to
achieve benefits beyond entertainment, such as training, education and performance improvement across
industries. Exergames, which involves digital interactive
physical motion and fitness games, is a $6.4 billion
segment and comprises the vast majority of the health
e-games market.
Residing at the intersection of the casual gaming, serious
gaming, and exergaming markets, health e-games are
estimated to be a $6.6 billion market segment within the
$42 billion video gaming industry.
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The $6.6 billion estimate reflects a bottom-up analysis
detailed in the Market Profile section below.
Health e-games leverage the easy-to-use, highly engaging
and interactive nature of electronic gaming to increase
health literacy, empower behavior change, and promote
professional education. The health e-games market is
comprised of four consumer categories and one professional, including:
• Exergames
(e.g. fitness, coaching, health promotion)
• Brain Fitness
(e.g. cognitive fitness, brain training)
• Condition Management
(e.g. diabetes, asthma, cancer, pain management)
• Healthy Eating
(e.g. weight management, obesity)
• Professional Training
(e.g. simulations for training surgeons, pilots, soldiers)
Growth of the overall video gaming industry is expected
to be significantly impacted by the non-traditional gaming
markets which include serious games, casual games
and health e-games. The growth of the health e-games
segment is being fueled by two primary market forces:
(i) the popularity and commercial success of Nintendo’s
interactive exergames Wii and Wii Fit and (ii) the growth
of the casual gaming market. In fact, Nintendo’s guiding
corporate strategy driving their innovation is what their
executives call “productive entertainment.” Productive entertainment is an experience that is fun, family oriented,
socially connecting and delivers a benefit.3 The four
consumer health e-game categories would fall within the
definition of productive entertainment.
• Wii and Wii FIT EXERGAMES: Nintendo reports that
29.6 million Wii consoles have been sold worldwide
in just 19 months from the November 2006 launch through June 2008, equating to approximately $8.9 billion in sales assuming a $300 average selling price, or $5.6 billion annualized. Wii Fit sold 4.6 million units,
or approximately $622 million, in the 7-month period
December 2007 through July 2008 despite not
being released into the United States until May 2008.
Together, these exergaming products have generated
approximately $6.2 billion in annualized sales for Nintendo and have forever changed the video gaming industry. The Wii is so popular there is a website,
www.wiialerts.com, which alerts perspective buyers
to Wii availability.
•Casual Gaming: Another significant growth factor
is the mass acceptance of casual gaming which is
expanding the video game industry in new customer
segments. In particular, casual games are unlocking
market demand among women aged 30-50; driving a
20% annual growth of this $2.2 billion market.
Nintendo’s Brain Age and Brain Training, casual games
which are brain fitness health e-games, have sold 13
million units and generated approximately $260 million
in sales over the 34 month period May 2005 to
March 2008.
Product and Services
Health e-games include three primary product types: (i)
video games, (ii) immersive learning simulations and (iii)
virtual worlds. This report will primarily focus on consumer-facing video games and will largely omit discussions
of professional-focused immersive learning simulations
and virtual worlds, which are used for training, military
preparation, 3D visualization of medical information and
other instruction. Health e-games are presented to users
through multiple platform types including consoles, computer, online, and mobile (e.g. iPhone, Nintendo DS and
other mobile internet devices). More than 300 health
e-games are currently offered across multiple platforms.
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Key Conclusions
Health e-Games Have Gone Mainstream
Health e-games are gaining widespread acceptance
across all age groups and customer segments. In the past
few years, women Baby Boomers have readily adopted
gaming largely due to the growth of casual gaming and
also Nintendo’s strategy of targeting this traditionally
under-served market segment. Pogo.com, a subsidiary
of Electronic Arts which operates the largest community
of casual gamers, reports that of its 18 million active
users, 63% are over age 35 and 61% are women. While
children and teens continue to enjoy Konami’s Dance
Dance Revolution, today we find Boomers sharpening
their cognitive skills by playing Brain Age while improving
balance and strength with the Wii Fit. Meanwhile, seniors
are enjoying virtual bowling and tennis from inside
retirement communities by playing Wii Sports.
Social Acceptance of Video Games
Mainstream adoption of health e-games is in part a function of a mass social acceptance of video games. 35%
of parents play computer and video games while 93%
of those parents have children who also play games, according to Peter D. Hart Research Associates. 61% of parents believe games are a positive part of their children’s
lives according to research conducted by the Entertainment Software Association. Exergaming, the largest segment of health e-games, is likely to gain further social acceptance and investment as the United States and other
countries work to reduce youth obesity, Type II diabetes
and sedentary lifestyles. For example, in 2007 the State
of West Virginia began deploying Konami’s Dance Dance
Revolution in more than 1500 schools as part of its effort
to address the childhood obesity epidemic within the
context of their physicial education programming.
Benefits of Health e-Games Are Being Validated
Through a Growing Body of Clinical Research
Several dozen clinical studies have either reported
positive results or are currently testing the health benefits
of video games on improving health literacy, prevention
and condition management. Completed studies have
examined the impact of Heath eGames on cancer,
physical fitness, healthy heating, asthma, diabetes, cystic
fibrosis and cognitive fitness. For example, a randomized
controlled study found that playing HopeLab’s
Re-Mission game improved adolescent and young adult
cancer patients’ cancer-related knowledge, self-efficacy
and adherence to their prescribed cancer treatment
plan, according to a August 2008 article in the journal
American Academy of Pediatrics. Many other clinical
trials of health e-games are underway, including 12
current studies being funded by an $8.25 million grant
from the Robert Wood Johnson Foundation (RWJF).
In addition to the evidence base, the experience base
of health e-games is expanding based on the rapid
adoption by consumers and professionals, which is being
documented daily by the news media around the world.
Note: Physic Ventures has authored a separate white
paper in collaboration with Debra Lieberman, Director
of RWJF’s Health Games Research program, to examine
the empirical research demonstrating the efficacy
of heath e-games in empowering healthy lifestyles,
prevention and self-care.
Organizational Awareness and Support of
Health e-Games Is Accelerating
For-profit corporations, start-up ventures, government
agencies and nonprofits are adopting existing health
e-games and funding next-generation research and
development. Humana operates HumanaGames.com
(HG4H) so health plan members and consumers can
“play their way to better health,” Kaiser Permanente is
empowering consumers to make healthier food choices
through award-winning online health e-games such as
The Amazing Food Detective, while CIGNA distributes
Re-Mission to help teens win their battles against cancer.
The Center for Disease Control and Prevention (CDC)
has an active presence in the virtual reality game Second
Life in order to advance education and drive healthy
behaviors, such as encouraging flu vaccines. The National
Institutes of Health (NIH) awarded a $9 million grant
in 2005 to Archimage to create two health e-games to
modify children’s behavior regarding diet and nutrition.
Johnson & Johnson (J&J) invited industry thought-leaders
and entrepreneurs to a two-day learning summit on
September 18-19, 2008 to examine ways in which
health e-games could enhance J&J’s consumer and
pharmaceutical products.
Quality and Quantity of Health e-Games
Are Increasing
Over 300 health e-games have been developed for
consumers, patients and professionals. The number and
variety of health e-games are growing rapidly as more
developers and publishers seek to enter this high-growth
market segment. At a September 2008 industry trade
show in Montreal, Nintendo and Ubisoft showcased 17
new health e-games in the fitness and life-coach genres,
including a new cooking guide, a stop smoking coach,
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two new yoga trainers and a Pilates guide. One new
high-profile example is Nintendo’s upcoming Personal
Trainer: Cooking! which helps people shop for food,
prepare healthy menus and cook meals with the help of
a virtual guide who reads out instructions during meal
preparation. The release of Apple’s iPhone has been a
disruptive force across the media and gaming industries
including the health e-games market segment. As of midSeptember 2008, more than 160 “health and fitness”
game-like applications were available on the iPhone to
consumers seeking mobile self-care tools.
Rapid Innovation and Experimentation
of Business Models
The fast-paced video game industry is constantly evolving
and creating new revenue models. At the June 2008
Social Gaming Summit in San Francisco, industryveteran David Perry described more than 25 video game
monetization methods. Health e-game companies are
currently using several of these models and are expected
to readily adopt best practices from industry pioneers.
Examples of health e-game companies using a few of the
top business models include:
•Consumer Direct: Nintendo’s Wii, Wii Fit, Brain Age; Ubisoft’s Easyway to Stop Smoking, Konami’s Dance Dance Revolution (DDR), Posit Science’ Brain Fitness Program; Fisher Price’s Smart Cycle
•Enterprise: Expresso Fitness’ S2U and S2R; Konami’s DDR, CogniFit’s DriveFit, Dakim’s [m]Power; Posit Science’ Brain Fitness Program
•Advertising: Fit Brains •Subscription: Lumos Lab’s Lumosity, Happy Neuron •Sponsorship: Kraft Game Pad, HopeLab’s Re-Mission •Nonprofit/Government Grants: Archimage’s Escape from Diab (NIH); ArchImage’s Food Fury (Aetna
Foundation), MyPyramid Blast Off (USDA)
Venture Capital and M&A Activity is Early
But Poised for Growth
To date, large corporations like Nintendo have created
and captured the value resident within the health
e-games market. This is expected to change as venture
capital firms and corporate development groups seek a
piece of this large and growing market. Over $50 million
in venture capital has been invested in recent years in
brain fitness companies such as Posit Science, Lumos
Labs, Dakim, Cognifit, and Happy Neuron. The casual
gaming space has been even more active: Big Fish
closed an $83 million round on September 12, 2008;
PlayFirst raised over $30 million from firms such as
Mayfield and Rustic Canyon Partners; while Gaia Online
secured the support of top-tier firms such as Benchmark
Capital, Redpoint Ventures, and Institutional Venture
Partners, which led the July 2008 Series C at an eyepopping $300 million valuation. Venture investment and
strategic acquisitions have been active in adjacent sectors
which could influence interest in health e-games – such
as disease management, corporate wellness, Health 2.0
and social media. Physic Ventures has a vested interest
in the health e-games market through an investment in
Expresso Fitness and will continue to closely monitor the
industry for future opportunities.
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III. History of Health e-Games
This section delivers an overview of key health e-games over the past 25 years. It focuses on the consumer market for
video games, exergaming devices and software that incorporate elements of virtual reality, virtual worlds and video gaming.
While this history is far from exhaustive, it provides an overview of key dates and highlights within five segments of the
health e-games market: exergames, brain fitness, healthy eating, condition management and professional training games.
Exergames13
1982 Atari Joyboard
This was a simple four-switch balance board controller for the
Atari 2600 that integrated the functionality of a standard joystick
into a ridged, black plastic board. Mogul Maniac, a single game
released for the Joyboard, emulated the experience of slalom
skiing. Although the Joyboard was not a commercial success, it
foreshadowed Nintendo’s release of the Wii Fit
in 2007.
1982 Atari Puffer
This gamepad system used stationary exerbike pedals or handlebars
as inputs for a series of racing/exercise-type games. Three Puffer
models – Pro, Arcade and Home - were planned, but the product
was never released due to Atari’s bankruptcy.
