[casual_games] can't bite my tongue any longer...

Tue Oct 10 01:23:16 EDT 2006

Okay, I've been biting my tongue all day but I finally feel compelled to
react to this mega thread that has been started. What I'm sharing here
is not necessarily the official PopCap party line, just my own
observations and musings.  Partly I just want to try and lay out some
facts to address a lot of the wild speculation. 

First, a few numbers. PopCap has been doing extensive testing over the
past year with all new releases. Classic A/B blind testing, with up to 7
different price/demo length combinations. The results? For our audience,
from our website (popcap.com, where admittedly we have trained our
customers to expect 19.95 games), the best revenue generator is a $19.95
game with a 60 minute free trial. There is some evidence that a
free-forever game where the player is content limited to the first few
levels may ultimately have a slight edge, but it's much harder to pull
off with all the myriad of various DRM's that are out there and the
slight edge isn't worth it. We have tested 29.95, 24.95, 19.95, 14.95,
and 9.95. We have tested 30 minute trials, 1 hour trials, free-forever
trials (content limited). We have tested showing the user the price
before they download, vs. not showing the price until after the user
downloads. The way we are doing it now on our site is the best revenue
generator we have found. As has been widely reported already, the price
simply isn't elastic below $19.95 on the PC. Other platforms (XBLA for
example, celphones) have different set points. We're happy with the
$19.95 price and frankly think even higher prices may work with certain
games.

In the casual game space it is very important to understand your
customers. We have done extensive profiling and surveys of our
customers, plus we go out there and talk to them. In general, our
customers are not like the folks on this mailing list. Someone's 30+
female b-school friends are not our primary demographic. Doesn't mean
they couldn't be, just that they're not.

Our audience is 76% women, 71% over the age of 40, 2/3 married. Only
half have graduated from college, and 2/3 work part or full time. Only
10% are stay-at-home moms (ie, these are not your classic suburban
soccer moms). They are hard-core casual game players, for the most part
- 77% have been playing casual games for 3+ years, and 57% play games
daily, with 52% playing 5 hours a week or more. As has been widely
reported, they play games to unwind and relieve stress.  Most gameplay
happens at home, not work. Many of our users do not have credit cards.
Average household income is lower than you might think.

We see the same low conversion rates that everyone else does on the PC
(2% conversion rates are typical, which means 98% are not playing), and
like many other players in the space are aggressively exploring
advertising as a way to monetize the 99.8% of our players (including web
game players) who don't buy our games at the moment. On the other hand,
it is also true that free gameplay on the PC is a great way to build a
brand, especially if your games are AAA quality, and top brands can be
monetized in all sorts of other ways including alternate platforms,
retail, etc.

We are participating in the wild coins project and are excited because
we think it's a nice way to pick up some incremental revenue, but we
don't think the model is going to completely replace all other schemes.
Some people just like to own the game outright, and that's great. Others
will never pay us a single cent, and that's great too - that's what ads
are for. We're not sure yet what kinds of users find tokens appealing,
but we're going to find out.

I've spent a lot of time over in Asia and understand the
micro-transaction model pretty well. What makes micro-transactions work
in asia will probably not work for our core demographic as it stands
today. "item buy" games are all about showing off to other players, and
as such are primarily a young-person's game. Avatar clothing sales in
games only work where you have lots of opportunities to see and be seen
by other players - players are not buying clothing items just to satisfy
themselves or personalize the game experience. The most successful
clothing sales models are coupled with instant messenger services where
you are able to be seen by lots of other players all decked out in your
finest as you chat.

Buying items for the game generally only works when you are buying items
that give you a slight performance edge to help you beat another player
in the climactic moments of a game. As such, they only work for
multiplayer games. It's just not as much fun to buy an item to give
yourself a slight edge when playing against the computer, though that
doesn't mean it couldn't be done - it's just probably not as lucrative.
Again, this makes these games a young-person's game since our audience
is trying to reduce stress, not increase it. Item sales work best in an
incredibly stressful down-to-the-wire showdown with several other
players where you're willing to do anything to win.

These games took off in asia among young people for three reasons: no
consoles, high piracy, and high bandwidth. Here in the states, young
people primarily play consoles and handhelds. Shifting them off their
consoles and onto the PC can be done, and all the major Korean portals
are all coming to the US to try and figure out how to adapt their models
(check out www.ijji.com <http://www.ijji.com/>  for the first) to this
country, but there's no evidence it's going to work. There's also no
evidence that these models in their current form will work with our
current audience - at least not as envisioned in korea. Puzzle Pirates
is interesting because they've turned a competiive experience into more
of a collaborative one, and I think that's an important distinction.
Likewise pogo is more about collection fetish than it is about competing
with other players.

About the flood of casual game content currently out there --- yup. I
wouldn't want to try to start a new casual game developer today. There
was a time just a few years ago when there was relatively low
competition, and you could make almost anything return a profit. Not
anymore. So many people have come into the casual game space recently
that it's awash in content. And it's probably going to become worse
before it gets better. Just read about the dust bowl in the US in the
30's. http://www.usd.edu/anth/epa/dust.html. In a nut shell, wheat had a
high price and so lots of people planted wheat. Prices inevitably fell,
and farmers found themselves making less money than they were before.
Rather than switch crops they simply planted more wheat. Prices fell
even faster. People plowed under even MORE soil to plant even MORE
wheat, until finally the entire market collapsed, and then all the
farmers let their fields go fallow. They didn't plant anything. And then
drought hit, big winds hit, and all the topsoil literally blew away.

The big players are responding for the most part by raising the quality
bar, and hence the price tag for new games. It's the exact same model
that was followed in the original PC game space years ago. We'll see if
we've all learned from our mistakes. 

On the other hand, I also agree that there are terrific opportunities in
this space for innovation and exploration. We really have only scratched
the surface, and with so many small companies trying to be successful in
this space I'm sure someone will eventually figure out a new model that
is far more successful than the current one. Heck, maybe in a year I'll
be eating my words as the entire casual game market moves over to a
unified pay-for-play model.

I agree with some other respondants, however, that the big portals will
not be willing to adopt a unified pay-for-play token system across all
games. It has nothing to do with technical issues - several people on
this thread have focused on technical implementations, but that's not
the issue. The issue is that big portals believe (rightly or wrongly)
that their primary value is their relationship with their customers, and
they're not going to do anything that helps those customers move to
another portal site. Once they've acquired a customer they never want
that customer to leave and go somewhere else, and so if they choose to
roll out a token-based "pay for play" system it's going to be limited to
just their site, like an island, or perhaps network of sites.

---------------------------

James Gwertzman

Director of Business Development

PopCap Games, Inc.

+1-206-256-4210

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