Generating Revenue: How Casual and Interactive Games Can Make Money

By Jean-François Arseneau (French)

Casual games played online have experienced very strong growth in the past few years and this growth continues to be strong despite the current economic crisis. Even before the Wii arrived on the scene, this segment was opening up new markets by attracting users who were not previously interested in games. This has been especially true of adults…particularly women. The rise in casual gaming has come mainly from independent companies that have managed to innovate in terms of content as well as commercial operations.

According to the primary business model, online gaming generates returns through downloading (either as unit sales or online subscriptions). A second model, however, generates earnings through advertising. Emarketeer recently reported that game portals financed by advertising have experienced a major increase in traffic.

There’s nothing casual about these market facts and figures…

This market represents several billion dollars in sales worldwide. In 2007, the Casual Games Association estimated the casual gaming market at US$2.25 billion… and growing at 20% annually.

Over 200 million people play casual games on the internet every month.

The majority of online portals have catalogues of over 1,000 games and are adding 75 to 300 more games every year.

Games sold via downloads are generally designed for the PC. Production budgets may range from $50,000 to $250,000 or more.

Free online games are usually small-scale Flash games. Production budgets are lower and vary with the scope of the title.

Casual games are simple. They’re very easy to learn and master. However, they are also very absorbing – users re-play them frequently.

The distribution of male and female gamers online is practically equal. This is true of adolescents, and especially true of adults.

An important detail to note is that 70% of the casual gamers who pay for their games online are women.

Casual gamers who pay for a subscription or frequently visit online social networks (such as Facebook) play an average of 7 to 15 hours a week online.

The heaviest traffic times are after supper (7:00 to 9:00 PM) and during lunchtime (12:00 noon to 2:00 PM).

People usually play casual games for short periods of time (5 to 20 minutes). Some gamers, however, will play several games, one after another, for several hours.

An excellent description of the casual gaming market and gamer profiles has been prepared by one of the market leaders, Big Fish Games, in cooperation with the NPD Group. For further details, you can download slides and an audio clip from the Casual Connect Seattle Conference in July 2008.

A Range of Business Models

Try and Buy

This is the model that’s usually associated with casual games. The game is made available in a free version that can be played for a limited time (usually 60 minutes). The consumer must then buy the game in order to continue playing. In a variation of this model, the consumer is offered a more elaborate version of the game, which must be paid for. The unit price is generally $19.95. The distributor keeps 50% or more of the sales. The developer gets 20% to 50%. Amazon.com recently drew major fire from the gaming industry by discounting casual game prices to $9.95.

Ad-supported

Some portals present games for free in sections that disseminate advertising. Revenue sharing between the portal and the developer is becoming more and more common.

Subscriptions

A few portals (though not many) have had success with this model. Consumers pay a subscription fee which allows them to access the entire catalogue of games. A variation of this model allows them to subscribe for a limited number of games, with the possibility of buying additional games at a reduced rate. Club Pogo (Electronic Arts) is a good example.

In-game advertising

Breaks are programmed into games at intervals to broadcast advertising. Gamers, in return, get to enjoy a longer-playing trial version or can obtain the more elaborate version for free. Casual gamers respond fairly favourably to this model.

Advergames

Development and distribution of these games are financed entirely by a brand. Burger King’s Sneak King game is a well-known example

Micro-transactions

Various additional game features are offered at very low prices. These may be supplementary levels, special items or ways to customize the game.

Skills-based games and tournaments

Participants in these competitions must pay a basic entry fee. The winner collects the total amount of the entry fees, minus an amount for the operator of the site. This model requires a very large number of players in order to be profitable. In order to be legal, the games must involve some actual skills, without which they would be considered games of chance.

Retail sales

Some casual games that have done well online are merchandised in the traditional manner in “physical” stores.

It all depends on the independent producer

An independent producer must personally assume the total cost of production. Gaming portals do not finance development, except for a very few (and very rare) expert developers with established track records.