1986 RacerMate CompuTrainer
This add-on converted a road bicycle into a stationary bike that
delivered electro-magnetic resistance. CompuTrainer attached to the
rear wheel and connected to a Nintendo Entertainment System or
Commodore 64. CompuTrainer evolved over time to include
PC-connectivity, 3-D graphics and multi-player features.
1988 Nintendo Power Pad and Bandai Dance Aerobics
In 1988, the Power Set Bundle was released with a 12-sensor
plastic mat and the World Class Track Meet game. Dance Aerobics
was released by Bandai in 1989.
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1989 Nintendo Power Glove
This simplified version of VPL Research’s robotic Dataglove was
able to identify 256 points of articulation in the hand and fingers.
Nintendo licensed the technology from VPL and brought a more
basic glove to market that worked with games such as Super Glove
Ball, Bad Street Brawler and Mike Tyson’s Punch Out, which was
widely promoted on television.
1992 Tectrix VR Bike and VR Climber
This gym-class piece of equipment featured a recumbent
pedaling position, an integrated CRT and wind-generating fans
that blew air in the rider’s face. Six different “worlds” were
available, all of which were stored on an internal CD-ROM. One
version of the VR Bike was developed for the U.S. military, based
in part on the game Battlezone.
1995 Exertainment System
A collaboration between Nintendo and Life Fitness, this product
hooked a Super Nintendo Entertainment system to a stationary
bicycle. Only two games – Mountain Bike Rally and Speed Race
– were released.
1996 Namco’s Prop Cycle
This arcade exergame involved a stationary exercise bike retrofitted
into a basic video game where the player flew a pedal-powered
ornithopter chasing balloons.
1998 Konami’s Dance Dance Revolution (DDR)
Sold initially in mall arcades, DDR quickly became popular and
heralded the “rhythm and dance” genre in video games. In the last
few years, numerous home versions of Dance Dance Revolution
have been released for a variety of gaming platforms, such as
PCs and consoles, and across numerous music genres. Studies
have shown that DDR helps promote activity and weight loss,
which has generated mainstream adoption among health clinics,
hospitals, senior centers and schools (e.g. West Virginia’s statewide
implementation in 1500 schools).
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2003 Cat-Eye Game Bike
This game used off-the-shelf software that ran on PlayStation racing
games, mapping the accelerator in the game design to the speed of
the bike’s pedals.
2003 Sony EyeToy
This digital camera device for the PlayStation 2 (PS2) allows players
to interact with specially designed games by moving their bodies,
including their head, arms, hands and legs.
2004 Yourself!Fitness
Serving as the player’s guide and coach, a digital aerobics instructor
named Maya leads the player through a series of exercises tailored
to the player’s health and status. This is achieved by tracking progress
on a profile using the hard drive (or the PS2’s memory card), setting
up a schedule and mobilizing Maya to make suggestions based on
computations made by the program.
2005 Bodypad
This suite of controllers strap at the knees, waist, elbows and hands
to allow gamers to control PlayStation games with physical motion.
Instead of acting as motion detectors, the devices send a series of
on-and-off signals understood by the games. The Bodypad allows
players to mimic the motions of the video game, but not to create
any new moves.
2006 Nintendo Wii
This revolutionary gaming console offers motion-sensitive game
play via the Wii Remote, a wireless controller used as a handheld
pointing device to detect movement in three dimensions.
WiiConnect24 receives messages and updates over the Internet
while still in standby mode. Included with the Wii console, the Wii
Sports game DVD provides players with several exergames, such
as boxing, tennis, bowling and baseball. Nintendo reports that 29.6
million Wii consoles have been sold worldwide in just 19 months
from the November 2006 launch through June 2008.
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2006-2007 Expresso Fitness S2U and S2R
Upright (S2U) and recumbent (S2R) fitness bikes deliver interactive,
virtual-reality enhanced riding experiences. Riders select from more
than 30 virtual road tours - from the Peruvian Mountains to the
California Coast - or they can choose to go off-road in a fantasybased world featuring flying dragons and Japanese temples. Along
the way riders steer and shift gears in response to curves, hills and
other riders, which results in a realistic riding experience. Because
every bike incorporates an Internet-connected PC, Expresso delivers
the latest 3-D gaming technology as well as performance data
such as calories, power, miles, ride times and heart rate, which is
captured and delivered to users online.
2007 Gamercize
Based on the concept of forcing exercise during video game play,
this approach requires children or adults to actually exercise in order
to play a video game. Gamercize uses an exercise device such as
a stair stepper or exercise bike as a start/stop button for an Xbox,
PlayStation or Gamecube console.
2007 Fisher Price’s Smart Cycle
This integrated stationary bike, learning center and arcade game
system is targeted at young children. Smart Cycle plugs into a
television. As kids pedal, characters such as Dora the Explorer,
Barbie and SpongeBob guide them through learning, discoveries,
games and races. Smart Cycle won awards such as “Educational
Toy of the Year” and the “Most Innovative Toy” from the Toy
Industry Association.
2008 Samsung T.V. with Embedded Fitness Content
The new series of Samsung Full HD IPTVs incorporates
Media Solution, allowing users to stream multimedia
content from their PCs for display. Samsung’s Content
Library features interactive fitness exercises, step-by-step
cooking recipes and built-in games for a new interactive
media experience for the whole family.
2008 Nintendo’s Wii Fit
This exergame delivers a virtual trainer, BMI tracking and more than
40 exercises and games focused on strength training, balance, yoga
and aerobics. Wii Fit consists of the Wii Balance Board peripheral
and a software program that measures a user’s weight and center of
gravity. First released in Japan, the Wii Fit has sold 4.6 million units
worldwide in the 19-month period December 2007 through July
2008, despite not being released in the United States until
May 2008.
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Brain Games
1999 Cognifit
Founded in 1999 and based in Israel, Cognifit has developed a
suite of software programs that targets both general and specific
cognitive functions. MindFit is a software program that promotes
“cognitive quality” by teaching cognitive and psychomotor skills.
DriveFit is a software-based cognitive training program focused on
improving driving skills.
2000 Happy Neuron
Founded in 2000, Happy Neuron develops and markets brain
fitness games. The company’s games provide scientifically-based,
convenient, quick and entertaining strategies for exercising the brain,
with exercises for attention, language, memory, visual-spatial and
executive function skills. Recently, the company developed
Wii-based titles and a series of games to help professionals manage
their patients.
2001 Journey to Wild Divine
Journey to Wild Divine is a biofeedback electronic game system that
promotes stress management, relaxation and overall wellness. The
PC-based program consists of proprietary biofeedback hardware and
finger sensors which measure heart rate variability and skin conductance
level. Several journey-oriented and adventure games were created for
the platform, including The Passage, Healing Rhythms and Wisdom
Quest. Game programming features luminaries such as Deepak
Chopra, M.D., Dean Ornish, M.D. and Andrew Weil, M.D.
2002 Posit Science
Posit Science, founded in 2002 as Neuroscience Solutions
Corporation, develops clinically-validated cognitive fitness programs
that target medical conditions such as Alzheimer’s, Parkinson’s
and Schizophrenia as well as general memory loss and mental
processing. The company’s first product was an auditory processing
program sold direct to consumer, into retirement centers and
through health plans. Humana, for example, distributed Posit
Science’s programs to its Medicare Advantage members at a sharp
discount relative to the $395 list price. In mid 2008 Posit released
its second product for visual processing, called Cortex with Insight.
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2005 Nintendo Brain Age
Brain Age: Train Your Brain in Minutes a Day! is a puzzle game
designed for the hand-held Nintendo DS and can be played with
single or multiple users. It stimulates the brain by inviting users to
solve math problems, count currency, draw pictures or unscramble
letters. Users take a series of tests to determine their brain age and
the game responds by tracking user progress through online charts.
Nintendo’s Brain Age and Brain Training combined have sold 13
million units between their May 2005 release and March 2008.
2007 Lumosity
Developed by Lumos Labs, a cognitive neuroscience research and
development company, Lumosity is an online brain fitness program
designed to improve memory and attention through a daily mix
of games, exercises, progress reports and brain health tips. The
Lumosity website was launched in 2007 and offers unlimited
access to its games for $6.70 per month, or $79.95 annually.
2007 Prevention.com
Prevention magazine offers a series of brain games to complement
its editorial features on brain fitness. Visitors to Prevention.com are
able to play games such as Busy Bistro, Pandara’s Boutique, Street
of Dreams, Split Words, Heraldry, Secret Files, Right Word and
Private Eye. Paradise Island invites users to sharpen their language
and visual spatial skills by constructing words within categories via
a list of letters and syllables. The Prevention.com brain games are
sourced from brain game producers Fit Brains, Happy Neuron
and others.
2008 Fit Brains
Fit Brains is a web-based brain fitness portal from
Vivity Labs. The site offers entertaining activities that help users
of all ages maximize their brain skills. Games are integrated with
personalization tools that allow users to participate in highly
individualized sessions. Additional brain fitness metric tools allow
users to track their performance and progress on brain fitness tasks.
In the years ahead, Fit Brains plans to integrate social components
to improve the brain fitness experience.
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Healthy Eating Games
2003 Hungry Red Planet
Funded by the National Institutes for Health (NIH) and developed
by Health Media Lab and Agora Multimedia, Hungry Red Planet
was designed for students to learn about healthy eating by planning
menus for a group of settlers on the planet Mars. The video game
was aimed at 9-15 year old students and blended SimCity style
simulations with knowledge about nutrition.
2004 MyPyramid Blast Off
As part of MyPyramid.gov, a major initiative to revise the longstanding food pyramid, the U.S. Department of Agriculture (USDA)
created a special kids section featuring MyPyramid Blast Off, an
online game that teaches children about food and exercise. Players
learn about the four major food groups by filling fuel tanks and
tracking their progress on the revised food pyramid.
2006 Cooking Mama
This healthy eating and cooking game was developed by Office
Create for the Nintendo Wii and Nintendo DS platforms. The original
Cooking Mama has sold more than 500,000 copies in the United
States as of August 15, 2007. In 2007, Cooking Mama 2: Dinner
with Friends was released in the U.S. As of January 30, 2008, the
series has sold more than 2.6 million copies worldwide.
2007 The Amazing Food Detective
Kaiser Permanente launched The Amazing Food Detective, a
healthy eating online game that incorporates fun and delivers
healthy eating messages to children. The Amazing Food Detective
has been distributed via the Internet to more than 5,000 schools in
Kaiser Permanente communities and has won numerous awards of
excellence, including the 2008 Best Products From iParenting Media
Awards and Best in Class from Interactive Media.
2007 Healthy Eating and Other Games at eatwellbewell.org
The Arizona Nutrition Network developed a series of activities and
online games to promote health and nutrition to people who are
either on food stamps or are eligible for food stamps. A series of
online games about nutrition were also developed for children to
help them make healthy choices. In the game Healthy Eating, a
character named Bobby must match food items before they get into
the hands of a character called Idler. Other games include Milky Mix
Up, Connect 3, Rainforest Frenzy, and Eat Smart, Play Hard.
