Game Monetization Report for 2012 - Design1online.com,...

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Game Monetization Report for 2012 With executive insights from: Paul Thelen, CEO BIG FISH David Reid, CMO CCP GAMES Carig Relyea, SVP Global Marketing WALT DISNEY INTERACTIVE MEDIA GROUP Michael Pachter, MD Equity Research WEDBUSH By John Gaudiosi © FC Business Intelligence ® 2011

Transcript of Game Monetization Report for 2012 - Design1online.com,...

Page 1: Game Monetization Report for 2012 - Design1online.com, LLCdesign1online.com/downloads/whitepapers/Game-Monetization-Report-2012.pdfGame Monetization USA Conference & Exhibition, San

Game Monetization Report for 2012With executive insights from:

Paul Thelen, CEO BIG FISH

David Reid, CMO CCP GAMES

Carig Relyea, SVP Global Marketing WALT DISNEY INTERACTIVE MEDIA GROUP

Michael Pachter, MD Equity Research WEDBUSHBy John Gaudiosi

© FC Business Intelligence ® 2011

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Game Monetization Report for 2012

Game Monetization USA Conference & Exhibition, San Francisco, December 5-6

Multi-Platform MonetizationStrategies to MaximizeAcquisition, Retention and RPU

Publishers, developers, billingengines and analytics platformscome together at the onlyindustry summit lookingexclusively at how to monetizethe digital gaming revolution

Over the past few years the game industryhas seen unprecedented growth, in largepart due to expanding business modelsthat have opened up new opportunitiesin social, mobile and subscription-basedgaming. Whether buying a traditional gamedisc or exploring a free-to-play game world,the industry has shifted more to digitalbusiness.

As the way in which games are deliveredand consumed is revolutionized, the shiftin the way games are monetized has shakenthe industry to its core. While traditionalpremium game experiences aren’t goingaway, today’s game publishers, large andsmall, need to explore multiple distributionavenues to connect with the expanding, andmore mainstream, audience that is spendingmore time, and money, playing games.

With millions of new players to be monetized,creating a solid strategy that engages andconverts the smaller payers, while still hookingin the whales, is essential. Four industryexperts from leading �rms Disney InteractiveMedia Group, CCP Games, Big Fish Games andWedbush Securities o�er their insights into thepresent and future of the evolving gamesindustry in this report. All four of these industryexecutives will be speaking at GameMonetization USA, which takes place December5-6 at Hotel Kabuki in San Francisco.

www.videogamesintelligence.com/monetization

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Cloud Gaming Prospects for 2012

Paul Thelen, CEO, Big Fish

Paul Thelen is the CEO of Big Fish Games, one of the world’s largestportals for downloadable games, distributing 1.5 million games per day.

One of the key challenges in online gaming is player acquisition.In recent years, as traditional players have concentrated on the coremarket, we have seen many new players rise. What lessons havebeen learnt that will allow traditional players and new entrants toget noticed in the online space?

If we go back a ways, retail console gaming used to be for everyone. Youngmen were the most active buyers and then retail fell victim to limited shelfspace. Females and older players were alienated and even the games comingout on the Internet addressing those demographics were hard to discover. Asa result, a whole generation past and games failed to gain traction. But theviral nature of social games has changed that. Social games have re-introducedfemales and over-30 gamers to gaming again. For the �rst time in a generation,those demographics thought of digital devices as their gaming platform. Thechallenge now is how do you approach this audience of 200 million new gamers.You need to put products in front of them with ease of entry and understanding,but o�er them more than the grind of social games. They need somethingdi�erent that will allow them to explore new types of content. We’re doing thatwith Big Fish Unlimited, which eliminates the friction of downloading andinstalling large games. In a few seconds, you can jump into the game just likethe point-and-click experience many gamers are used to online. Even on theconsoles today, the days of the 60-page user manuals are over. You need tocreate games that explain themselves.

