2006 has been an exciting year for games with a number of interesting trends. One of those trends is the continued growth of casual games. Casual games promise to enlarge the gaming tent and present a lot of interesting twists on the traditional game industry.
the market
In contrast to AAA-titles or MMORPG’s, these games are “casual” because they are less “immersive” than traditional games.
In other words, casual games are more like the arcade games of yesteryear and the handheld/cell phone games of today. Rather than “more blood” or realism, casual games go for more of a cartoonish or retro look. They also go for more abstract or puzzle games, in the mold of Tetris or word games.
As a result, these games don’t require fancy hardware and they appeal to different people. Rather than fight over the same customers, like Sony and Microsoft are doing, casual games promise to grow the overall gaming market.
Unlike “kill ‘em all!” games, casual games appeal to people who don’t identify themselves as “gamers”. Research is showing that casual games are enjoyed by people of all ages and both sexes. In fact, women over 35 are singled out at the target audience which is a big change from the teenage male target of tradition console games.
Since gamers are really a small segment of the total population, appealing to non-gamers has the opportunity to greatly expand the game market. Not only do casual games have the opportunity to create their own large market, they can also act as the gateway drug to traditional games. This is especially true when they are experienced on console systems like the Xbox360 and PS3.
Even the way casual games are played is different.
Casual games are almost all played on the personal computer platform. Instead of being sold in the store, casual games are downloaded directly by users from the Internet and they come in two flavors: games that can be played in a web browser (usually based on Flash or Java), or complete downloads. In general, the web games are free and the download games cost money, usually $20.
As downloaded PC games, casual games aren’t restricted to the living room couch. They are equally at home in the office and the home as well as on cell phones. Different use occasions like this are another factor that encourages casual games to expand or compliment the existing game market.
distribution
Since casual games are directly downloaded by users, they represent a very different business model from AAA titles which depend on retail.
Traditional games depend on retailers to reach customers and retailers command a hefty commission for doing so. Direct download games don’t have to fight for shelf space; instead they have to fight for eyeballs, like other Internet companies. This difference has a number of ramifications.
There really is no constraint on casual games which is good and bad. It is good because it lowers the barriers to entry and opens to the door to more creativity. It is bad because there is little quality control on the product, which could lead to a mediocre game glut like the one that killed the video game industry back in the 1980’s.
Ironically, casual games still have a shelf space problem except it is inverted. Instead of limited shelf space in retail, casual games have infinite shelf space! But if you have 300+ titles, like Real Arcade, how do you get anyone to look at them all? How do consumers know which are the good games? How do you convert lookers into buyers?
Instead of fighting to find a publisher who has strong retail connections, casual game developers have to fight for eyeballs. This is where casual games show their dotcom roots. Instead of shepherding potential customers past a few retail shelves, casual game companies have to find a way to get users to look at their games and then to buy them. As a result, only a handful of casual games actually get the majority of traffic and revenue. There is a network effect that causes the leaders to just get bigger.
If you look at the structure of the casual game market, retailers go away but in their place appear aggregators and portals. Like Internet advertising, the key is finding users which is where aggregators come it. The big portals, Yahoo, Real Arcade and Microsoft, have users but they need content to keep them. There are lots of developers but they only make a few games apiece and no one has ever heard of them. The aggregator sits in the middle, contracting with developers in order to provide a big selection of games to the portals. The portal gets a nice inventory to show users. The aggregator provides the selection and the distribution and in return gets a slice of every purchase. The developers write games and hope that someone picks their game and not someone else’s.
profits
Casual games companies are closer to Internet companies that AAA game companies but they also resemble direct marketing companies. Users generally get to try the games for free but the developer only gets paid when the user pays for the full game or the download version. Like direct mail, casual game developers need to convert trials into purchases. Even the conversion rates are similar, hovering down around 2% and below.
Due to the super low costs of casual games, even those low conversion rates can turn a profit. In contrast to AAA games, casual games costs very little to make ($100K versus $10M). Most AAA games barely break even but the low cost of casual games means that they can turn a handsome profit, even when sold for only $20.
a trend to watch
Overall I think casual games is one of the most exciting trends in gaming today since it combines download distribution as well as a different game development model.
Casual games promise to bring more people into the game world and to bring back some of the glory days of game development. The low cost of entry brings back the “three guys in a garage” game development model that has long since disappeared in AAA titles.
Casual games also face a lot of new challenges which reflect the Internet-business world. These companies need to think more like Google than Sony in their quest to get more eyeballs and increase conversion rates. And the market is very new.
One of the coolest ideas I have heard about is being explored by Wild Tangent called Wild Coins. (A name that certainly beats “Microsoft Points” on Xbox Live.) Instead of offering free trials and hoping for conversions, they charge a quarter for each play like arcades used to do. Now that’s retro gaming? :)
I also hope to see more experiments with promotions, lower prices and bundles. I think that a $5 to $10 price (rather than a $20 price) turns the games into impulse buys and could increase conversion rates. Similarly “2 for 1” or weekend sales and other promotions could work well. Valve is not a casual game company but they are doing online distribution and they are already doing a great job with presales and promotions like free-play weekends.
Casual gaming is an exciting trend that will be fun to watch in the years ahead.
PS- To learn more about casual gaming, check out the 125-page whitepaper at IGDA.org