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2008 Playnormous
Playnormous, a subsidiary of the design and game-development
studio Archimage, is an online game portal and community where
children and their parents can learn about health in a fun, interactive
way. Playnormous believes in “getting healthy the fun way! …with
a magic formula which can help you live a healthier life without
getting bored.”
Condition Management Games
1994 Rex Ronan: Experimental Surgeon
Rex Ronan is Super Nintendo Entertainment System game that
teaches players about the hazards of smoking tobacco cigarettes.
The player goes inside a man dying of lung cancer during surgery
and must defeat the evil tar and nicotine.
1994 Packy & Marlon
ClickHealth’s Packy & Marlon is an interactive entertainment
software product that elevates health literacy and self-care
regarding juvenile diabetes. To win the game, children must
effectively manage their character’s glucose levels.
1995 Bronkie the Brachiosaurus
Also released by ClickHealth, Bronkie the Brachiosaurus focuses on
the management of pediatric asthma. Bronkie the Brachiosaurus,
like Packy & Marlon, ran on the Super Nintendo Entertainment
System and was tested in clinical trials that demonstrated
effectiveness helping children manage their chronic condition.
These studies concluded that children who played the games
increased their self-efficacy, improved their self-care and reduced
emergency room visits.
2003 Diabetes Education for Kids
Created by dbaza and available on a CD-ROM, Diabetes Education
for Kids invites children to create a character to represent them in a
story about another character named Piper, who needs assistance.
Children can help Piper only if they can prove their ability to
perform certain tasks such as testing for blood glucose levels.
The game includes a personal journal, interactive exercises, quizzes
and a dictionary.
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2005 Escape from Diab
NIH granted $9 million to Archimage to develop games about
healthy eating, exercise and diabetes management for children.
Collaborating with the Children’s Nutritional Research Center of
Houston’s Baylor College of Medicine, Archimage has used the
NIH grant to develop and test two games: Escape from Diab and
Nanoswarm: Invasion from Inner Space. Now in clinical trials
managed by Baylor College of Medicine, the games are scheduled
to be released in early 2009.
2006 Re-Mission
Created by HopeLab, Re-Mission is a first-person shooter
game designed to help young adults with cancer learn how to
better manage their condition. HopeLab conducted a randomized,
controlled trial to test the effect of Re-Mission on adolescents and
young adults with cancer. The study included 375 male and female
cancer patients ages 13- 29 at 34 medical centers in the United
States, Canada and Australia. Findings from this research, which
were presented at peer-reviewed scientific meetings, indicate that
playing Re-Mission produced increases in quality of life, self-efficacy
and cancer-related knowledge for adolescents and young adults
with cancer. Young people who played Re-Mission maintained
higher levels of chemotherapy in their blood and showed higher
rates of antibiotic utilization than those in the control group,
indicating that Re-Mission helps patients adhere to cancer
therapy regimens.
2007 Quest for the Code
Developed by the Starlight Starbright Children’s Foundation, Quest for
the Code turns asthma education materials into an online adventure
for children and teens with asthma. Players learn about warning signs
and symptoms, asthma myths, asthma medication devices, longterm control of asthma and measuring peak flow. The game was
developed with the input of a team of national pediatric experts, and
is now part of a research program at the University of Miami School
of Medicine and Case Western Reserve University School of Medicine. 2008 Posornot
The online Internet game Posornot works to promote HIV/AIDS
education and awareness. The site reveals photographs and
biographies of men and women and asks visitors to determine
whether or not a person is HIV-positive or negative. As the game
is played, HIV-positive participants discuss when they first learned
about their HIV status, while HIV-negative participants explore how
they have been affected by the disease. The game was developed
by MTV’s college network, and the Kaiser Family Foundation, in
partnership with POZ Magazine.
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Professional Training Games
1982 Microsoft Flight Simulator
The first version of Microsoft’s Flight Simulator was released in
1982. Since then, 11 new versions have been released, each with
increasing fidelity. The current version includes detailed weather
and air traffic control.
1994 Virtual Reality Modeling Language
Known as VRML, the Virtual Reality Modeling Language provided a
standard file format for representing 3D graphics. This provided an
easy way for people to create virtual worlds for the Internet.
1996 National Research Council Report
The National Research Council published a report entitled
“Opportunities for Collaboration Between Defense and
Entertainment Research Communities from the Committee on
Modeling and Simulation” which examined how the military,
entertainment industry and simulation/model developers could
cooperate to improve training. It was the first attempt to link the
disparate communities of serious simulation developers with
game developers.
2001 Operation Flashpoint
Developed by Bohemia Interactive Studio and published by
Codemasters, Operation Flashpoint was a sophisticated militarytraining game. The game was selected by DARPA to be used in
DARWARS, a program designed to rapidly move cutting-edge
technology into the field.
2002 Serious Games Initiative
In 2002, the Woodrow Wilson International Center for Scholars
in Washington DC launched this initiative to encourage the
development of games that address policy and management issues.
More focused sub-groups began to appear in 2004, including
Games for Change, which focuses on social issues, and Games for
Health, which addresses health care applications.
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2004 -2008 Games for Health Conference
The annual Games for Health Conference, now in its fifth year,
examines how interactive games and emerging game technologies
can improve consumer health education and professional clinical
practice, including disease and injury prevention, service delivery,
professional education and training.
2006 Pulse!!
Developed by BreakAway Games in conjunction with Texas A&M
University-Corpus Christi, Pulse!! is a PC-based virtual training
tool for medical and nursing students. Comparable to first-person
shooter games in its design and game play elements, Pulse!!
teaches skills such as resource utilization and time management
under difficult conditions (such as natural and man-made disasters).
The game was developed with a $7.5 million grant from the Office
of Naval Research.
2007 Medical Training in Second Life
Numerous professional training simulations appear within the
virtual reality world Second Life. An example is Ann Myers Medical
Center, a virtual medical school, which was created to test the
possibilities of virtual training for real-world medical and nursing
students. Participants focus on patient history, physical examination
and telemetry. A virtual mentor gives the students a disease process
with which to familiarize themselves before presenting a diagnosis
to a physician.
2008 Robert Wood Johnson Foundation
In 2008, RWJF launched Health Games Research: Advancing
Effectiveness of Interactive Games for Health, a national program to
support research enhancing the quality and impact of computer and
video games used to improve health. Under the direction of Debra
Lieberman, the $8.25 million program awarded $2 million in May
2008 across 12 research studies examining the impact of games on
fitness, nutrition, condition management and other health behaviors.
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IV. Market Drivers
The health e-games marketplace is being catalyzed by market drivers in social media, health and wellness, and gaming.
The intersection of these market forces is accelerating the development of diverse, effective business models and
companies that serve a growing demand in the United States and beyond.
Social Media Drivers
Social Network Power (or SNP)
The power of online social networks and the rapid rise
of social media are integral elements in the lives of
billions of connected individuals across the globe. SNP
also reflects Metcalf’s law as it relates to the growth of
virtual social networks. Originally developed to illustrate
the impact of Ethernet cards, Metcalfe’s law says that
“the value of the network is proportional to the square
of the number of users.” As applied to SNP, Metcalf’s
law suggests that as the number of social network users
increases and multiplies over time, the more powerful
and influential social networks will become.
Examples: Facebook, MySpace, LinkedIn, TBD,
CarePages, Daily Strength, Patients Like Me, Enurgi
i Connect 24/7
Individuals within a network are connected to the Internet
anytime and anywhere – at work, at home, at play. This
always-on, ubiquitous connection to the Internet cloud
through a computer or mobile device has accelerated
the growth of casual gaming, enabling the rise of social
networks and 3-D virtual worlds such as Second Life.
Examples: iPhone and other smartphones, Nintendo DS
and MID
iAvatars
Intelligent Avatars echo the transition from PDAs, or
Personal Data Assistants, to PIAs, or Personal Intelligent
Assistants. This transition reflects a broader evolution from
mere information technology to intelligent information
technology or I2T. It also reflects the rapid evolution from
a flat, one-dimensional Web 1.0 Internet experience to
a three-dimensional Web 3.0 Internet experience where
adults and children can participate in virtual worlds and
learn, grow and experience in ways previously impossible
in physical space.
Examples: Second Life, Gaia Online, Webkinz, Club
Penguin, virtual coaches embedded in Wii Fit and
Yourself!Fitness.
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Fun Factor
From the Senet board game found in Egypt dating
back to 3000 BC to contemporary releases such as
Spore and Wii Fit, games have wielded a critical role in
human civilization and culture. Whether games function
in physical space or in cyberspace, they attract and
retain audiences when they deliver fun, engagement
and challenges. The ‘fun factor’ drives the growth of
every dimension of the global video games market. This
applies to the health e-games market where developers
and publishers are producing well-designed games that
empower healthy behavior by effectively harnessing the
fun factor.
Examples: Casual games in general, the Amazing Food
Detective by Kaiser Permanente, Playnormous games
such as Juice Jumbo, Bubble Trouble and Food Fury.
Health and Wellness Market Drivers
60 is the New 40
Today’s active 60-year old feels and acts more like the
40-year old of years past. 77 million Baby Boomers
are driven by a powerful desire to keep a youthful
appearance, stay fit and remain young in spirit. This
unprecedented consumer demand has created
enormous opportunities for companies selling health
and wellness products and services.
Examples: Widespread popularity of Brain Age among
Boomers, rapid adoption of Wii Sports and Wii Fit,
healthy eating games such as Cooking Mama and
Personal Trainer: Cooking!
Health@Anywhere
Empowered by technology innovations and a consumerdirected healthcare environment, health consumers
are evolving from passive patients into complex, multidimensional health and medical decision-makers. The
empowered health consumer surrounds him/herself
with interactive and increasingly intelligent devices
and services that deliver tailored health and medical
knowledge services at the point of need 24x7 from
almost any location.
Examples: BodyMedia physiological monitoring devices,
GlucoBoy diabetes testing, monitoring and gaming
system for Nintendo Gameboy, and smoking cessation
campaigns in the virtual world of Club Pogo.
Decrease Cost and Improve Quality
The United States spent $2.26 trillion on healthcare, or
$7,429 per person, representing nearly 16% of total GDP.
Projected to reach 20% of GDP by 2017, the healthcare
system is under tremendous pressure to lower costs
while improving quality. This has led to a large and rapidly
growing marketplace of specialized health and behavior
change services, including corporate wellness programs,
disease management, health promotions and new
models for primary care delivery. The next generation
of wellness and disease management programs might
embrace and integrate health e-games that have both
demonstrated clinical effectiveness and achieved
popularity among consumers/patients.
Examples: Humana Games for Health, Escape from
Diab, Nanoswarm and Re-Mission.
Well-tainment
This movement features fun, engaging and entertaining
products and services that support health and enable
wellness across all sectors of society and the economy.