Free-to-play, subscription and premium are just three of the businessmodels being used in the online space today. Why is there so muchhype around free-to-play at the moment, and does this meansubscription and premium will simply die out?

A games business model needs to match the game mechanic and the gameneeds to be designed for that business model. Free-to-play is new to us, but it’sbeen dominant in China and Korea for a long time. That’s because premiumgames and rampant piracy don’t work over there, so free-to-play was developedto get around that. Free-to-play is the fastest growing segment in gaming today,but it’s not growing at the expense of subscription or premium models. Oursubscriptions grow year over year. World of Warcraft still succeeds as asubscription business. Free-to-play is a new type of game business model thatattracts intrinsically motivated players with status building. It’s a largelyincremental base of gamers that are coming o� social games and now playingsingle-player free-to-play experiences.

Game Monetization USA Conference & Exhibition, San Francisco, December 5-6

Multi-Platform MonetizationStrategies to MaximizeAcquisition, Retention and RPU

Publishers, developers, billingengines and analytics platformscome together at the onlyindustry summit lookingexclusively at how to monetizethe digital gaming revolution

www.videogamesintelligence.com/monetization

Page 4: Game Monetization Report for 2012 - Design1online.com, LLCdesign1online.com/downloads/whitepapers/Game-Monetization-Report-2012.pdfGame Monetization USA Conference & Exhibition, San

Cloud Gaming Prospects for 2012

What are the key platforms developers and publishers should becreating for?

Analytics and successful games have been tied at the hip for some time. Therecan only be so many non-replayable genres like physics-based arcade games.You can only have so many Angry Birds. When everyone is competing based onprice alone that becomes a tough market. You can overcome that in free-to-playby eliminating the apples to apples comparison because there’s no way tocompare the cost of additional dragon food to the value of extra guns in a gameworld. We’re doing this at Big Fish with games as a service. We o�er over 100games for a single �xed price per month, which is hard to compare to with$0.99 per game. The key is to be the best in your niche. Rovio can price itsproduct high with Angry Birds because it owns that category. We have a strongposition in light adventure and hidden object games and we’ve been able tomaintain our price integrity within those genres genre. The three keys tosuccess are free-to-play, games as a service and having unique titles.

If you’re thriving or surviving on a few branded hit IPs, it make sense to portthose to multiple platforms. As a publisher you have to focus on high velocityplatforms �rst, and then get a hit and bring it over to other platforms. Wehave 1,000 titles heading to Big Fish Unlimited from our catalog of 2,500games. That’s a big commitment with a 60-plus person team that overseethe complicated process of bringing our games to other platforms. We’reusing the PC version of Big Fish Unlimited and porting the thin client to 10platforms including connected PCs and consoles. Native apps make sensefor PC/Mac and iOS and we do on average three new titles a week. Thisspring we started doing Android because the penetration has hit a criticalmass where it makes sense.

The biggest platform in the world today is still the PC with over 2 billion activeusers. Mobile is more than 50 percent of browsing tra�c now. Smartphonesare a must have with Android and iOS, while iPad is a dominant player for thelarger screen today with emerging Android tablets like the Amazon KindleFire, Nexus 7 and new Samsung Galaxy tablets. Windows 8, depending onhow easy it is to go from PC to platform, could be interesting, as well.

With such low price points and such high levels of competition, it canbe tough to keep players engaged and playing your digital titles. Howimportant is the use of analytics in keeping players engaged and spending money?

Cross-platform has been a buzz word for a while now, how importantis it to provide a good cross-platform experience for your players, andwhat challenges are thrown up in the process?

