E3 Workshop: Casual Game Giants Discuss Revenue, Future

"The myth used to be like, spend two months and $10,000 and make millions. And I think four years ago this was the case," said James Gwertzman, director of business development at PopCap. "But it's definitely changed today, it's out of control." Gwertzman says that the casual game market is much more competitive than it used to be. "The average PopCap budget today is between $200,000 and $300,000. There's so much competition now that I think the only way to really establish yourself anymore is to spend above the clouds," he said. The workshop, titled "Casual games update: How new business models are accelerating the growth of today's game marketplace," brought together representatives from all aspects of the casual games spectrum, including self-publishing developers, high profile subscription-model publishers, advergaming creators, and even viral marketers, to discuss, mainly, the pros and cons of a subscription-based "buffet" model for casual gameplay, as well as a number of methods for obtaining advertising revenue. "The look, the brand, the critical reviews…they don't really matter, because your consumers are going to try the game before they buy them. So in a way, we really have to be the most honest developers," said Alex St. John, CEO of WildTangent. The simple, instant access to playable demonstrations is inherently necessary to the success of casual games, which necessitates both a small download size and a certain amount of free play time, typically 60 minutes in the currently predominant business model. According to Fuel Industries' Mike Burns, a casual publisher is "not necessarily trying to get [customers] to buy the game" during their session on a portal. "You're trying to get them to play your games and establish brand loyalty," he said. This is, of course, dependent on quick access to game content, which requires a small download. "We keep a graph around to show how the sales fall with larger download sizes," said St. John. "It keeps the developers in line." Advertising revenue is an undeniably huge segment of casual game earnings, and the panel was asked to discuss how to increase ad revenue. "We're looking at kid loyalty programs, like say opening a bottle of Pepsi and putting in a unique code," said Burns, as an example of one way to integrate a brand relationship. "We're not only helping a client with sales, they're using our games to establish their online presence." According to St. John, by nature of games being interactive, the closer that an advertisement comes to being an integrated part of a game, the more advertisers pay. A simple in-game billboard advertising a product or brand, such as those used in popular non-casual games by the recently-Microsoft-acquired Massive, Inc., does well to establish a brand, but is not effective in-game advertising, he said. "So the advertisers want to know how to go beyond that. They could, say, sponsor an online tournament, or give away custom branded levels," said St. John. Another model WildTangent is using involves sponsored tips and hints in-game. "In every third or fifth level on our Penguins game coming out, we have hints and tips sponsored by Nissan, for example. It gets the brand integrated into the game." Additionally, he says, a casual game publisher looking for advertisers needs to know their audience on a nigh-intimate level. "With any given game we put out there, we get an age and gender breakdown and gameplay statistics," said St. John. "So when we go to an advertiser we have the data there already." One problem with integrated advertising, says Atom Entertainment's Dave Williams, is that advertisers are by their nature "conservative, despite the fact that they're always looking to do the most cutting edge, cool things to impress their clients. They're reluctant to spend money underwriting someone else's big idea," he says. Additionally, Williams is a firm believer in the need to establish brands through casual games, which makes pitching an advertising scheme to clients a lot easier. "Advertisers like branded content, like the Super Bowl," he said. "They want to be adjacent to something their audience thinks is cool, and that's one thing the casual business hasn't been able to do, to develop really strong content that has good marketing legs behind it. I'm hoping people will take bigger chances and invest in building brands, and I think that will become a virtuous cycle that advertisers want to be a part of." Subscription services are "universally reviled" by developers, said St. John, because they don't see as much revenue. He gave the analogy of paying a monthly all-access pass to movie theaters. "George Lucas won't be making movies, because it's not making him any money!" he said. "From an industry standpoint, it's pretty clear from my perspective which is a better model," said Williams, who quoted research by Atom Entertainment that indicates a typical casual customer spending $30 a year for individual games, as opposed to a $10 a month subscription model, which nets $120 annually. "I think casual games may end up working the same way as television, because I think a lot of people would come in and play more casual games and experiment if they were paying a subscription and there wasn't an incremental cost every time they wanted to try something new." "Once you're paying for ShockWave, you're not going to download games elsewhere. So I think that's one reason why PopCap doesn't support a lot of industry models," said Gwertzman. "So I think we're giving ourselves a few months to maximize the pay model first." For now, there is a discrepancy between subscription publishers and casual game developers. Gwertzman's one requested improvement for a subscription model is a higher revenue share for developers. James Smith, however, is more than happy with the subscription revenue that Reflexive has earned. Williams continues to argue that developers need to give subscription models a chance. One important aspect that all of the panelists agree on is the necessity for brand establishment. Whether it creates demand for advertisers or for increased revenue from consumers, whether in an a la carte or an all you can eat model, it is clear that creating a brand should be the top priority for a casual developer at this stage of the game.