GameON Finance 2009 conference: New threats and opportunities for games developers

An increasingly diverse customer base, new distribution options, and changing technologies present video game developers with novel opportunities, according to participants at a Toronto conference this week on the interactive entertainment industry. But speakers at GameON Finance 2009 also outlined a host of unprecedented challenges for Canadian game makers. On Tuesday, Jason Della Rocca, senior consultant at Montreal-based gaming industry advisory firm Perimeter Partners, explained that the sector is witnessing three important changes. First, all sorts of people are playing games these days. Nintendo’s Wii console, social networking games on Facebook, and Apple’s iPhone have helped expand the customer base well beyond the 18-to-34-year-old-male demographic. Second, new distribution models such as Valve’s Steam and Apple’s App Store allow developers to disseminate games without turning to picky publishers – companies that could essentially make or break games by choosing which ones to put out, and which ones to ignore. Third, technology has advanced to such a degree that it’s easier – and less expensive – for developers to create games. It’s also easier to track the popularity of games – how many people are playing, how long they’re playing, which aspects of the game prove compelling, which parts aren’t so hot – making for a stronger business case, particularly for developers targeting advertisers, Della Rocca said. That three-pronged change – customers, distribution and technology – adds up to “a shift in risk,” he said. In the past, developers and their backers would pony up piles of money to create the game, launching it only after it had been tried, tested and verified, praying that the big bucks invested result in an even bigger return. Now, developers can release games in something like a perpetual-beta mode, learning which aspects hit home for customers and transforming that info into new features, new levels, and other elements designed to keep the players interested. Developers start making money earlier in the cycle – “unless it sucks,” Della Rocca said. Micro payments for new features can generate a steady revenue stream. As their games gain traction, developers can create more features, more levels, et cetera to fund future revenue boosts. “You never quite get out of beta... but it’s a real shift in the way things are starting to occur.” But it also spells a real shift in the challenges that developers face. Greg Short, chairman of Electronic Entertainment Design and Research (EEDAR) – a Carlsbad, CA, video game research company – noted that developers are experimenting with different business models to learn which ones make the most sense in the new paradigm. Each model has its pros and cons, Short said. For instance, developers that eschew publishers may well have an easier time bringing their games to market – but they face a more difficult task marketing their wares, because that’s the sort of support that publishers offer. Looking to make your game stand out in the App Store? Good luck. You’re competing against 20,000 others for the consumer’s attention. According to EEDAR’s research, game platforms are changing as well. Sony’s PS3 console is less expensive now than it used to be, so developers are starting to build more games for that system. Nintendo’s expected to begin investing in new content for the Wii. Microsoft’s Xbox 360 is on a role, steadily growing its games options year over year. It’s difficult to pinpoint the best model. Casual games seem to be popular, but “very few people are actually making money,” Short said. Developers are at odds over which model makes the most sense, judging from the words of development company representatives during a GameON panel yesterday. Hong-Yee Wong from IUGO Mobile Entertainment in Vancouver said the “freemium” model’s main drawback is that players don’t necessarily trust that they’re getting the complete gaming experience – or that the advanced version they have to pay for will be any better – so they sometimes stay away. But Robert Ferrari from Boston-based Sanrio Digital said free games can work well, especially when combined with other business models such as ad-based systems, and “virtual goods” platforms, where users make “micro payments” for pieces in the game (swords, maps, etc.). Wade Tinney from New York City’s Large Animals Games said the micro-payment model has done well for his firm – so much so that he called for an end to the “micro” prefix. “We have a bowling ball on our bowling game that’s $100,” he said. “And people are buying.” None of the panellists completely discounted the alternative business models, however, suggesting that no one is quite sure that his company’s chosen revenue system is the right one for the long term. After all, “the companies dominating the social games space are not the big publishers,” Tinney said, pointing out that because of the industry’s current upheaval, success could be anyone’s game.

GameON Finance 2009 conference: New threats and opportunities for games developers

Broadcast | October 28, 2009

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