Game Monetization USA Conference & Exhibition, San Francisco, December 5-6

Multi-Platform MonetizationStrategies to MaximizeAcquisition, Retention and RPU

Publishers, developers, billingengines and analytics platformscome together at the onlyindustry summit lookingexclusively at how to monetizethe digital gaming revolution

www.videogamesintelligence.com/monetization

Page 5: Game Monetization Report for 2012 - Design1online.com, LLCdesign1online.com/downloads/whitepapers/Game-Monetization-Report-2012.pdfGame Monetization USA Conference & Exhibition, San

Cloud Gaming Prospects for 2012

Craig Relya, SVP Global Marketing, Disney Interactive Media Group

Relyea is currently Senior Vice President, Global Marketing, for the DisneyInteractive Media Group, the interactive arm of The Walt Disney Companycharged with producing compelling experiences on mobile, social, onlineand console platforms.

What lessons have been learnt that will allow traditional players andnew entrants to get noticed in the online space?

It’s more challenging now if you’re a new entrant than just a few years ago.Back then it was dominated by a handful of core targeted MMOs. Fueled bythe rise of social media and the portability of mobile web access, as well asthe true mass market nature of gaming now, it’s a more competitivemarketplace. Discoverability is a huge issue for anyone coming into thespace at this time. Customer acquisition is the challenge after that. And forthis space, the �rst customers are the hardest to acquire and, arguably,they’re the most important customers. They’re going to help you initiallywith feedback with iteration on the game’s features and satisfying the gamers’wants for the product. In addition, their role with virality is critical to gettingthe word out about the product.

Why is there so much hype around free-to-play at the moment, anddoes this mean subscription and premium will simply die out?

Free-to-play has a lot of attention, but I don’t’ think other models will die out.If you take a few steps back and look at entertainment, movies, TV, and games,one of the key lessons learned is that as a content provider, you can’t grip ontoany one business model for too long because it’s going to change. There aregoing to be multiple bus models and the pendulum is going to swing prettywildly over which model seems to be the most prevalent at any given time. It’simportant to be guided by the type of content and not to the business modelthat’s popular at any given time. The advantage of free-to-play now is that itgets you the most reach, and if you have an outstanding product getting themost reach is attractive. And then you can monetize against that, but higherquality products should win out. It’s also attractive because so many people lay games in the mass market now and if you’re structured correctly, it’s a greatproposition.

Game Monetization USA Conference & Exhibition, San Francisco, December 5-6

Multi-Platform MonetizationStrategies to MaximizeAcquisition, Retention and RPU

Publishers, developers, billingengines and analytics platformscome together at the onlyindustry summit lookingexclusively at how to monetizethe digital gaming revolution

www.videogamesintelligence.com/monetization

How important is the use of analytics in keeping players engagedand spending money?

Analytics and metrics are extremely important. It’s getting a lot of attentionnow but it’s always been important. In the realm of games as a service it’scrucial. But even in past with games that were more singular experiences,that whole process of satisfying the consumer and listening to what theywant has always been debated in games and entertainment overall. Gamesas a service need to have the numbers around consumers preferences, asyou’re serving up content the same as Amazon, Ebay or any live servicegame.

Page 6: Game Monetization Report for 2012 - Design1online.com, LLCdesign1online.com/downloads/whitepapers/Game-Monetization-Report-2012.pdfGame Monetization USA Conference & Exhibition, San

Cloud Gaming Prospects for 2012

What are the key platforms developers and publishers should becreating for?

We release products on multiple platforms where it makes sense and wewill capitalize on it. Cross-platform is not a necessity in its own right. Itdepends on the type of product. We look at this from a consumer guestpoint-of-view. Our guests are interacting on multiple platforms, sometimes inthe same space at the same time. Whether or not it needs to be cross-platformis an individual platform decision. I’d put that need underneath fun, solid coregame mechanics, great IP, great story telling, and interesting characters.Having a great product is �rst and foremost and then cross-platform comesafter.

I wouldn’t look at this from the lens of the devices themselves, but consumerpreferences. Consumers interact with multiple devices for di�erent reasons,and sometimes for the same reasons but for di�erent needs like work, school,vacation, and travel. It’s about extending these experiences we have onto theright platforms from a consumer perspective. It’s more about how can wesatisfy their needs on various platforms within their lifestyle. We have aparticular focus these days on mobile because there are a billion smartphonesout there and a whole lot of our guests using those devices. We’re looking atthe experience �rst and then putting them on the right platform.

