Gaming has changed for good
Last month saw the launch of EA Sports’s Madden NFL 25 on iOS, the first free to play offering from Electronic Arts on the Apple platform. It represents a notable moment in the history of gaming from a company that has been at the forefront of the industry since 1982.
Rovio, developer of Angry Birds, has not fared so badly, doubling revenues in 2012. Yet 45% of that came from cuddly toys.
Once the world’s largest casual gaming company, EA has struggled in recent years to remain relevant as consumers stopped paying £40 a go for the latest Sims console game and instead played equally compelling titles on their phones and tablets for free.
Zynga’s downfall
Yet it is not just the old hands who have found the shifting sands of mobile and social gaming difficult to navigate. Zynga, at one time the sole generator of one fifth of Facebook’s overall revenue and a pioneer of social gaming, has had a well-publicised annus horribilus, culminating in the loss of 520 jobs and the departure of founder and CEO Mark Pincus.
Rovio, developer of Angry Birds, has not fared so badly, doubling revenues in 2012. Yet 45% of that came from cuddly toys. A cartoon series and a movie in production suggest that the company is harvesting as much as it can from the franchise, unsurprisingly, but we are still waiting for a game that comes close to matching the success of the troupe of furious fowl.
Digi-Capital, a specialist investment bank, has called gaming the highest growth large technology area, but the business strategy behind these firms seems as uncertain as ever. It is perhaps no surprise that the investment community has fallen out of love with mobile and social games, with VC investment down from $2bn (£1.3bn) in 2011 to $790m (£530m) in 2012.
Embracing free-to-play
Yet Bigpoint, a German develop of browser games, insist that there is a clear and compelling science to this new era, and perversely it does involve embracing free-to-play as EA is now doing.
The key is understanding the new segmentation of consumers correctly, separating core, midcore and casual gamers and marketing to each cohort differently, at the same time as realising that within each segment 90% of players will never pay. The strategy is to remain relevant to everyone so that you can find the 10% that are willing to pay, and then to keep them engaged.
This requires investment in infrastructure, analytics, hosting, payments and community relations. It represents a significant operational platform and not one that your average developer with a hit game is likely to care for.
It suggests a solution. Some independent third party will emerge that is capable of providing this platform as a service. In doing so they will free the developer from the drudgery of operational management in order that they can focus on building a sustainable hit machine. However, until then expect the flogging of dead horses to be the biggest game in town.