Fueling this growth is the desire among consumers
to organize their lives less around consumption
and hierarchical achievement than around learning,
community and good health achieved in an environment
of fun, entertainment and involvement. Featuring a blend
of fun, health, learning and self-improvement, health
e-games fit squarely at the center of this market driver.
Nintendo internal strategy of “productive entertainment”
is a reflection of this driving force that combines fun
with purpose.
Examples: Rapid adoption of Wii Sports, Dance Dance
Revolution and other exergames in senior citizen centers,
schools, cruise ships and other social settings.
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Video Game Market Drivers
GamerMoms
Women, who often function as the ‘chief financial
officers’ of households, represent a majority of today’s
casual gamers while also serving as primary healthcare
decision makers. Women of all ages spend time playing
casual games that range from word, card and puzzle
games to time management, hidden object and brain
games. With more gaming choices available within the
worlds of casual and health e-games, women have
become a central hub for game decision-making. They
buy, play and manage the household’s game menu in
much the same way they have made family healthcare
decisions for decades.
Examples: Casual games such as Sudoku, Diner Dash,
Bejeweled, Solitaire, as well as the acceptance of
Nintendo Wii into households that would never have
adopted traditional game consoles and violent games
such as Grand Theft Auto.
Not Your Son’s Video Games
Historically, video games have been associated with
teenage boys and young men glued to their televisions
playing violent shooter games. This stereotype has
shifted in the last five-to-ten years with the rise of casual
games, brain games, exergames, and virtual worlds.
Gaming involves people of all ages and profiles – from
very young children and parents, to college-educated
women, teenagers and seniors. PlayFirst, a leading casual
gaming company, reports that 40% of all gamers are
now women, 90% of PlayFirst users are women, 35 is
the average age across all games, and 67% of US heads
of households are gamers.
Examples: Spore, Peggle, Tetris, Sims, and Boom Box by
Steven Spielberg.
Games R Media
Multimedia video games have become a medium rather
than a product. Video games have evolved to resemble
television series with multiple episodes such as “Lost,”
or even full-length motion picture productions as with
newer game releases such as Spore. Much like a newly
launched television program, the launch of a video game
introduces a fresh media brand complete with story lines,
characters, heavy promotion and community developed
around characters, and previous and future episodes.
Video games also connect participants in multi-player
environments featuring collaborations, competitions,
battles and shared knowledge and resources. Both
television series and games thrive as they build ongoing,
reciprocal relationships with viewers and players.
Examples: Nickelodeon’s Carrie the Caregiver, Electronic
Art’s Spore and PlayFirst’s Diner Dash series.
Dollar$4
This driver represents the diversification of business
models in the highly innovative and quickly-changing
video game industry. The traditional revenue stream
for games features a direct-to-consumer model where
a consumer purchases a game through a retail outlet
or online via “pay to play” or “trial play,” in which the
first hour is free, followed by a lock until payment is
received. Newer, rapidly developing models include
advergames, sponsorships and in-game advertising
where advertisements are woven into the game’s theme
to support and enhance the total game experience. Entire
economies, complete with currencies that translate into
real money in the real world, have been constructed
within virtual worlds. In Second Life, for example, $1.00
USD buys $250 Linden Dollars (L$). Both virtual world
and casual games generate revenue through microtransactions in which players are charged for optional
add-on content, such as a new level of the game or
tweaks that bolster an avatar. Advertising and sponsorsupported gaming is another business model likely to
drive the growth of health e-games, with a particular
adoption anticipated in exergames and healthy
eating games.
Examples: Expresso Fitness’ in-game advertising strategy,
Lumosity’s subscription model for online brain games,
Kraft’s sponsorship of a DDR-based exergame, Nobel
Biocare’s $65 million sponsorship of a dental
simulation game
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V. Health e-Games Market Profile
Market Size Snapshot – Video Game Industry
Video gaming is a rapidly growing industry that transacted
nearly $42 billion in annual global revenue (hardware
and software) in 2007, and is projected to reach $68
billion by 2012 (a 10.3% annual revenue growth)
according to PriceWaterhouseCoopers. The health egames market represents $6.6 billion of the overall video
gaming industry, a 16% share. Though modest in relative
size, the nontraditional video gaming market segments
(such as casual games, serious games and exergames),
are expected to significantly contribute to the growth of
the overall industry going forward. For example, casual
games are expected to grow at 20% annually in 2008
and beyond, nearly twice the rate of growth of the overall
video game industry. Nintendo, largely due of the success
of the exergaming console Wii, today represents 60% of
the growth of the console market vs. only 20% apiece for
Sony PS3 and Microsoft Xbox.
Revenues for the other health e-game categories, such as
healthy eating, condition management and professional
training, are significantly smaller at present and harder
to quantify for several reasons. Reasons include the lack
of published data among numerous small companies,
evolving business models, unconventional distribution
model, lower consumer demand and the nature of
these games. Most of the games in these categories
are being developed and given away for free through
the support of government agencies (e.g. NIH, CDC,
US Navy), nonprofits (e.g. Kaiser Family Foundation,
Aetna Foundation), or corporations (e.g. Nobel Biocare).
Business models are evolving for these games, but as
yet, there are few data points showing direct revenues for
these games. Three notable exceptions are Nintendo’s
Cooking Mama, Nintendo’s Personal Trainer: Cooking!,
and Ubisoft’s Easyway to Stop Smoking game.
Health e-Games Categories
For consumers, health e-games provide a fun experience
to increase health literacy, manage health conditions,
improve brain function, aid in recovery/rehabilitation,
reduce stress and enhance physical fitness. Researchers
are finding that games can change behaviors, help boost
the cognitive fitness of senior citizens and even help in
providing therapy for wounded veterans.
The health e-games market is comprised of four
consumer categories and one professional, including:
Market Size Snapshot – Health e-Games
The size of the health e-games market is estimated to
be $6.6 billion in worldwide revenues based on trailing
12 month revenues through mid-2008. The 2008
market size estimate of $6.6 billion almost exclusively
reflects revenues of two categories: exergames and brain
fitness games. These products have direct-to-consumer
revenues because people are buying these games at
retail or online for a combination of entertainment and
health benefits (“self-care”).
• Exergames: These are games that require physical activity. They include games that motivate exercise through game-play and virtual -coaching, such as Nintendo’s Wii and Wii Fit for home use. In a gym or
other shared-use facility, companies such as Expresso Fitness provide sophisticated exergaming equipment which integrates virtual reality landscapes and simultaneous multi-player gaming for an engaging and immersive experience. Exergames are by far the largest portion of the health e-games market, comprising
$6.4 billion of the estimated $6.6 billion market.
• Brain Fitness Games: These are games that help exercise and improve various cognitive functions including attention, memory, visual/spatial processing, auditory processes and language, motor coordination and executive functions like planning and problem solving. The brain fitness market, while focused primarily on Boomers and seniors, includes games
that address a wide range of customer types. For
77
example, Dakim and Posit Science sell software into retirement centers, while companies like Fit Brains and Lumos Labs target healthy adults and even young job-seekers in their 20s. SharpBrains, a market research company focused exclusively on the brain fitness segment, published a comprehensive industry report in March 2008 which estimated the brain fitness market in the United States to be $225 million.
• Healthy Eating Games: These are games designed
to improve the knowledge and behaviors regarding nutrition and weight management. Many of these games are targeted at children to help them make smart nutritional choices. These games are typically offered online for free and are sponsored by health care companies, government agencies or consumer product good companies who are trying to promote their products in association with healthy eating.
• Condition Management Games: These are games targeted at a specific health condition such as asthma,
diabetes or cancer. These games provide educational information about the condition and treatment methods to improve adherence to a physician-
recommended treatment plan. Most of these games are being developed by a sponsoring corporation,
non-profit organization(s) or from government grants.
Most of the games are then made available for free to people who have the condition and are seeking to
improve their care.
• Professional Training Games: These are interactive
simulation games designed to be used for education
and training of soldiers, pilots, first-responders, nurses and physicians, among others. For example, a virtual
reality game can be used to train surgeons, allowing
them to practice on virtual body tissue and get the same feedback they would experience in performing a
real operation. In this segment, corporate sponsorships
are starting to appear. For instance, Nobel Biocare, a dental implant company, has provided $65 million
in grant money to the Medical College of Georgia to develop training games and simulations for classrooms and clinics around the world. These games focus on decision-making and risk mitigation.
78
Exergaming: $6.4 Billion Market
The total exergaming segment is estimated to be approximately $6.4 billion based on a bottom-up analysis
performed by Physic Ventures and iConecto. The table below provides a revenue breakdown of the exergaming
market segment by key players.
PRODUCT
(Company)
GLOBAL UNITS
SOLD TO DATE
ANNUALIZED
UNITS SOLD
UNIT PRICE
TOTAL
REVENUES
TRAILING 12
MONTH REVENUE
Dance Dance
Revolution
(Konami)
7.50 million
7 years,
1998-2005
1.07 million
$50.00
$535 million
$53.5 million
Konami press
release19
Wii
(Nintendo)
29.62 million
19 months,
11/06 to 6/08
18.71 million
$300.00
$8,886
million
$5,612 million
Nintendo
public filings
Wii Sports
(Nintendo)
21.56 million
16 months,
11/06 to 3/08
16.17 million
Bundled
with Wii
console
Included
with Wii
Included
with Wii
Nintendo
public filings20
Wii Fit
(Nintendo)
4.60 million
8 months,
12/07 to 7/08
6.91 million
$90.00
$414 million
$622 million
The NPD
Group
Smart Cycle
(Fisher Price)
Not available
Not available
Not available
$110.00
Not available
Not available
N/A
EyeToy
(Sony)
10.5 million
6 years:
2003-2008
1.75 million
$30.00
$315 million
$52.5 million
DarkZero21
Expresso
Fitness
7,870
3 years:
2006-2008
5,250
(FY 2008)
$3,714
$28.3 million
$19.5 million22
Physic Ventures
confidential
TOTAL
PERIOD
$6.36 Billion
SOURCE
79
• Dance, Dance Revolution (DDR) – According to
an online press release from Konami, the company
reported selling 7.5 million units over a seven-year
period 1998-2005, or approximately 1.07 million
units annually. Sales since 2005 are unknown, but
more Konami DDR products are being released each year and it can be assumed that sales of this popular
game are meeting or exceeding the previous growth
rate. Assuming an average per unit price of $50, DDR
generates approximately $53.5 million in annual sales.
This is likely a conservative figure because the current
game version, DDR Hottest Party Game 2, with game
and dance pad for the Wii, currently sells for $70 and is
expected to have strong unit volume. Konami reported
in a March 2007 press release that their annual sales
revenue was approximately $2.3 billion and they
praised the DDR series which grew by more than one
million units in the previous 12 month period.