How important is it to provide a good cross-platform experiencefor your players, and what challenges are thrown up in the process?

Game Monetization USA Conference & Exhibition, San Francisco, December 5-6

Multi-Platform MonetizationStrategies to MaximizeAcquisition, Retention and RPU

Publishers, developers, billingengines and analytics platformscome together at the onlyindustry summit lookingexclusively at how to monetizethe digital gaming revolution

www.videogamesintelligence.com/monetization

Page 7: Game Monetization Report for 2012 - Design1online.com, LLCdesign1online.com/downloads/whitepapers/Game-Monetization-Report-2012.pdfGame Monetization USA Conference & Exhibition, San

Cloud Gaming Prospects for 2012

David Reid, CMO, CCP Games

David Reid was appointed CMO of CCP in January 2012, bringing more than adecade of video game marketing experience to the team. He joined CCP fromTrion Worlds, where as SVP of Publishing, he led the best-selling fantasy MMORIFT to one million paid activations faster than any Western MMO in history.

What lessons have been learnt that will allow traditional players andnew entrants to get noticed in the online space?

We’re part of the big shift happening in the market now, all of us in the gamesindustry. The core way in which games have been predominantly sold the pastfew years is completely di�erent than the traditional games business thatexisted through the end of the PS2 cycle. The days of having one big businessmodel with retailers in which there was a window before the price was reducedand fell into bargain bins are over. Things have changed drastically withfree-to-play, micro transactions, and subscriptions, which are still new in thegrand scheme of things. Things we once thought of as laws aren’t the only wayto do business today. Subscriptions aren’t dead, but they’re no longer mandatoryto grow an MMO or live gaming service. The premiere of big games at retail isn’tthe only way to get a big AAA game out today. It’s important to learn where theconsumer is and how they’re involved with the game and brand over time. It’salso important to remember what’s worked over the years. Some of the biggerpublishers in the industry are feeling the pain of how hard it is to change tothese new models like smaller companies have successfully done.

Why is there so much hype around free-to-play at the moment, anddoes this mean subscription and premium will simply die out?

Part of the excitement around free-to-play today is because it’s new. Thepremium model, where a game shows up at retail for $60 and has big boxo�ce premiere weekend like Hollywood, is still healthy, but it doesn’t workfor every game. There’s no good reason to move away from that when youcan make hundreds of millions of dollars in an opening weekend. Free-to-playis getting new gamers into the business and with the right games it makessense. CCP’s EVE Online is a subscription game that has �ourished even as theMMO business has been under pressure because gamers devour content fasterthan developers can create it. That’s because of the game’s strong PVP (playerversus player) vibe continues to �ourish under subscriptions. With DUST 514we’re building a free-to-play game that allows new players to tiptoe into thiscrazy MMO universe. All of these models work because we, as gamers, buyproducts with all three models. It’s important to think from a high-levelperspective what’s right for the game and service you’re o�ering. When EAsaw that subscriptions weren’t working for The Old Republic, they addedfree-to-play later. I believe it’s better to start developing the game with the rightbusiness model from day one, rather than trying to force a game into a businessmodel later.

Game Monetization USA Conference & Exhibition, San Francisco, December 5-6

Multi-Platform MonetizationStrategies to MaximizeAcquisition, Retention and RPU

Publishers, developers, billingengines and analytics platformscome together at the onlyindustry summit lookingexclusively at how to monetizethe digital gaming revolution

www.videogamesintelligence.com/monetization

Page 8: Game Monetization Report for 2012 - Design1online.com, LLCdesign1online.com/downloads/whitepapers/Game-Monetization-Report-2012.pdfGame Monetization USA Conference & Exhibition, San

Cloud Gaming Prospects for 2012

What are the key platforms developers and publishers should becreating for?

