The Traditional Model is Suffering

Yesterday GamePolitics ran a story covering Fortune's article on videogame takeovers. As Rolf Winkler and Rob Cox of breakingviews.com report, "With their business models under threat and shares in the doldrums, video game publishers like Electronic Arts look ripe for the picking by larger media conglomerates such as Walt Disney."

Contributing to the environment is, of course, the economy. However, the success of social gaming is both a symptom of the current climate and a factor aggravating the wounds of traditional game publishers. EA recently announced that it would be released fewer, but better games. While this scaling back of content is a sign that media conglomerates might be able to move in and make some hefty purchases, I wouldn't say that it's an entirely desperate move. As Winkler and Cox explain:

Publishing video games is like making movies: Invest millions developing titles and pray for blockbusters. As in Hollywood, the trick is to establish successful franchises and regularly ride them to riches. Studios look for the next Harry Potter. Game publishers search for the next Call of Duty.

On the other hand, social gaming requires a lot less investment in individual titles, especially at the start. Here quantity -- generally at the expense of innovation -- is a dominant factor. It isn't surprising that traditional published like EA have to move away from a model like that, and personally, I don't think it's upsetting, either.

It's silly to drop all the time and resources to produce a well-polished but terrible game. You can either be the dexterous indie developer that blows everyone's mind with their quirky innovation, or you can funnel millions into creating a breathtaking, blockbuster experience. There is rarely room for middle ground.

I fully support EA's decision to let the smaller companies do what they do best. Their purchase of Playfish shows that they're willing to get into the field of social gaming, without making the mistake of pitting their big titles against the likes of stuff you play for 5 minutes a day on Facebook.

Presentation Topic: Social Gaming

I've been deliberating for a couple weeks now, and a few days ago I decided that for the final project for Business of Media, I'd like to dig into the quickly growing world of Social Gaming.

I've taken a quick look at social games in the past, as well as EA's purchase of Playfish.However, as with many emerging trends in the realm of online social activity, this is only the tip of the iceberg. Social games are doing things that traditional games have never be able to accomplish. For example, Nintendo recently bragged about how many female players it has, compared to other consoles like the Xbox or PS3.

This is all well and good, but when you look at social games, women and girls aren't just a small pink chunk on a pie chart: they dominate the field. This is a by-product of the fact that they are spending more time with social media, in general.

And while bridging the gender gap alone would is an impressive feat in the gaming industry (women have always been big gamers in the casual sphere, but rarely have they been so readily talked about), it is just one reason why social gaming is so attractive right now.

EA Drops $300 Million to Pick up Social Gaming

(Image courtesy of Kotaku.com)

I posted some time ago about the rampant success of social games like Farmville, and this is just a quick update in that realm. Techcrunch, Mashable, Kotaku, and PaidContent each ran a story yesterday on EA Interactives's purchase of Playfish for $275 million up front and $25 in "equity retention arrangements."

On the advertisement front, Playfish games clearly have much of the same appeal as successful games like Farmville: they are sugary sweet, colorful, and utterly playful. Like feel-good movies and mass-market paperbacks, this type of advertising easily draws in people where more typical gaming markets may not reach. Games on social networks, along with innovative practices by traditional gaming companies like Nintendo, are expanding the gaming market from being very genre-specific, to being something that everyone can feel good about enjoying.

Facebook: Soon to be more Civilized.

Yesterday Games.com reported that Civilization, one of the pillars of the real-time strategy videogame genre, will be launching a version of its long-running franchise on Facebook in the upcoming year.

As I mentioned to fellow classmate katdiogo in a comment on a recent post about Farmville on Facebook, there are very few games available on Facebook that appeal to me. Though I clearly enjoy playing videogames, as someone with regular access to other gaming platforms, Facebook does not tend to draw me in.

However, the news of Civilization coming to everyone's favorite social-networking site, for me, could be a (no pun intended, honest) game-changer. When I grew up, the bread and butter of my videogame experience was half Doom, half Warcraft and Command and Conquer style RTS (real-time strategy) games -- until I was about 8 years-old and started playing online games.