• Wii: Over the 19-month period November 2006 to
July 2008, Nintendo sold 29.62 million Wii consoles
worldwide according to a company report. Assuming
an average sales price of $300 (which includes the
Wii console and Wii Sports), the Wii has generated total
revenues of $8.9 billion, or approximately $5.6 billion
on an annualized basis. Nintendo is forecasting 25
million units, or about $7.5 billion in sales, for the
forward 12-month period April 2008 to March 2009.
• Wii Fit: The Wii Fit was first released in Japan in
December 2007 and later released in the US in May
2008. According to the NPD Group, a market research
firm which tracks sales of video games, Wii Fit sold 3.6
million units from January through July 2008, and
another 1 million units in Japan in December 2007,
resulting in a global figure of 4.6 million units over 8
months. Assuming an average price of $90, the Wii Fit
represents $622 million in annual revenue on a
trailing 12-month basis. This estimate is believed to
be conservative because only three months of US sales
(May-July) are included in this figure. According to NPD
Group, Wii Fit sold 1.4 million units in the US from May
through July, which annualizes to 5.6 million or $504
million in revenues. The pro forma figure for Wii Fit
sales increases to $993 million when taking into ac
count an annualized figure for US sales. For the
purposes of this health e-games analysis, the more
conservative $622 million is applied.
• Smart Cycle Physical Learning Arcade System:
Fisher-Price’s Smart Cycle for children 3-6 years old is a stationary bike, gaming system and learning center
that encourages children to pedal through activities on the TV screen. The Smart Cycle, released in 2007, was
awarded the “Most Innovative Toy of the Year Award”
at the Toy Industry Association’s Annual T.O.T.Y. Awards
gala in NY City in February 2008. The Smart Cycle
retails for $100 and additional games sell for $20 each.
Actual sales of the Smart Cycle are unknown and
research is underway, but it is likely that this toy
contributes millions to the exergaming market segment.
• EyeToy: Sony’s EyeToy is a digital camera device
designed to be integrated with the Sony PlayStation 2
console. The technology uses computer vision to
process images taken by the camera. This allows
players to interact with games using motion, color
detection and sound through its built-in microphone.
There are a number of Sony games that require the
EyeToy (e.g., EyeToy: Play Sports and Fight), and it can
also be used optionally with games like DDR. According
to a gaming news and reviews website, Dark Zero,
global shipments of the EyeToy family of products
exceeded 7.5 million units since its release in 2003,
translating to an average of 1.75 million units annually.
The retail cost for the EyeToy is $30, resulting in
annual estimated global revenues of approximately
$52.5 million.
• Expresso Fitness: In 2006, Expresso Fitness released
the Spark (or S1U for Spark 1st Generation Upright),
a virtual reality stationary bike delivering an interactive,
engaging and game-like fitness experience. In 2007,
Expresso released the second generation upright bike,
the S2U, and in June 2008 began selling a recumbent
bike, the S2R. Expresso’s cutting-edge exergaming bikes
are extremely popular with consumers (gym members)
and gym owners/operators who purchase the
differentiated equipment to both sell new members
and retain existing customers. Market demand is clearly
visible in the company’s revenue growth from
$1.5 million in 2006 to $7.2 million in 2007 to
$19.5 million in 2008.
Brain Fitness: $225 Million Market
SharpBrains, a market research firm, published an industry report in March 2008 titled The State of the Brain
Fitness Software Market which estimates the size of the
US brain fitness software segment at $225 million in
2007. This represents a 50% CAGR from 2005 when the
market was $100 million by SharpBrain’s estimates.
80
Nintendo’s Brain Age is by far the biggest brain fitness
product as measured by revenue. Nintendo has released
two versions: Brain Age: Train Your Brain in Minutes
a Day and the sequel, Brain Age 2: More Training in
Minutes a Day, both on the Nintendo hand-held DS
console. Nintendo reports that Brain Age and Brain Training combined have sold 13 million units sales in the 34
month period between May 2005 through March 2008.
Assuming a price of $20 per unit, these two brain games
have generated $260 million in revenues for Nintendo.
Several online casual gaming websites have been
recently launched with a focus on brain fitness games.
Examples include Lumos Labs, Happy Neuron and Fit
Brains. Happy Neuron earns revenues by charging consumers subscription fees of $9.95 per month or $99.95
per year, while Lumos Labs provides access to its games
for $6.70 per month or $79.95 annually. Fit Brains offers
games for free on their website and monetizes its users
by selling advertisements. These companies also drive
sales from licensing fees paid by syndication partners,
such as WebMD, Prevention.com and Revolution Health.
Lumos Labs, Happy Neuron and Fit Brains do not report
their revenues, but SharpBrains estimates sales of less
than $1 million for each company.
Healthy Eating (Market Estimate
Not Available)
The majority of the games in this category are available
for free via the Internet. Notable exceptions do exist, with
Nintendo again leading the way. Nintendo’s tremendous
commercial success with games for physical fitness (Wii
Sports, Wii Fit) and games for brain fitness (Brain Age)
appears to be encouraging the pioneering company to
expand into the healthy eating category. Nintendo has
already experienced a successful entry in the healthy eating market, selling 2.6 million copies of Cooking Mama
worldwide through January 2008, which translates into
total revenues of approximately $75 million assuming
an average price of $30. In November 2008, Nintendo
will release another healthy eating game called Personal
Trainer: Cooking! which helps people shop for food,
prepare healthy menus and cook meals with the help of
a virtual guide who reads out instructions during meal
preparation.
Other games that focus on healthy eating and
nutrition include:
• Feed the Monster and Nutrition Explorations by the National Dairy Council
• Food Fury by Playnormous (Archimage)
• The Amazing Food Detective by Kaiser Permanente
• Fatworld by ITVS’s Electric Shadows initiative
• Noteniks Healthy Eating & Exercise by Sound Advice
• Body Mechanics by Big Red Frog
• Hungry Red Planet by Health Media Lab
• Food, Fun and Fitness Internet Program for Girls
by Agricultural Research Center’s Children Nutritional Research Majesco Entertainment
Condition Management (Market Estimate
Not Available)
With few exceptions, condition management games are
not designed or positioned to generate revenue directly
from consumer sales. Instead, the research, development
and distribution of these games are typically underwritten by a sponsor, advertiser or grantor organization from
the private or public sector. Consumer/patients typically
receive condition management games at no cost from
health plans, the government, schools or other
institutions with a vested interest in improving public
health. Examples are shown below by disease type:
•Cancer: Re-Mission by Hope Lab is a game designed
for young cancer patients. According to the HopeLab
website, more than 125,000 free copies of Re-Mission
have been distributed in 80 countries since its release
in April 2006, or nearly 63,000 games per year.
Re-Mission has been distributed free of charge to
CIGNA members. The development and distribution
expenses of Re-mission have been estimated at
$10 million, with funding and other support provided
by Pam and Pierre Omidyar, CIGNA and others.
•Diabetes / Obesity: Most health e-games which focus
on obesity and diabetes have been underwritten by a
nonprofit or government agency, but it is conceivable
that revenues could be generated through in-game
advertising or sponsorship from a company marketing
a healthy food or beverage, a pharmaceutical, medical
device or weight loss service. The following is a
sampling of 21 of the diabetes education games:
- Diabetes Food Pyramid Bingo by SmartPicks
- Build a Healthy Plate, Food Fight, Food Safari,
Crossword and Wizdom by Diabetes.org
- Can you Count to Ten, Checks and Boluses,
Dominoes, Friends for Life, In Balance, Kit Cards,
Monitors, Pair the Pumps, Pic-Tac-Toe, Scrambled
Words, and Two the Same all by GrandmaSandy.com
81
- Diabetes Trivia Game by Food and
Health Communications
- Escape from Diab by Archimage
- Future Focus by Future Focus
- Learning About Diabetes by Tracey Associates
•Smoking Cessation: In November 2008, Ubisoft is
scheduled to release Allan Carr’s Easyway To Stop
Smoking game for the Nintendo DS. The game is an
extension of Allan Carr’s Easyway to Stop Smoking
book which is an international best seller. Over
10 million smokers in 50 countries have already turned
to Allan Carr’s Easyway books, clinics or DVD in order
to stop smoking. With Nintendo DS titles selling for
$28, and 10 million smokers already using Allan Carr’s
programs, this new condition management game could
generate many millions in new sales for Ubisoft.
New Revenue Models for Healthy Eating and
Condition Management
There is growing activity in health e-games for condition
management and healthy eating. Although exact revenue
potential has not been estimated at the time of this
publication, there is increasing interest in these categories
among game developers, funding sources and partners.
As of the time of this report, iConecto identified 66
healthy eating games and 85 condition
management games.
As discussed above, most healthy eating and condition
management games are not generating revenue directly
from consumers. A few exceptions exist, such as Nintendo’s Cooking Mama, and soon to be released titles
including Personal Trainer: Cooking! and Easyway To
Stop Smoking. These games will generate revenues from
direct-to-consumer sales, but the vast majority of health
e-games that focus on healthy eating and condition
management do not have a traditional revenue model.
That said, health e-gaming companies in these categories
are experimenting with various revenue models including sponsorship, in-game advertising, product sales and
subscriptions. These business models with examples are
discussed below.
•Advertising and Sponsorship Revenue: In-game
advertising is being used by many of the largest brand
marketers, including Coke, Pepsi, Nike, Toyota, Time
Warner, Unilever and Adidas, to name a few. Google
purchased AdScape in February 2007 to develop a mar
ketplace and delivery system for advertisements within
games. It is conceivable (and highly likely) that food
and beverage companies would be interested in de
livering brand awareness, special promotions or product
placements within health e-games focused on
nutrition and healthy eating. Other companies are
co-creating entirely new games based on healthy eating
and fitness themes. An example is Kraft’s collaboration
with Konami to launch the Kraft Game Pad based on
the Dance Dance Revolution platform.
•Product Sales: Companies are starting to use health
e-games as a means to increase product sales of
pharmaceuticals, medical devices or other products.
For instance, Guidance Interactive Healthcare
created the Health eGame GlucoBoy, which is a blood
glucose meter that interacts with the Nintendo Game
Boy Advance System. When the product is effectively
used to measure blood glucose levels, it unlocks a
series of fun and interactive games. This strategic
marketing approach taps demand from children
desiring fun video games and their parents desiring
a blood glucose device which increases compliance.
GlucoBoy is sold directly to consumers (i.e. parents).
The game is currently available in Australia for a price
of $125 (Australian dollars) but has not yet received
FDA clearance in the United States.
•Subscription Revenues: The next generation of
web-based health e-games games could incorporate
a subscription service that offers a two-tiered revenue
stream: (i) in-game advertising to users who play free;
and (ii) ad-free and unlimited play to paying sub
scribers. This model has been effectively executed by
companies like Pogo.com (Electronic Arts), which
charges $6 per month or $40 annually to nearly
2 million current subscribers while monetizing
16 million non-subscribing players via advertisements
and sponsorships. Health e-game companies, such as
Fit Brains, Happy Neuron and Lumos Labs, are
experimenting with this two-tiered business model in
the brain fitness category. It is conceivable that an
online gaming portal that focuses on healthy eating
could likewise charge a monthly subscription free. For
example, Playnormous could potentially charge a fee
to parents seeking a child-friendly gaming portal that
offers fun games focused on nutrition and other
health themes.