It’s super important, but it’s not the solver glue to �xing everything. Analyticswill tell you what people are doing in your game today and what they mightdo if you turn the dial. But games are a creative industry and an executiveproducer still needs to have the ability to add a creative incite that numbersmight not predict. When you look at some of the mechanics with Zynga’sbusiness over the past year, the feeling was that the company ruled by metricsinstead of design. Metrics can’t build you a good game. Games are both an artand a science. While metrics will show you how things are going and researchcan help you avoid making mistakes, they’re not going to give you a Minecraftor EVE.

The advent of casual, mobile and social are not going to replace the deep endof gaming for real gamers who look at games as an important part of their life.It’s like the sport of golf. Some people play golf for fun, others spend thousandsof dollars on the best equipment. But they’re still playing golf together on thesame course. The games industry still needs to have high-end console systemsand PCs with immersive, breakthrough experiences. And there will continue tobe a need for new portable platforms and more shallow gaming experiences. Isee things evolving moving forward. There are a lot of things that happen in anMMO – auctions, grinding, equipping – that don’t have to happen on a high-endPC. They can go in a cross-platform device or in browsers. You’ll see those typesof elements taking a bigger part of the gaming experience, augmentingexperiences on other devices. With DUST 514 we have a NeoCom App on Vita –similar to what the Fable guys were doing with the Fable Pub game on Xbox Live.These things are becoming an important part of cross-platform. The consolebusiness isn’t dying, but the ecosystem of devices is going to be a bigger part ofa fully integrated AAA gaming experience.

How important is it to provide a good cross-platform experiencefor your players, and what challenges are thrown up in the process?

Game Monetization USA Conference & Exhibition, San Francisco, December 5-6

Multi-Platform MonetizationStrategies to MaximizeAcquisition, Retention and RPU

Publishers, developers, billingengines and analytics platformscome together at the onlyindustry summit lookingexclusively at how to monetizethe digital gaming revolution

www.videogamesintelligence.com/monetization

How important is the use of analytics in keeping players engagedand spending money?

Cross-platform is an interesting concept, but it’s not a requirement. It can be aterri�c ampli�er if done correctly through a transmedia way of doing di�erentthings together in the same universe. Square Enix allows people to play FinalFantasy on PS3, PC and Xbox 360 together in one shared experience, whilemeeting consumers on the platforms they chose. EVE and DUST take place ona persistent, shared universe, where all the history of EVE has always happened.EVE is an MMO RPG on the PC that has �ourished as a single shard universe witha robust economy and thousands of people joining corporations and going towar with each other. DUST introduces a new kind of player into this universewithout having to go to a PC game with 10 years of history. Cross-platform canwork for a unique experience, especially with new cloud technologies that haveopened up new opportunities, and it can be a big eye-opener with the rightgames like EVE and DUST.

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Cloud Gaming Prospects for 2012

Michael Pachter, MD, Wedbush Securities

Mr. Pachter is an analyst at Wedbush Securities providing coverage of theEntertainment Software, Entertainment Retail and Movies and Entertainmentsectors.

What lessons have been learnt that will allow traditional players andnew entrants to get noticed in the online space?It depends on the company. Activision will say you partner with Tencent withCall of Duty. For EA it’s brands. They get noticed because of Tiger Woods or FIFAonline, or they take Star Wars and make it free-to-play. The lesson learned is youneed to market your game. The barriers to entry are low, but it still takesspending to get to market. The new learning for the traditional guy is to put thegames where the gamer is. He’s not at retail. He’s online. He’s on mobile. He’son consoles. Then once you �nd them, you have to make it easy to engage.

Why is there so much hype around free-to-play at the moment, anddoes this mean subscription and premium will simply die out?

