[casual_games] Better Casual Game Business Models

[Alex St. John]

Interesting thread.  I thought I’d chime in, since we’ve been working on the monetization problem a long time.  We built our own DRM solution for casual games way back in 2001 and have been iterating it ever since.  Because we originally developed it just to support games from our own Studio we chose a Content limited DRM model instead of the time limited model the rest of the market went with.  This proved very educational when we took downloadable games we had been selling with content limited DRM and released them to major portals that were using time limited DRM.   What we found was that a hit game that was content limited would sell very strongly within our channel over a period of many years, often with a slow steady escalation in audience.  The same game posted on a major gaming portal with time limited DRM would experience a huge spike in sales that rapidly collapsed. 
   
  The difference in behavior is the result of time limited DRM killing a games viral audience momentum before it can gain traction.  A hot game falls rapidly off  the top 10 list as the time based DRM on the game drives off it’s free players.  We all like to talk about our audience being 70% women 35 and up, but this really isn’t the case.  The audience is very broad, and a large majority of it is kids without credit cards.  We found that when we sell a game to a woman 35+, 50% of the time she’s buying it for the kids not herself.  I think it’s very interesting to look at the sources of popcap.com’s traffic on www.alexa.com.  What you see is a lot of moms looking online for content to keep the kids entertained.  A small fraction of the kids and teenagers who don’t have a means of buying games online are successful in persuading a parent to do it for them, the rest are S.O.L. and must content themselves with hunting for free play.  The problem is that this audience is also
 the word-of-mouth group that generates buzz for a game. When they are thrown out of a game they like because they can’t or won’t purchase, the buzz stops.  
   
  There is an important and interesting caveat to this observation.  Content based DRM works best for content based games; that is games that unlock new “art” or “levels” in exchange for purchase.   Games based on simple repetitive play such as puzzle games perform well with time based DRM because there is little or no “content” other than the basic game to unlock.  Games that depend on repetition addiction to drive a conversion must cut off the player to make a conversion before the players, “addiction” to the game play is satisfied.  
   
  For content based games with content limited DRM we find that the games have extremely long shelf lives and develop growing audiences over time, even after the game has dropped off the front page and out of marketing efforts.  Out of 300 games in our channel and 30 from all of the top developers that ship on OEM machines, FATE from our studios is consistently the #1 best seller when presented equally besides the best casual games from other leading developers.  Polar Bowler which is also content limited has ranged between #1- and #4 for over 4 years.  
   
  Content limited DRM also has another important benefit.  Once a game has developed a standing audience it becomes an appealing franchise for advertisers to target.  When a game throws out its audience, it throws out the opportunity to monetize all of the free play.  Portals are first and foremost in the business of selling $.50-$5.00 CPM ad units in huge volumes; actually selling downloadable games is a tiny and irrelevant side business to all of them.  It doesn’t matter to a portal if their DRM solution is antiquated, wastes content, is inefficient at converting a sale or is easily subverted.  It’s the free play that makes their core advertising business, the sales are tertiary.  Portals also have little ability to target premium advertising dollars at specific titles and audiences.  It’s easier for them to sell a low yield $1/cpm ad unit than it is to sell a $25/cpm video ad targeting a specific game or family of games.  If they could give premium downloadable games
 away without trying to sell they would!  The problem is that developers want $$ for their games, so the portals share revenue from the business they don't care about and try hard to keep the ad $$.    
   
  We’ve done a lot of work at WildTangent on how to fix what’s obviously a broken business model for the game developers and concluded that a model based on selling game sessions vs selling whole games may yield a vast improvement in revenue generation potential and advertising yield.  I’ll talk about it more if folks are curious but in the interest of brevity I suggest that folks take a look at Penguins and BlasterBall3 on Wildgames.com.  Both of these games from WildTangent Studios had major advertising sponsors that had funded the games before they completed production.  They are wrapped in session based DRM and have major advertisers sponsoring the gameplay for consumers for free.  Since a session of these games is priced at around $1 to the consumer, the advertiser buys the free play from us wholesale at a discount and gives the play away
 especially to all those kids who don’t have credit cards.  I’m sure it won’t take anybody long to calculate the CPM value of this
 kind of advertising, but a session of premium game play is worth a hell of a lot more than a $1/cpm run or site banner ad.  *Note that there is zero advertising to consumers who buy the game, or pay for the sessions themselves.  Gameplay is never interrupted with advertising as Microsoft and Real propose.  Consumers simply choose a payment mechanism for the single session of play they are about to consume and play uninterrupted.  
   
  Personally I think the "big idea" in casual gaming is the idea that consumers, given the opportunity, will glady CHOOSE offers from advertisers over paying for sessions of game play.  I think consumers will reject getting advertising in the games they purchase with their own money and they will reject having their games forcibly interrupted for advertising messages.    
   
  -Alex St. John

 		
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