82
Technology Platforms24
Market Profile Summary
The figure below shows the different technology
platforms for which health e-games are delivered. The
largest segment are games available online and/or downloadable from the Internet. Of the more than 300 games
identified, 53% are available online. The next largest segment (with 10% of the total) includes games that have
special devices, such as exergaming equipment. CD-Rom
and other computer-based games make up a combined
16%, whereas health e-games developed for specific
consoles (e.g., Sony’s Playstation, Microsoft’s Xbox,
and/or Nintendo’s Wii) make up only 7% of the overall
market. Other segments, each representing less than a
10% share, include mobile, television, and board games.
Mobile, while currently one of the smallest segments, is
the platform most likely to experience accelerated growth
as wireless Internet access on these devices becomes
more common, combined with ever-faster
download speeds.
The health e-games market is a large, dynamic and fast
growing segment that shares many features of the overall
casual games and serious games market. It is being
driven by the confluence of social media, health and
wellness, and gaming market drivers. The health e-games
market is estimated to be $6.6 billion and expected to
grow rapidly.
The Wii console and Wii Fit together represent nearly
$6.2 billion in annual sales and are well positioned
for accelerated expansion as evidenced by Nintendo’s
forecast of 25 million units, or about $7.5 billion, for 12month period April 2008 to March 2009. According to
SharpBrains, the brain fitness industry is slated to reach
$2 billion by 2015 (just in the U.S.). The other categories, such as healthy eating, general health and condition
management have shown growing interest by health care
companies, advertisers, product developers, government
agencies and non-profit organizations. There are many
opportunities and business models for game developers,
publishers and distributors to enter this market and make
a difference to the health and wellness of people in the
U.S. and beyond.
The next section examines the health e-game market
from the perspective of an investor.
VI. Investment Opportunities
Health e-games have been used by consumers for over
25 years, yet the financing and investing activity in this
marketplace is still nascent, though poised for growth.
For example, over $50 million in venture capital has been
invested in recent years in the brain fitness segment.
Interested investors – venture capital firms and strategic
corporations alike – can gain insights from examining
current investments and acquisition activity in the health
e-games market as well as in adjacent sectors which are
driven by similar economic and social forces. Hence,
an appreciation of the potential of the health e-games
market from an investor’s perspective requires a broader
analysis of the venture capital investments, strategic
acquisitions, corporate development initiatives and government/nonprofit support in related sectors.
83
As illustrated in the diagram, indicators for the growth of
health e-games are rooted in investments made in casual
gaming, social media, video gaming and mobile gaming.
The health e-games market also benefits from accelerated investments in Health 2.0 and Specialized Health
Management (SHM), which includes corporate wellness and disease management among other services.
SHM companies, in particular, are likely to adopt health
e-games that demonstrate clinical efficacy in improving
health behaviors and lowering costs.
•Dakim secured $11 million in February 2008 from
Galen Partners, a private equity firm specializing in
healthcare investing. Dakim’s [m]Power system, which
are primarily sold to senior living communities,
comprises a touch screen interface, head phones,
built-in camera and facial recognition software to help
maintain brain health and mental acuity.
•Expresso Fitness has raised three rounds of venture
financing totaling $33 million from Enterprise Partners,
Sierra Ventures and Physic Ventures to develop and
market commercial-grade exergaming equipment that
integrates virtual reality gaming and interactive fitness.
Expresso’s upright and recumbent stationary bicycles
incorporate an Internet-connected PC to enable multi player gaming and capture health data (calories, power,
miles, ride times, heart rate, etc.). •HopeLab was founded and funded in part by Pam
Omidyar who is married to eBay founder Pierre
Omidyar. HopeLab is reported to have invested
approximately $10 million to develop, distribute and
support a cancer-management game titled Re-Mission.
More than 125,000 copies of Re-Mission have been
distributed through a partnership with CIGNA. Venture Capital – Health e-Games
Venture investing in health e-game companies has been
modest, but increasing, with a primary focus on the brain
fitness and exergaming categories. In contrast, the healthy
eating and condition management sectors have been
largely funded with grants from government agencies
and nonprofits. For example, Archimage received a $9
million grant from NIH and a separate grant from the
Aetna Foundation to develop healthy eating and condition management games to teach and change behavior
around nutrition and obesity. Key venture investments in
health e-games include:
•Cognifit raised $5 million in July 2008 from
Paris-based Milk Capital to develop cognitive fitness
software and expand its presence in North America.
CogniFit’s solutions apply to many fields and disciplines
including healthcare, driving, education and sports.
The company previously raised $4.2 million to develop
its first-generation product and to sell into markets in
UK, Europe and the Middle East. •Interaction Labs has raised $6.5 million since 2002
from Sachs Capital, Maryland Venture Fund, TEDCO,
friend and family for the development of computer
interface technologies for immersive physical
interactions. To date, the company has generated
revenues of $2 million from resistance-based and
motion-based exergaming equipment sold to consum
ers and the military. •Lumos Labs raised $3 million in June 2008 from
Norwest Venture Partners and FirstMark Capital to
develop web-based brain games aimed at users across
age groups, ranging from job seekers in their 20’s to
Boomers in their 70’s. •Posit Science has raised more than $25 million from
two financings, in March 2003 and July 2005, from
Aberdare Ventures, Draper Fisher Jurvetson and other
funds to develop science-based brain health software
programs that address a range of issues from improving
cognition to ameliorating conditions such as
Alzheimer’s, Parkinson’s, Schizophrenia, obsessive-com
pulsive disorder, chronic pain and focal dystonias. 84
•Vivity Labs launched Fit Brains.com, a brain fitness
online gaming portal and platform with $1 million in
angel financing. Based on its growing member base
and engagement with Vivity’s first generation of casual
brain games, the company is pursuing additional
growth capital.
Venture Capital – Casual Games
Venture capital firms have taken a keen interest in the
casual gaming market over the past few years. Brain fitness and certain healthy eating games are considered to
be casual games, so the robust venture activity in casual
gaming market could be viewed as a possible sign of
future capital deployment in the health e-games market.
Following are some recent venture investments in casual
game companies:
•Alamofire, a casual gaming start-up focused on
lightweight casual social games, secured $2 million in
funding from the Founders Fund. Packrat, the
company’s first game, is one of the most popular
games on Facebook.
•Big Fish Games completed an $83 million round
of venture capital in September 2008 with financ
ing provided by Balderton Capital, General Catalyst
and Salmon River Capital. Having already achieved
profitability and a leadership position in casual gaming,
Big Fish has doubled in size over the past three years,
bringing in $50.8 million in revenue in 2007. •Fluid Entertainment, which is developing a Massively
Multiplayer Online Game (MMO) for children, secured
$3.2 million from Trinity Ventures. Fluid has announced
plans to release a green game that offers children the
tools to use initiative and imagination in an ecologically
themed environment. •Gaia Interactive closed an $11 million Series C
investment in July 2008 from blue-chip funds such as
Benchmark Capital, Institutional Venture Partners and
Redpoint Ventures. Strategic investors Sony and Time
Warner also joined the round which valued the
company at $300 million.
•Gamook, a casual game company, raised $1.5 million
in funding from U.S. Venture Partner.
•Grockit secured $10.7 million in funding to develop a Massively Multiplayer Online Learning Game (MMOLG).
The game will offer learners an environment where
they can meet and work with each other within a live,
collaborative platform. •PlayFirst, a developer and publisher of casual game
titles including the popular Diner Dash series, raised
$16.5 million from Rustic Canyon Partners, Trinity
Ventures and DCM in a December 2007 Series C
round. The company has raised more than $30 million
to date, including early support from the Mayfield Fund. •Raptr raised $12 million in venture capital from
Accel Partners and Founders Fund. •Turbine raised $40 million in venture funding to
expand its position in the general casual gaming market.
Health 2.0 – Active Venture Investment
and M&A Activity
Web 2.0 technologies and solutions – search, wikis,
blogs, video and online communities – are empowering, engaging and educating healthcare consumers and
providers. This movement, known as Health 2.0, can
be defined as “the use of social media software and its
ability to promote collaboration between patients, their
caregivers, medical professionals and other stakeholders
in health.” Health e-games are closely related to Health
2.0 as both sectors provide consumers and professionals
with social, collaborative and interactive tools to empower
healthy behavior.
This close association between Health 2.0 and health
e-games stimulated Matthew Holt and Dr. Indu Subaiya,
co-founders of the Health 2.0 Conference, to include a
“Gaming in Health Care” track in the 3rd annual conference (October 2008). Panel participants include Brian
Button, CEO of Expresso Fitness; Richard Buday, CEO of
Archimage; Paul Puopolo, Director with Humana; Richard
Tate, Marketing Director with HopeLab; and Michael Cole,
CEO of Fit Brains. Douglas Goldstein, co-author of this paper, was selected to moderate the panel. In addition, the
Health 2.0 Conference will be hosting a Gaming4Health
2.0 Interactive Space patterned on a home of the future.
In this area, health e-game organizations will be able to
share and demonstrate their multimedia gaming, social
media and virtual world products and services.
85
Given the close linkage between Health 2.0 and health
e-games, it is instructive to explore recent investment and
acquisition activity in the Health 2.0 space to gain insights
into the future of the health e-games marketplace. Below
is a list of select venture capital investments, followed by
a table of recent strategic acquisitions:
•Carol.com received $12 million in venture funding
from Lemhi Ventures to develop a consumer-friendly
marketplace which enables users to browse,
compare and purchase healthcare services from
healthcare providers.
•ConnectivHealth, which provides digital health
information to physicians, health care professionals,
hospitals and schools, has received more than
$7 million in two rounds of venture capital funding
from Chrysalis Ventures and Petra Capital Partners. •DailyStrength, a social network entirely focused on
health and wellness, received a $4 million Series A
investment in June 2007 from Redpoint Ventures. •DestinationRx, which offers consumer drug
comparison and purchasing technology solutions,
raised $10 million from Lehmi Ventures in May 2006.
•HealthCentral Network, founded in 1999, secured
a $50 million investment in January 2008 from a
blue-chip investment syndicate which includes Sequoia
Capital, Polaris Ventures, Carlyle Group, IAC/Interac
tiveCorp and Allen & Company.
•Healthline Networks, which offers online health
search and content, has received $45 million in
venture investments over three rounds (2000, 2006
and 2007) from Aetna Ventures, JHK Investments, Kaiser Permanente Ventures, Mitsui & Co, Peacock
Equity Fund, Reed Elsevier Ventures, U.S. News &
World Report and VantagePoint Venture Partners.
•Organized Wisdom, which provides online
physician-reviewed search services for health informa
tion, received a $2.3 million investment in June 2008
from ETF Venture Funds and Esther Dyson. •PatientsLikeMe, a healthcare social networking site,
raised $5 million in a Series A round financing with
funding provided by Collaborative Seed & Growth
Partners, CommerceNet, Omidyar Network and the
Invus Group.
