Casual Hamburger

Last month I visited the 2009 edition of Casual Connect in Hamburg, Germany. With our casual games report almost finished, I flew to Hamburg to meet the movers and shakers in Europe. The industry’s state of affairs amidst an economic downturn persuaded a wide selection of companies to make an act-de-presence and network with existing and new clients. So here’s what’s up.

 

Serious Retailing
One keyword defining this year’s conference was retail. John Barbour, the newly minted head of Real Arcade, delivered the opening key note. With only “fourteen weeks of experience the casual game’s space,” Barbour admitted, he leaned heavily on his experience with Toys”R”Us to guide Real. His appointment is an indication of the industry’s maturing. To better capture and maintain a loyal customer base, a solid retail plan is essential. Working out the kinks on the back-end and making products and services more accessible to customers are two obvious cost-saving initiatives that will serve companies well. Also present was MMOLife, an aggregator of free-to-play MMOs, which recently received €1 million in funding. Its CEO Simon Usiskin earned his stripes by increasing the conversion rates for hotel websites. And Amazon, present in the form of recently acquired Reflexive, is hoping to convert a few of its 88 million annual customers into casual gamers. Quick math indicates that Amazon is looking at about $20 million of additional revenue from casual games. Its expertise as an online retailer will no doubt serve it well.

Price Point
Perhaps the most significant issue that surfaced at the conference was the expected drop in the average price point of casual games. If Amazon’s entry into the market wasn’t competition enough, the retailer also put its price point substantially lower, eyeballing the sweet spot between $7 and $10 for a game. Currently, Amazon sells games at $9.99 across the board. Many fear a decline in sales revenue at the same as advertising revenue is taking a dive. But, in fairness, a price drop has been a matter of when, rather than if, advertising’s common metric “Cost Per Thousand” (CPM) currently stands at about $0.02, down from $0.15 a few months ago. In response the larger fish in the pond now offer customer loyalty programs in the form of $5.99 monthly subscriptions. 

Casual Games, No Fun?
A remarkable panel was “Publisher Showdown 2009,” in which RealGames, Oberon, Reflexive, Intenium and iWin offered insight into their relation with small designers and developers. When asked what freshmen game developers should expect, answers varied but were mostly bleak. Work hours are endless, creative autonomy a naive dream, and you’ll be “punished” whenever you fail to make a milestone. In an industry suffering from commoditizing content (e.g. clones), one would expect a little more encouragement for those undiscovered geniuses who are need to come up with the next generation of premium content. But no such luck. The overall imperious attitude with regards to price point and quality of content left little love in the room for aspiring game designers. 

iPhone, youPhone, everyonePhone?
Clearly the current focus is squarely on making money. Beyond squeezing the margins out of consumption and production, many are looking to expand the current audience base by developing for new platforms. In particular the iPhone was hailed as a worthwhile solution. During a panel discussion on Apple’s successful handset, both panelists and audience members expressed their excitement, calling the device “a beacon of light.” The phone’s user-friendly interface drive growth as games yield 20 to 25% more sales when placed on a desktop, instead of hidden in a collapsed menu, according to Oberon. Nonetheless, large publishers seem to insist on an unfathomably high price point of $19.99 for an iPhone game. Claiming it to offer a similar experience to Sony’s PSP and Nintendo’s DS, the current generation of executives are hopeful the iPhone can bring in much needed additional sales. 

In this imperfect storm of declining revenues, increased competition and incessantly migrating audiences, there remains plenty of opportunity. A newcomer like Kongregate, a online publisher of user-created content, offers a substantially higher CPM of $2 and is moving toward virtual item sales. “Building a community,” Chris Pasley told me, “is an essential part of the business model.” A variety of other companies echoed this sentiment and reiterated the importance of engaging customers within a social setting to better facilitate monetization. As a result, many are looking to capitalize on the current success of games based on social networking platforms. With low development costs and a desirable audience segment, even the industry’s modest conversion rate of 1% to 3% from free-play to a paying customer might prove profitable in the context of giants like Facebook. Perhaps the next Casual Connect, which will be held in Seattle on July 21 to 23, 2009, will further elaborate.


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About Waffler

Joost is fascinated by games and human behavior. His research explores video games as an entryway to contemporary media culture. After completing a Master's degree in Media studies in Amsterdam, he continued his research in New York. There he was project manager on a landmark investigation of three decades of ownership trends in the American media landscape, the results of which were part of a congressional testimony, a series of articles and a book. In 2010 he received his doctorate from Columbia University for his dissertation titled "Social Gaming and Communicative Exchange." Joost currently teaches at the NYU Game Center.

In addition to his academic pursuits, Joost is also founder and CEO of an online games research firm called SuperData. In early 2010 the company secured multi-year seed funding, and today employs five people. Clients include publishers such as Electronic Arts, SEGA, Wargaming.net and Pokémon as well as all the major Wall street firms.

Joost lives in the East Village with his wife Janelle and son Maximus.

Selected Presentations
  • Video Game Data & Trends, Ottawa International Game Conference, Canada, 2013.
  • Business Principles and Market Trends for Multi-Platform Games, Festival of Games, Amsterdam 2013.
  • 2013 Game Changers: How Will Devices Impact Your Future Growth? (keynote), Game Developer Conference, 2013.
  • Free-to-Play State of the Industry, Game Connection Paris, 2012.
  • Online Games Research: Getting Publishers to Play Nice, New Media, New Demand Measurement Methodologies, 2012 Columbia University.
  • The Great Unboxing: Major Trends in the Transition to Digital and Free-to-Play Gaming, DCM East, 2012.
  • The Rise of Free-to-Play, moderator and co-organizer, Re:Play - The Theory, Practice, and Business of Video Games, 2012, NYU.
  • Trading Card Games: Delivering the Digital Promise, PAX East, 2012.
  • From Asteroids to Zynga: Three Decades of Game Design and Revenue Models, GDC Online, 2011.
  • Video Game Industry, 2010 Fordham University, 2010.
  • Social Media and TV, LATVfest, 2010 Los Angeles.
  • Top 5 Trends in Gaming, NY Games Conference, New York, 2009.
  • Kids, Tweens & Teens, State of Play IV, New York Law School, New York, 2009.
  • Game Theory, Play Money, Columbia Business School, New York, 2008. (event organizer)
  • Media Economics: The Question of Ownership, Hunter College, New York, 2008.
  • On Game Mod Communities, 106th Annual Meeting of American Anthropological Association, Washington, DC, 2007.
  • Game Mods & Post-Industrial Play, CITI Visiting Scholar’s Brown Bag Lunch Seminar Series, Columbia Business School, New York, October 2007.
  • The Video Game Vocabulary and the Production of Meaning, MiT5: Creativity, Ownership and Collaboration in the Digital Age, Massachusetts Institute of Technology, Cambridge, April 2007. (abstract)
  • Cities, Games and Media: Playing with and in the Urban Setting, Time|Space Dynamics in Urban Settings, Technishen Universität, Berlin, May 2007.
  • The Aesthetic Vocabulary of Video Games, Seventh Annual Convention of the Media Ecology Association, Boston College, Chestnut Hill, November 2006.
  • Haussmann’s Media Environment (revised), Sixth Annual Convention of the Media Ecology Association, Fordham University, New York, May 2005.
  • Media Technology & Society: Video Game Theory, Dissertation outline, Columbia University, New York, April 2005.
  • Good Day New York, Fox Television, aired August 20th, debate with Attorney Sanford Rubenstein on videogame violence, August 2004.
Contact: joost at waffler dot org

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