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The Casual Games Industry in 2009: Developments, Trends and Forecasts Alexander Lyskovsky President of Alawar Entertainment

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Topics for discussion: <ul><li>2008 in review </li></ul><ul><li>Casual 1.0 </li></ul><ul><li>Casual 2.0 </li></ul><ul><li>Trends </li></ul><ul><li>The financial crisis: price wars, knowing how to economize, new conditions </li></ul><ul><li>New level of performance </li></ul><ul><li>Successes of our Eastern European developers and publishers </li></ul><ul><li>New data for the casual games audience on Runet </li></ul>

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2009 in review: From Kiev to Kiev <ul><li>October '08 </li></ul><ul><li>Amazon purchases Reflexive. </li></ul><ul><li>Playfish receives $17 million for a Facebook game. </li></ul><ul><li>November '08: </li></ul><ul><li>EA shuts down its EA Casual label, transferring development to The Sims division and renaming it The Sims Casual label. </li></ul><ul><li>WildTangent closes internal development studio, cuts jobs. </li></ul><ul><li>December '08: </li></ul><ul><li>SEGA launches PlaySEGA, a free online gaming site. </li></ul><ul><li>IGG receives $10 million to develop casual ММО. </li></ul><ul><li>Investments in the gaming industry and virtual worlds in 2008 total about $937 million. </li></ul><ul><li>February '09: </li></ul><ul><li>Alawar Entertainment and &quot;Farm Frenzy&quot; developer Melesta create Alawar Melesta Studios. </li></ul><ul><li>Amazon launches a casual games section. </li></ul><ul><li>PopCap purchases Gastronaut Studios to develop XBLA games. </li></ul><ul><li>April '09: </li></ul><ul><li>BigFish Games opens its European headquarters in Ireland. </li></ul><ul><li>May '09: </li></ul><ul><li>BigFish Games purchases developer studio Grubby Games. </li></ul><ul><li>July '09: </li></ul><ul><li>GameStop launches a section with RealArcade casual games. </li></ul><ul><li>October '09 </li></ul><ul><li>PopCap receives an investment of $22.5 million for Facebook games. </li></ul>

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Casual Games 1.0 <ul><li>Main feature: downloadable PC games </li></ul><ul><li>Business models: try-before-you-buy and buy-and-download </li></ul><ul><li>Price: $19.99 </li></ul><ul><li>Target market: women aged 45+ </li></ul><ul><li>Scope: more than 250 million users worldwide </li></ul><ul><li>Main distributors: Real Networks, Oberon Media, Metaboli, BigFish Games, AOL, Reflexive, TryMedia and Wild Tangent </li></ul><ul><li>Main developers and publishers: PopCap, Reflexive, BigFish Games, Alawar, iWin, PlayFirst, NevoSoft and Realore </li></ul><ul><li>Main sales market: North America </li></ul><ul><li>Development model: expand distribution partners in current markets, cultivate home territories and obtain exclusive rights to games </li></ul>

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Casual Games 2.0 <ul><li>Main feature: downloadable games for the PC and other platforms, including online play </li></ul><ul><li>Business model: try-before-you-buy as well as freemium, micro-transactions, gaming clubs and &quot;All You Can Eat&quot; </li></ul><ul><li>Price: depending on model, from $.25 up to $19.99 </li></ul><ul><li>Target market: age 13+ </li></ul><ul><li>Scale: 500 million users </li></ul><ul><li>Main distributors: same as above plus AppStore, PSN, XBLA, Facebook, MySpace and VKontakte </li></ul><ul><li>Main developers and publishers: same as above plus Zynga, Playdom and Playfish </li></ul><ul><li>Main sales markets: North America, Asia and Europe </li></ul><ul><li>Development model: same as above plus new platforms and markets </li></ul>

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Casual Games 3.0 <ul><li>? </li></ul>

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Trends: conquering new platforms <ul><li>Casual publishers are conquering new platforms: </li></ul><ul><li>Oberon - 17 iPhone, 1 social </li></ul><ul><li>Real Arcade - 15 iPhone </li></ul><ul><li>BigFish Games - 7 iPhone, 1 browser-based </li></ul><ul><li>PlayFirst - 6 iPhone </li></ul><ul><li>Alawar - 6 iPhone , 1 client-based, 2 PSN, 1 NDS, 1 Android, 1 Nokia OVI </li></ul><ul><li>Intenium - 5 iPhone, 1 browser-based, 1 NDS </li></ul><ul><li>G5 - 5 iPhone, 1 PSP </li></ul><ul><li>PopCap - 3 iPhone, 1 social, 3 PSN , 1 XBLA </li></ul><ul><li>Reflexive - 2 iPhone </li></ul><ul><li>Playrix - 1 iPhone , 2 NDS , 2 Mac </li></ul>

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Trends: changes in the downloadable games market <ul><li>Price wars: the price for downloadable PC games decreases, with $6.99 becoming the new industry standard </li></ul><ul><li>New platforms and prices : $0.99 for a casual iPhone game </li></ul><ul><li>Mergers: penetration of distributors on the market </li></ul><ul><li>Unstable currency : with dollar conversion taken into account, the speed of growth decreases (on Runet, losses total $8 million) </li></ul><ul><li>New markets: game content appears in local languages and currencies </li></ul>

