CBC, other media find new revenue streams with video games

Online videogames are creating new revenue opportunities for CBC and other media organizations looking to retain and grow audience share, say gaming executives. Top gaming companies also shared their secrets for making money with free online games at the inaugural GameON Finance summit held January 17-18 in Toronto - Canada's only event dedicated to financing video games. Hosted by Interactive Ontario, the summit also explored the high-growth opportunities in new types of gaming. Asi Burak, co-founder of Pittsburgh-based ImpactGames, said the "serious gaming" genre presents a profitable alternative to mainstream gaming. In partnership with Carnegie Mellon University, ImpactGames developed Peacemaker, a game simulating the Israeli-Palestinian conflict that allows players to assume roles to test different resolution strategies. "It's like CNN meets fantasy world," said Burak, adding that about 100,000 copies have been distributed in Israel and the West Bank.Peacemaker is being introduced to a larger audience outside the mainstream gaming community through partnerships with mainstream media companies, he said. The game uses real images from sources such as Reuters, which presents branding opportunities for big media companies.ImpactGames also has revenue-sharing arrangements with the New York Times, the CBC and other news agencies. Burak said teaming up with media companies, which are also trying to reach and retain eyeballs, has been instrumental in gaining audience. "We have the same struggle," he said. "We were able to prove to the New York Times that they got seven to nine extra clicks if the Peacemaker game was offered on their site." Partnerships and affiliations with this type of existing base are critical, he said. "Gaming companies need to offer a layer on top of something," he said, citing the success of the Zynga Game Network, which develops games for social media platforms such as Facebook. In Peacemaker's instance, syndication by traditional media companies is creating a viable business model for ImpactGames. How free online games can make moneyGroove Media, a Toronto-based company, is exploring another approach, combining video games, skill gaming and e-commerce, said CEO Jon Walsh. The company publishes about 20 free online games that allow players to compete against each other for cash in genres such as first person shooter, racing, sports and fighting. Players can also purchase virtual add-ons such as apparel and equipment to enhance the experience or increase their chances of winning. With this combination, Groove Media's UTour Golf game, for example, has 35,000 registered players, 1,600 cash players and generates about five million game ad impressions. "This business is one giant math equation," said Walsh, pointing out the company has four types of revenue streams. There are cash facilitation fees to set up competing players; micro-transaction fees for virtual add-ons; advertising outside the game in the form of banner ads, tournament sponsorships and contests; and advertising inside the game that allows big brands to buy product placements and other types of ads for their cars, sports apparel and the like.The internal ads are a strong selling point, as they generate large numbers of eyeball impressions, said Walsh. And there's a lot of demand from major companies such as MacDonald's, Lenovo and Mazda for suitable online advertising vehicles that reach their target customer demographic. "But you need a minimum threshold of one million impressions to get advertisers interested," he warned. To facilitate in-game advertising, Groove Media built its own ad-generating engine which gives the company greater flexibility to respond to advertisers' needs while also retaining control of the content. He said there are also significant revenue opportunities in micro-transactions for virtual add-ons in games, citing the example of Kart-Rider, a multi-player game from Nexon Corp. Developed as a free online offering to circumvent Asian piracy, the game is wildly successful in Korea, where about a quarter of the population has downloaded it. Walsh points out the company makes its money in virtual add-ons to the basic free offering. "The car sucks unless you pay money for the add-ons needed to win," he explains. Faster cars, rockets that can be fired at other racers and other items that sell for $.50-$2.00 apiece can add up fast.

CBC, other media find new revenue streams with video games

Broadcast | January 22, 2008

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