•Phreesia, which develops patient check-in solutions,
has secured more than $13 million in two rounds of
financing (December 2006 and September 2007)
from HLM Venture Partners, Long River Ventures, Polaris
Venture Partners and Village Ventures.
•Revolution Health Group has received a reported
$500 million from the personal fortune of Steve Case
to build a consumer-centric online health company.
Having completed the acquisitions of several smaller
companies – CarePages, Extend Health, myDNA Media,
Simo Software, TestMyHealth, TLContact and
Wondir Health – Revolution Health is in merger talks
with Everyday Health to combine two of the three
most-visited online health information networks.
•Sermo, an online physician social network, has raised
more than $40 million in three rounds of venture
capital in 2006 and 2007 from large financial
institutions and media-focused investors, including
Allen & Company, Legg Mason, Longworth Venture
Partners and SoftBank Capital.
•Trusera, formerly named PeerWisdom, raised
$2 million in seed funding from Seattle-based
Benaroya Capital, TerraPass’ Erik Blachford, Ackerly
Partners’ Christopher Ackerley, Amazon.com’s Kim
Rachmeler and Washington Mutual’s Craig Tall.
•Vimo, which operates an online shopping portal of
healthcare products and services, has received
$12 million in two financings (May 2005 and April
2007) from Bessemer Venture Partners and
Trinity Ventures.
•ZocDoc, which provides online services for finding
and booking dentists and doctors, received a
$3 million investment in August 2008 from Khosla
Ventures. This marks the first investment in Health 2.0
from the renowned venture capitalist Vinod Khosla.
86
The following chart lists recent strategic acquisitions of Health 2.0 companies:
DATE
BUYER
TARGET
TRANSACTION
VALUE
TARGET DESCRIPTION
6/07
Meredith
Corporation
Healia
Not disclosed
Consumer health search engine
6/07
ConnectivHealth
Relegent
Not disclosed
Health content and services to
hospitals and schools
4/07
Revolution Health
Group
CarePages
Not disclosed
Private-label social networks for patients and
their families offered from hospitals
4/07
Revolution Health
Group
TLContact
Not disclosed
Tools that help the healthcare community connect
3/07
About.com
UCompareHealthCare
$2.3 million
Healthcare ratings and comparison site
2/07
Microsoft
Medstory
Not disclosed
Healthcare search engine
11/06
WebMD
Subimo
$66 million
Online tools for managing health and selecting
physicians and health insurance
6/06
McKesson
RelayHealth
Corporation
Not disclosed
Healthcare communication services to patients,
providers, pharmacies and payers
1/06
WebMD
eMedicine
$25.5 million
Online medical information for consumers,
professionals
3/05
WebMD
HealthShare
Technology
$36 million
Decision support tools to evaluate hospital
care, quality
1/05
iVillage
Healthology
$16.6 million
Physician-generated video content supplier
1/04
Zix Corp.
MyDocOnline
$9 million
Internet-based healthcare services
87
Specialized Health Management – A Rapid
Growth Adjacent Sector
Health plans, employers and government agencies are
actively developing products, services and strategies
to help consumers/patients/members stay healthier,
thereby containing healthcare costs and improving quality. Activity among third-party payers has, in turn, accelerated investment in specialized health management
products and services, which cover disease and condition
management, wellness, health promotion and productivity support. Key companies in the Specialized Health
Management (SHM) sector include Healthways (HWAY),
Matria/Inverness Medical Innovations (IMA), I-trax/Walgreens (WAG) and HLTH Corporation (HLTH).
The $2.3 billion SHM industry is growing at a rate of 10%
annually, with revenues expected to reach $2.7 billion by
2010 according to Health Industries Research Companies
(HIRC) Health & Disease Management Service Report.
Wellness revenues are expected to grow from $284
million in 2008 to $440 million in 2010, a 55% annual
growth rate. SHM companies have benefited from
investment transactions and mergers, as well as the
growth in consumers’ use of the Internet to find online
health information, condition management and other
health-related products and services.
88
The chart below presents a selection of recent SHM acquisitions:
DATE
BUYER
TARGET
TRANSACTION
VALUE
5/08
Inverness Medical
Matria
$1.2 billion
Disease management (DM) and worksite
wellness, including nurseline, coaching and
online tools
4/08
Walgreens
iTrax/CHD Meridian
$278 million
Onsite clinics and wellness services
4/08
WellPoint
Resolution Health
Not disclosed
Health promotion through predictive modeling of
products and services
12/07
Bupa
Health Dialog
$775 million
DM and wellness services, analytics, health coaching
and risk assessment
10/07
Inverness Medical
Alere Medical
$311 million
DM specializing in home monitoring
3/07
Nationwide Better
Health
WellCorp
Not disclosed
HRA and wellness program provider
3/07
CVS
Caremark
$26.5 billion
Pharmacy benefits management with leading
employers and health plans
12/06
Healthways
Axia Health
Management
$502 million
Preventive health services for employers
and health plans
9/06
CVS
MinuteClinic
$170 million
Retail health clinic
6/06
WebMD
Summex
$30 million
HRA, health coaching and wellness
for employers
5/06
OptumHealth
(Unitedhealth)
Health AtoZ
Not disclosed
Health management programs via an
online consumer health portal
2/06
Axia Health
Management
Harris Health
Trends
Not disclosed
Health advising, onsite health, consulting
and other health services
12/05
Matria
CorSolutions
$445 million
Disease management services
12/05
Health Fitness Corp
HealthCalc
$6.1 million
Health risk assessment tools and wellness
7/05
BCBS of
Tennessee
Gordian
Not disclosed
Wellness, health coaching and HRA to
employers and health plans
6/05
Healthways
MyHealthIQ
Not disclosed
Risk assessment, screening, self-directed
programs and coaching
5/05
Aetna
ActiveHealth
$405 million
Technology-driven health management
and analytics company
4/05
Matria
Miavita
Not disclosed
Self-paced, algorithm-based lifestyle
coaching online
11/02
Caremark
Accordant
$100 million
DM specializing in chronic condition management
2/00
MediMedia
StayWell
Not disclosed
Employer wellness, HRAs, coaching
TARGET DESCRIPTION
89
Consumer Product, Media and
Electronics Companies
Several large and prominent corporations producing
branded consumer goods, media and electronics are
becoming active is sectors which will influence the
growth of health e-games. Nike, Apple, Electronic Arts
and Disney are a few representative examples.
•Nike and Apple have partnered to develop the Nike + iPod Sport Kit System, which combines a
Nike shoe wirelessly connected to an iPod Nano with an
application designed to log, monitor and manage a
user’s running activities. The Nike shoe features a microchip that tracks speed, distance, time and calories burned in real-time, and allows for verbalized feedback throughout a workout. The product merges the iPod’s
convenience and quality-of-life benefit with Nike’s plan
to support a wider spectrum of active experiences.
While the Nike + is not technically a health e-game as
defined herein, the product foreshadows developments
that will blend exergaming with a mobile health
anywhere experience.
•Disney has set up a $300 million fund for gaming and
social network acquisitions. In September 2008, Disney
announced the formation of a fund to acquire video
games and social networks that complement the family friendly Disney and ESPN brands.
•Electronic Arts delivers casual game offerings and virtual worlds that support fun and health. Electronic
Arts is engaged in a multi-front pursuit of new casual
consumer targets such as tweens, families and women.
The company offers Pogo.com online and EA Mobile,
which is available to cell phone users as well as through
Apple’s iPod. Meanwhile, EA Sports has revamped its
Wii games lineup to take advantage of Wii’s motion
sensing technology features. A virtual world called Club
Pogo, which is populated by avatars, games, awards
and micro-transactions, has hosted smoking-cessation
and breast cancer awareness campaigns which have
been very well received by community members.
Health Plans – Driving Adoption and
Development of Health e-Games
Several of the largest health insurance companies in the
United States are experimenting with health e-games to
help improve member health and reduce claims. The
outcomes of these early experiments will help shape the
development of the next generation of health e-games.
Notable examples include:
•Apple has filed exergaming technology and program
patents. In March 2008, AppleInsider reported that
Apple had developed a digital fitness system for use
with the iPhone and iPod Touch. Based on analyses of
patent applications, the system features hardware based heart rate and physiological sensors to monitor
the body during physical activity, as well as an iTunes like software application, a rewards tracker and a
component that facilitates synchronous group activities.
•Humana has launched Humana Games for Health
(HG4H) so consumers can “play their way to better
health.” Humana sponsored the exergaming exhibit
hall at the May 2008 Games for Health Conference.
•Inland Empire Health Plan was the first health
maintenance organization (HMO) to fund a wellness oriented exergaming program through a partnership
with the XRtainment Zone. •CIGNA has supported the promotion and
distribution of HopeLab’s Re-Mission, a sophisticated
video Health eGame and online community for young
cancer patients. Since releasing Re-Mission in April
2006, HopeLab has distributed more than 125,000
free copies of the game in 80 countries.
•In addition to their support for Re-Mission, CIGNA has
launched a variety of health e-games activities including
the creation of the Cigna Virtual Healthcare Community,
a patient education island within Linden Lab’s Second
90
Life, where avatars walk through 3-D interactive
displays, play educational games, listen to seminars on
health and receive virtual consultations.
•The Aetna Foundation funded Archimage to develop
the Health eGame Food Fury as part of the “Games for
Wellness” collaborative led by Dr. Cynthia Phelps of The
University of Texas Health Science Center. This online
healthy eating game targets 3rd-5th graders in order to
teach and change their behavior around food choice
and portion control.
•Kaiser Permanente created The Amazing Food
Detective and other online health e-games, which
have been distributed to more than 5,000 schools,
to teach the importance of balanced nutrition and
health eating habits.
VII. Conclusion
Health e-games are an early-stage, large and rapidlygrowing market that holds promise for informed investors. The financial transactions and growth of the
neighboring sectors deliver a series of positive indicators
for the future of health e-games in terms of investment
and exit potential. Venture investors and corporations
are strongly encouraged to first examine the differences
across the health e-game categories to understand how
social and economic forces will drive unequal rates of
growth and commercial success for exergames vs. brain
games vs. healthy eating games vs. condition management games. This report concludes that exergames
and brain games are ready for venture investment and
corporate involvement, while e-games for healthy eating
and condition management might require more time for
business model development and market adoption.
Key observations from this report are:
•Large, Rapidly-Growing Market: This report
estimates the health e-games market to be $6.6 billion,
which includes trailing 12-month revenues for
exergames and brain games but not healthy eating or
condition management games because estimates are
not available. Health e-games, along with casual games,
will drive growth within non-traditional gaming markets,
fueled in part by the commercial success of Nintendo’s
interactive exergames, such as Wii Sports and Wii Fit
(developed under Nintendo’s “productive entertain
ment” strategy) and the growth of casual gaming
among adults and women in particular. The video
game industry is expected to grow 10.3% from 20072012. The health e-games segment is likely to grow even faster.