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Trends: price wars <ul><li>February 2009 </li></ul><ul><li>Amazon.com launches a casual games portal with $9.99 games. </li></ul><ul><li>April 2009 </li></ul><ul><li>RealArcade releases &quot;The Count of Monte Cristo&quot; for $19.99; </li></ul><ul><li>BigFish Games reduces the price of &quot;The Count of Monte Cristo&quot; to $0.99. </li></ul><ul><li>May 2009 </li></ul><ul><li>BigFish Games Club reduces the </li></ul><ul><li>price for one game to $6.99. </li></ul><ul><li>GameHouse Club reduces the </li></ul><ul><li>price for one game to $5.99. </li></ul><ul><li>July 2009 - Return of the minimum price per copy; game suppliers demand a minimum price per copy guarantee. </li></ul>Casual Game =

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Game Live Cycle Management <ul><li>Game Live Cycle Management - the management of the price of a game while it's being sold . </li></ul><ul><li>The main idea : </li></ul><ul><li>During the first three months, the price of a game shouldn't be lower than the price assigned by the publisher or developer. </li></ul><ul><li>The terms are secured in the distribution agreement. </li></ul><ul><li>Supported by : Alawar Entertainment , iWin , PopCap , NevoSoft and Playrix </li></ul><ul><li>Join us ! </li></ul>

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How to sell more games: <ul><li>The majority of major distributors now have their own game club featuring special prices. This is the consumer's primary means of getting the best price. </li></ul><ul><li>Other paths: </li></ul><ul><li>RealArcade is building a syndicate with more than 600 distribution partners (sales increased 224% this past year). </li></ul><ul><li>Alawar is developing regional markets such as Poland and Finland. </li></ul><ul><li>Intenium this year began distributing PopCap, MumboJumbo, Sandlot and GoGii Games. </li></ul><ul><li>Yahoo! Games is distributing 400 games via the advertising model. </li></ul><ul><li>iWin is selling 17 games through Steam at $19.99. </li></ul><ul><li>All-You-Can-Eat (Fun Pass on Game House, Shockwave Unlimited) </li></ul>

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Prices and channels:

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Prices and countries: <ul><li>Germany (Intenium) - $21.90 ($8.50 through GameClub) </li></ul><ul><li>Finland (Alawar): $20 </li></ul><ul><li>US (RealArcade): $19.99 ($9.99 through GamePass) </li></ul><ul><li>US (BigFish Games, Amazon): $6.99 </li></ul><ul><li>Poland (Alawar): $6.60 </li></ul><ul><li>Russia (Alawar): $6 </li></ul>

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Developing market in Eastern Europe: <ul><li>A demand for higher quality games </li></ul><ul><li>Increase in average development budget ($50,000) </li></ul><ul><li>Decrease in deductibles to developers (royalties go from $8 to $2.40) </li></ul><ul><li>Personnel dilemma (artists, game designers) </li></ul><ul><li>More difficult to enter the market </li></ul><ul><li>No new publishers </li></ul>

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Genres: <ul><li>What have we done in the past? </li></ul><ul><li>Tetris </li></ul><ul><li>First casual quest </li></ul><ul><li>First 3D arcade game </li></ul><ul><li>First music-based casual game for the PC </li></ul><ul><li>What now? </li></ul><ul><li>No new genres </li></ul><ul><li>Old tried-and-true brands used </li></ul><ul><li>Serial format leaves no room for new one-off products </li></ul>

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Distribution on Runet:

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Size of sales market on Runet:

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Payments on Runet: <ul><li>What's required? </li></ul><ul><li>To have the option of receiving payments for content services, with the commission not exceeding 10%. </li></ul><ul><li>To have the option of making periodic charges to a subscriber's account if they, for example, sign up for a catalog of games. </li></ul><ul><li>To have the option of receiving payments for services up to a maximum of 1,500 RUB. </li></ul>

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Payments on Runet: <ul><li>Outcome: </li></ul><ul><li>Paying advances to partner program participants (NevoSoft, Alawar) </li></ul>In connection with the tightening of credit, mobile operators are searching for new means of business development. The delay in payments has doubled.

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Increase of piracy on Runet: Yandex: number of searches for &quot;Alawar cracks&quot; has increased five-fold in one year. Number of searches for &quot;Alawar games&quot; has increased four-fold in one year.