Free-to-play is a model that was born out of necessity in China because of piracy.And unintentionally, the guys who tried it found it was overwhelming successful.They realized they couldn’t get subscriptions in China, but they could sell virtualitems and the few devoted gamers could support the many. It proved out thatnon-traditional gamers embraced this model. Free-to-play is popular because itreaches the broadest audience, it’s approachable and easy, and there’s no barrierto entry. But subscription and premium will never go away because they allow agreater amount to be spent on game development. If you can’t get 800,000 ormore subscriptions, subscription doesn’t work. You can make $100 million o� agame that’s free-to-play like Riot Games’ League of Legends. Free-to-play takesaway some of the risk. But no one is going to spend as much money, becausepeople don’t expect it to be as rich as a subscription game. Players have lowerexpectations for free-to-play. If you have a success with this business model, youcan expand – that’s what Angry Birds did. There will always be a place forsubscription and premium models, but subscription will be very limited. Star Warsproved that out.

Game Monetization USA Conference & Exhibition, San Francisco, December 5-6

Multi-Platform MonetizationStrategies to MaximizeAcquisition, Retention and RPU

Publishers, developers, billingengines and analytics platformscome together at the onlyindustry summit lookingexclusively at how to monetizethe digital gaming revolution

www.videogamesintelligence.com/monetization

How important is the use of analytics in keeping players engagedand spending money?

Analytics allow you to maximize revenue. You can deliver the game and hopethat the 2% spend a lot of money. You can tailor what you’re o�ering to get themonetization up to 3%. The reason Zynga monetizes better than other gamepublishers is because of they invested a ton of money and resources in analytics.King.com is doing it well. Wargaming.net is doing it well. The Playdom guys aredoing better. EA bought Play�sh because they were good at analytics. The topcompanies are all succeeding because of analytics.

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Cloud Gaming Prospects for 2012

What are the key platforms developers and publishers should becreating for?

It will di�er for di�erent companies. You need to know which audience has thegreatest potential and that should be your primary SKU. If console is yourprimary SKU, then focus there. You can allow Sims Social or The Ville players toearn cash towards what they need to buy in the game by doing repetitive taskson a smartphone like grocery shopping. I used to play Dragon Age Social andyou could heal your dragon in the social game and it bene�ted in the consolegame. You want to keep the audience engaged. Let guys play target practice ona smartphone for Call of Duty to level up for the console game. The challenge isto help people earn credit toward their goal and understand the value propositionof what they’re doing.

How important is it to provide a good cross-platform experiencefor your players, and what challenges are thrown up in the process?

Game Monetization USA Conference & Exhibition, San Francisco, December 5-6

Multi-Platform MonetizationStrategies to MaximizeAcquisition, Retention and RPU

Publishers, developers, billingengines and analytics platformscome together at the onlyindustry summit lookingexclusively at how to monetizethe digital gaming revolution

www.videogamesintelligence.com/monetization

Di�erent platforms have di�erent power and di�erent user bases. A cell phoneuser doesn’t expect the same experience as a console or PC user. Social gamesdon’t have to be as rich on di�erent platforms. Gamers know a Dead Spacesmartphone game won’t be the same as an Xbox 360 experience. The challengeis giving the user a familiar experience, but dealing with the constraints of theplatform you’re on. The di�culty is not to diminish the brand or experience. Asan example, Tiger Woods on a smartphone may be better served focusing onputting, rather than hitting the ball 280 yards. Recognizing the limitations ofplatforms is a real challenge.

All the cloud gaming pioneers who have contributed to this reportwill be speaking at the upcoming Game Monetization USA Conference& Expo, San Francisco, December 5-6.

This is the only event looking exclussively at digital acquisition, retentionand RPU and has some of the biggest names int eh industry participating,Including: Tencent, Ubisoft, Google, Big Fish, Gameloft, Namco Bandaiand many, many more.

Head to www.videogamesintelligence.com/monetization for moreinformation or contact the organiser, Alex Manessi, direct [email protected]