Civilization is a game which defines the RTS genre for many people. Much like something in Farmville, the game is based on progression (rather than say, Pacman or Tetris -- you are generally building off of where you left from. The idea is to take a group of people (normally sorted by nationality) from their start as simple gatherer-hunters, up to their pinnacle as world-dominating superpowers.

I initially heard about this game via Twitter, when all the gaming sites I follow suddenly went crazy as they broadcasted the news. Then, I had gaming friends who similarly tweeted and retweeted the information. I know I just made the point about buzz driving games on social-networking sites, but this is a prime example of what I meant. Already, without having to do anything other than pump their story into the right channels, many people in the target audience (people who have enjoyed past Civ games and would be likely to try out the Facebook version) have this news on their radar.

It remains to be seen if the game would have any more power to retain a player-base than the usual Facebook game-application fare, but given Civilization's (well-earned, in my opinion) good reputation amongst avid gamers and even an older audience (the first Civilization game was published in 1991), I have high hopes already.

Gamers on Social Networks... a Whole Goddamn Lot, Too

I recently touched on the idea of the "give it away free" business model when it comes to video games in a post about World of Goo's temporary offer of "pay what you can." While it's quite rare for traditional videogames (PC or console alike) to adopt this strategy, there is actually quite a large precedent for "play for free" videogames, especially online games.

And I'm not just talking about Text Twist or some dodgy online pool game. I'm talking about games that people play, often without even associating them with videogames. Even the most stereotypically anti-geek, mainstream, Gossip-Girl loving individual might spend hours a day fiddling around with these games.

But enough with the cheesy suspense: I'm talking about Facebook. On Thursday USA Today reported that Farmville, a game which will celebrate it's four month anniversary this October, has 56 million unique players monthly, and something like 20 million unique players daily.

Atul Bagga, a gaming analyst at market researcher Think Equity, expects the $500 million to $600 million social-gaming slice of the online market to at least double, to $1 billion, in 2010.

And where, oh where, does that money come from? After all, downloading the application and running it -- playing the game itself -- is free. The answer comes from two main streams of revenue. The first is micro-transactions. While you aren't paying a monthly subscription fee (like you would pay to play World of Warcraft, or what you pay to access Xbox Live's full services), you might, from time to time, spend a dollar here or there (on particular farming tools in Farmville, for example). The games don't necessarily nickle-and-dime you to death, because most of the experience is free. However, all that pocket change certainly adds up.

The other revenue stream comes from advertisers.

Meanwhile, advertisers are gravitating to the popular social-gaming sections of social networks to reach tens of millions of consumers.

"It's attractive real estate," says Hi5's Trigg. Hewlett-Packard, Verizon and Netflix are among major brand names running banner ads on MySpace's gaming areas.

It's unclear what, if any, portion of this goes directly to the publishers of the specified applications like Farmville (rather than just Facebook itself). However, it is more than clear that this industry is experiencing incredible growth with profit margins that could make anyone salivate.

The cleverest part of the advertising, when it comes to games like Farmville, is that it is so damn cheap. After all, the cost it takes to implement an obnoxious "Invite your Friends!!!" template is obscenely inexpensive in comparison to running something like a TV ad. You don't need a well organized campaign that sprawls across every available window. All you need is to prompt your players to invite a handful of other people, who go on to invite a handful more.

The best trick, of course, is to reward the players for doing your advertising for them. Instead of paying an agency hundreds of thousands of bucks, you pay one dedicated player 100 apples or oranges, or whatever the hell the currency is in Farmville, to get one other player on board. Maybe if they invite two friends they get a cow. Ten friends? A barn.

I'm probably showing that I definitely don't play this game to anyone who does, but the point holds true: you are paying people in fake currency to do what you would otherwise have to pay people in cold hard cash to do.

The downside to social gaming, however, is that they are like viruses. They blossom exponentially for a little while, infecting many of the people they come into contact with, dominating a population. But then people get over them (or, I don't know, die -- time to abandon the metaphor). In the terms of social gaming, they get bored. Then they move on. The same system that makes it so easy to join games like Farmville is what makes them easy to leave: they get swallowed up by the 'next big thing.'

To put it in more proper vocabularly: these games thrive on buzz, which is also the core component to their advertisment.