Producers distribute their games through specialized portals worldwide. Sales returns are shared between the distributor (who keeps at least 50%) and the producer (who gets 20% to 50%). This means there is a substantial interval between the time when money is spent on production and the time when returns are generated. The degree of financial risk is high, since the producers have no real guarantee of recovering their investment.

Developing the business aspects of the game can be done from remote locations. But the game must be virtually complete in order to obtain a distribution agreement, and personal relationships are key. The main events where these key contacts are developed are Casual Connect Seattle, Casual Connect Europe, Casual Connect Kiev and Casual Games Summit @ GDC.

The situation for free Flash games is somewhat different. Once again, the producers must assume all the production costs. However, they may then sell non-exclusive licences to as many portals as possible. Licensing fees can range from US$500 to US$40,000. The business end is developed in the same way as explained earlier, but it involves obtaining agreements with a larger number of portals. Developers must make allowance for the time it will take to accomplish this.

One option to consider is to employ the services of an intermediary firm such as

Flash Game License.com. One advantage of Flash-based games is advertising content can be inserted. A producer can then generate additional returns with micro-transactions (such as additional game levels, which must be paid for) or self-promotions that direct gamers to some other website where the producer can generate additional revenue. It should be noted, however, that some portals do not allow advertising to be included.

Producers may also arrange sponsorships of their game by one or more of the casual game industry “majors” in return for visibility within the game.

A recent article on Gamasutra presents an interesting overview of the Flash games market.

Producers may also operate their own game sites. This option involves major investments of energy into marketing and promotion.

Opportunities for Independent Producers

A revenue stream in the making

A game that’s carefully targeted, well designed and distributed through the right channels can be a promising source of earnings. The game may be an independent title, or an excerpt from some larger, more complex game…or a tie-in to some other intellectual property. A game that’s successful may also become a promising source of revenue through licensing of subsequent versions.

A hot promotional tool

Casual games may be an extension of content that’s operated from another source. They make it possible for this content to reach new audiences. Self-advertising allows producers to promote their other properties.

Yes, it pays to advertise!

MochiAds and CMP Stars are two advertising networks that specialize in gaming. Both are worth considering as ways of generating returns.

The iPhone Market

Gaming on iPhones has become extremely popular. However, the number of games available is already very large, and it’s the major hits that are the main moneymakers. Producers can’t rely on the App Store alone. They must do their own promotion if they want to recoup their investment. The major video game publishers already hold a substantial share of this market. Be sure to read a series of articles about this on Casual.gaming.Biz and the study entitled State of the iPhone Game Development 2009.

Other segments await you…

The video gaming industry has entered a phase in which genres are diversifying and new market segments are opening up. These trends are centering on the idea of casual gaming, and Wii has been a major catalyst. Other casual gaming genres worth noting include cell phone games, games for social networks (social games) casual massively multiplayer online games (MMOGs), digital distribution on gaming consoles (XBLA, PSN, WiiWare) and TVi.

  • By fantrust, October 20, 2009 @ 1:42 pm

    Social gaming, which you mention is a burgeoning field, is truly fascinating. Its fanbase is expected to surge to 250M in 2009 from 50M the previous year.

    FanTrust has just released a white paper on social gaming, which includes an overview of
    * Market opportunities
    * Monetization tactics
    * Fan favorites

    Read or download “Socialize Me — FanTrust’s Fast Facts To Help You Tap Today’s Billion Dollar Social Games Sector” at http://www.fantrust.com/2009/10/19/socialize-me-tap-todays-billion-dollar-social-games-sector-with-fantrust/

  • By Wychowanie Dzieci, April 3, 2011 @ 8:28 am

    Hello! This is my 1st comment here so I just wanted to give a quick shout out and tell you I truly enjoy reading your blog. Can you recommend any other blogs/websites/forums that cover the same topics?

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