•Solutions for Behavior Change: Health e-games
combine fun with benefits. Entertaining design and
features blend with a purpose or a specific health
benefit, such as weight loss, fitness, smoking cessation,
healthy eating, condition management, medication
compliance, stress reduction or brain fitness. Well
designed, consumer accessible health e-games are
powerful tools for practical behavior change.
•Leaders Enter the Market: Major healthcare
enterprises such as Humana, CIGNA, Kaiser Perman
ente, Aetna, NIH, CDC, and the RWJF have invested in
health e-game development, marketing and distribution.
There is growing investment from venture capital firms
and involvement by multinational corporations including
J&J, Nike, Apple, Kraft, Unilever, Google, and WebMD.
•Potential Adoption from the SHM Sector:
Companies in the growing $2.3 billion Specialized
Health Management sector, such as Matria and
Healthways, are in the business of motivating
behavior change to reduce corporate healthcare costs.
These organizations are currently experimenting with
Web 2.0 technologies, such as social networks,
user-generated video and wikis. Health e-games
could be the next area of interest for SHM companies through near-term licensing leading to longer-term
acquisition.
•Measurable Impact: For health e-games to gain
widespread adoption with SHM companies and health
insurers, clinical research will need to demonstrate
significant improvements in health promotion and cost
reduction relative to existing solutions. For this reason,
several dozen research studies are currently underway
with leadership from the RWJF, Cornell University, UC
San Diego School of Medicine, University of Florida,
University of Washington School of Medicine, Baylor
College of Medicine, among others. Physic Ventures
has authored a separate white paper in collabora
tion with Debra Lieberman, Director of RWJF’s Health
Games Research program, which examines the
empirical research demonstrating the efficacy of heath
e-games in empowering healthy lifestyles, prevention
and self-care.
91
VIII. Questions for Further
Consideration
Who Will Deliver and Capture Value?
To date, Nintendo and Konami have been the only
companies in the health e-game market that have been
clear winners, commercially speaking. Will this change?
Where will the value be created and captured in the next
generation of the health e-games market? Do industry
dynamics encourage wealth creation for start-up ventures? If so, which product categories are the most attractive in the near-term? What Will the Major Players Do?
What strategies can we expect from the large video
game companies with regards to health e-games? Will
Electronic Arts, Viacom, Sony, Microsoft and others follow
Nintendo’s lead? If so, will they enter the market with
innovative products (“build”), will they enter through
acquisition (“buy”) or neither? What are the opportunities
and risks to these companies in integrating healthy messages into games which have been traditionally about
pure entertainment? Pogo reports that, after fun, “health
and wellness” is the #1 topic that its members care
about, yet it is unclear whether the Pogo brand can really
extend into health. Can Microsoft bridge their XBox and
Health Vault groups? Do they want to?
How Much of the Solution Do Video Games
Deliver?
Are video games the right approach to addressing youth
obesity and sedentary lifestyles? While games like the Wii
and Dance Dance Revolution are healthier than Grand
Theft Auto and Halo, do these games really approach the
health benefits of actual sports and outdoor recreation?
What is the Right Health Message for Video
Game Delivery?
How should health literacy and support be best delivered
in video games? In what situations should health messages be overt and primary? In what situations should
health messages be stealth? In what situations should
a game not contain any health message, but rather be
used as incentive for healthy behavior such as testing
blood glucose levels or exercising? What can we learn
from past and current games on the market and the
growing evidence and experience base?
How Will Healthy Eating and Condition
Management Games Become Commercially
Viable?
Will these categories continue to rely on grants and
sponsorship, or will companies be able to develop viable
direct-to-consumer business models for monetizing
games that assist with everything from meal preparation
to diabetes management? Is the lack of direct consumer
sales offset by the potential of professional sales to enterprises which have vested financial and social reasons
for people to prevent and better manage disease? Are ingame advertising or sponsorship models plausible? Can
health e-games attain the scale and installed user base
to attract significant advertising and sponsorship dollars?
Does Nintendo’s strategy of “productive entertainment”
deliver guidance to the entire health e-games sector?
How Will SHM Integrate Health e-Games Into
Their Solutions?
How fast is the Specialized Health Management (SHM)
industry likely to adopt health e-gaming into their toolkit
of patient-centered support interventions? How would
SHM companies, such as Matria and Healthways, integrate health e-game capabilities into their corporate wellness and disease management solutions? Build vs. buy? What will health e-games need to demonstrate in terms
of clinical effectiveness and user experience to become
an integral element of wellness and patient care support
interventions by SHM companies, health plans, government and employers?
About the Authors
This market research report was a joint effort between
Physic Ventures and iConecto. Andy Donner, a Director
with Physic Ventures, co-authored the report in
collaboration with Douglas Goldstein and Julia Loughran
of iConecto.
Physic Ventures
Physic Ventures is the first venture capital firm dedicated
to investing in consumer-driven health and living, providing capital and support to entrepreneurs focused on
building exceptional science-based, consumer-directed
health and sustainable living companies. The firm’s strategy is to capitalize on major economic, social and political
trends shaping the landscape of personal and planetary
health, including the rapid migration toward a consumerdriven, prevention-oriented “self-care” paradigm.
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Andy Donner is a Director with Physic Ventures and
leads the firm’s investment practice in “innovation
channels” which include health e-games, Health 2.0,
technology-enabled health services, corporate wellness,
health monitoring and retail. Prior to joining Physic, Andy
was a Senior Associate with Great Spirit Ventures, where
he focused on consumer healthcare investments. Before
Great Spirit Ventures, Andy held various operating roles
in high-tech companies, serving as Co-Founder and Chief
Operating Officer with atMadison.com, Director of the
Product Marketing at Entopia and head of new business
opportunities for LeapFrog Enterprises in the healthcare
industry. Andy’s career in financial services began as a
member of Wasserstein Perella’s Technology M&A Group.
Andy graduated with honors from Duke University’s
pre-med program and earned his MBA at UC Berkeley.
iConecto
iConecto is a leading multimedia gaming technology,
digital media and market research firm focused on
health. The Health e-Games Market Report is the kick-off
product of the company’s I4 – Information, Intelligence,
Insights and Innovations – subscription service focused
on health e-games, social media and virtual worlds, and
their impact on people, professionals and enterprises
involved in the health and medical industries. The
company also sponsors Gaming4Health.com, which
delivers daily health e-games news and a social networking portal for consumers and professionals to share their
experiences in using all forms of health e-games to help
improve personal health and professional performance. Douglas Goldstein is an “eFuturist” who delivers
perspective and recommendations on how emerging
and electronic technology and entertainment are revolutionizing our lives and organizations. He is the author
of 10 widely regarded books on health and technology.
Prior to the “Health e-Games Market Report – How Video
Games, Social Media and Virtual Worlds will Revolutionize Health,” his most recent books were “eHealthcare
– Harness the Power of e-Commerce and e-Care” and
“Medical Informatics 20/20 – Quality and Electronic
Health Records through Collaboration, Open Solutions
and Innovation.” As a sought after keynote speaker, he
catalyzes insights and motivates his audiences to use
Distinctive Innovation™, digital media and their
ingenuity to create a better future. He has served as
CEO and senior executive of organizations that deliver
innovative products and services that address emerging
market opportunities in the wellness, health and
entertainment fields.
Julia Loughran is a foremost serious and casual
games expert who has developed gaming strategy and
solutions for the U.S. Department of Defense,
Department of Homeland Security, the Defense Research
Projects Agency (DARPA), Non-Governmental
Organizations and other government and commercial
organizations worldwide. She is a co-author of the book
“Virtual Teams: Contemporary Insights” and is a frequent
speaker at industry events. Numerous publications
feature interviews with Ms. Loughran for her technology
expertise and insights, including Entrepreneur Magazine, The Washington Post, Washington Technology and
Government Computer News. She is currently on the
management team of iConecto and the owner and CEO
of ThoughtLink, Inc.
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References
1 Casual Games Association, Casual Games Market Report 2007, page 30.
2 http://www.businessandgames.com/blog/2008/04/reconciling_serious_games_mark.html
3 Nintendo presentation to Physic Ventures on September 18, 2008.
4 Nintendo public filing, Consolidated Sales Transition by Region, July 30,
2008.http://www.nintendo.co.jp/ir/library/historical_data/pdf/consolidated_sales_e0806.pdf
5 NPD Group January-July 2008 analysis http://www.npd.com/press/releases/press_080821.html +
December 2007 sales in Japan http://www.gamesindustry.biz/articles/wii-fit-sells-1m-in-japan
6 Casual Games Association, Casual Games Market Report 2007, page 30.
7 Nintendo public filing, Financial Results Briefing for the Fiscal Year Ended March 2008:
Supplementary Information. http://www.nintendo.co.jp/ir/pdf/2008/080425e.pdf#page=6
8 iConecto analysis.
9 Pogo Presentation to Physic Ventures on September 18, 2008.
10 New York Times, P.E. Classes Turn to Video Game That Works Legs, April 30, 2007.
11 http://pediatrics.aappublications.org/cgi/content/full/122/2/e305
12 iConecto analysis.
13 Sourced from numerous sources including: Gaming4Health.com GameBase and other primary research
and secondary sources such as From Atari Joyboard to Wii Fit: 25 years of “exergaming by Joel Johnson,
May 15, 2008, http://gadgets.boingboing.net/2008/05/15/from-atari-joyboard.html, various Wikipedia
entries and other video gaming Web sites.
14 http://www.majescoentertainment.com/news/display_news.php?id=289
15 http://www.hopelab.org/innovative-solutions/re-mission%E2%84%A2/
16 Centers for Medicare and Medicaid Service, National Health Expenditure Data: NHE Fact Sheet,
February 26, 2008.
17 PlayFirst presentation to Physic Ventures on September 18, 2008, referencing data from ESA and DFC.
18 Nintendo presentation to Physic Ventures on September 18, 2008, referencing data from the NPD Group.
19 http://www.gamershell.com/companies/konami/229495.html (from Konami press release).
20 Nintendo public filing, Financial Results Briefing for the Fiscal Year Ended March 2008:
Supplementary Information, April 25, 2008, http://www.nintendo.co.jp/ir/pdf/2008/080425e.pdf#page=6
21 http://darkzero.co.uk/game-news/sony-to-have-11-motion-tracking-sword-game-by-xmas/
22 Actual January-September, estimated October-December 2008.
23 Nintendo public filing, Financial Results Briefing for the Fiscal Year Ended March 2008:
Supplementary Information. http://www.nintendo.co.jp/ir/pdf/2008/080425e.pdf#page=6
24 iConecto analysis
25 California Health Foundation, The Wisdom of the Crowds: Health Media Meets Online Social Media,
April 2008.
26 Pogo’s Vice President of Marketing during a September 18, 2008 meeting with Physic Ventures.
27 Pogo Presentation to Physic Ventures on September 18, 2008.
© 2008 Physic Ventures, LLC. All Rights Reserved.