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Partner programs on Runet: <ul><li>Reasons for growth: </li></ul><ul><li>Automatic registration on the Alawar partner program. </li></ul><ul><li>Development of NevoSoft partner program (Gameboss). </li></ul><ul><li>Appearance of new partner networks from Realore (IgroMoney) and Turbogames. </li></ul>

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New paths: <ul><li>Diversification of sales channels </li></ul><ul><li>Reducing the dominance of the North American market </li></ul><ul><li>Distribution on new markets (Central and Eastern Europe, India, Japan, China, Southeast Asia, Middle East, North Africa, countries of the CIS, Baltic States) </li></ul><ul><li>Search for new platforms (iPhone, Sony PlayStation 3, PSP Minis, Nintendo DS, Microsoft Xbox 360, Google Android) </li></ul><ul><li>Web-based application ($1 billion in 2009) </li></ul>

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Hailing from the USSR: <ul><li>Big Fish Games № 1: </li></ul><ul><ul><li>Adventures of Robinson Crusoe (32 days ) - MagicIndie Softworks </li></ul></ul><ul><ul><li>The Treasures of Mystery Island (14 days ) - Alawar Five-BN </li></ul></ul><ul><ul><li>Strange Cases: The Tarot Card Mystery (13 days ) - Sulus Games </li></ul></ul><ul><ul><li>Treasure Seekers: The Enchanted Canvases (12 days ) - Artogon </li></ul></ul><ul><ul><li>Magic Encyclopedia: Moon Light (10 days ) - V-games </li></ul></ul><ul><ul><li>Haunted Hotel II: Believe the Lies (5 days ) - Specialbit Studio </li></ul></ul><ul><ul><li>Veronica Rivers: Portals to the Unknown ( 4 days ) - Vogat Interactive </li></ul></ul><ul><ul><li>Vampire Saga: Pandora's Box (4 days) - GO!games </li></ul></ul><ul><ul><li>PuppetShow: Mystery of Joyville ( 9 days ) - ERS G-Studio </li></ul></ul><ul><li>2008 : 8 games , 41 days </li></ul><ul><li>2009: 9 games , 103 days </li></ul>

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Oct. 14, 2009 - ...

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Hailing from the USSR: <ul><li>Real Games №1 : </li></ul><ul><ul><li>The Treasures of Mystery Island (10 days ) - Alawar Five-BN </li></ul></ul><ul><ul><li>Annabel (7 days ) - JetDogs </li></ul></ul><ul><ul><li>Virtual Farm (6 days ) - Alawar Melesta </li></ul></ul><ul><ul><li>Fishdom H2O: Hidden Odyssey (5 days ) - Playrix Entertainment </li></ul></ul><ul><ul><li>3 Days: Zoo Mystery (4 days ) - Realore </li></ul></ul><ul><ul><li>Alabama Smith: Escape from Pompeii (3 days ) - Alawar Stargaze </li></ul></ul><ul><ul><li>National Geographic Games: Herod's Lost Tomb (3 days ) - Media Art </li></ul></ul><ul><ul><li>My Kingdom for the Princess (2 days ) - NevoSoft </li></ul></ul><ul><ul><li>Call of Atlantis (2 days ) - Playrix Entertainment </li></ul></ul><ul><ul><li>Farm Frenzy: Pizza Party! (2 days ) - Alawar Melesta </li></ul></ul><ul><li>2008 : 9 games , 45 days </li></ul><ul><li>2009: 10 games , 44 days </li></ul>

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Hailing from the USSR: <ul><li>AppStore </li></ul><ul><li>StoneLoops! of Jurassica (PlayCreek for iPhone) </li></ul><ul><ul><li>- 51 days in Top 10 iPhone Paid Apps in the US </li></ul></ul><ul><ul><li>- Best result: 2 nd place in iPhone Paid Apps in the US </li></ul></ul><ul><li>Farm Frenzy (Alawar Friday's Games for iPhone) </li></ul><ul><ul><li>26 days in Т op 10 iPhone Paid Apps in the United Kingdom </li></ul></ul><ul><ul><li>Best result: 3 rd place in iPhone Paid Apps in the United Kingdom </li></ul></ul><ul><li>Casual Connect Seattle 2009 Awards : </li></ul><ul><li>TOP MATCH-3 : Around the World in 80 Days (Playrix Entertainment) </li></ul><ul><li>UP-AND-COMING DEVELOPER: The Mystery of the Crystal Portal (Artogon) </li></ul>

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The target casual games market in Russia <ul><li>TOY-Opinion research (conducted February and March 2009): </li></ul><ul><ul><li>612 telephone survey respondents </li></ul></ul><ul><ul><li>4 focus groups </li></ul></ul><ul><ul><li>2 cities: Moscow and St. Petersburg (60% of sales) </li></ul></ul><ul><li>Core target audience in Russia: </li></ul><ul><li>Married women, age 20–40, with an income of approximately 20,000 RUB ($670) per month. </li></ul><ul><li>Consumers want: </li></ul><ul><li>To relax and forget about their problems. </li></ul><ul><li>Casual games to be labeled &quot;regular&quot;, &quot;simple&quot; or &quot;mini-game&quot;. </li></ul><ul><li>To play at home, not at work. </li></ul><ul><li>Consumers do NOT want: </li></ul><ul><li>To get sucked into games. </li></ul><ul><li>To have to remember the names of games. </li></ul><ul><li>Games to become more complicated. </li></ul>

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Players of casual games: <ul><li>Top their phone up only when the balance reaches zero. They top up 500 RUR. </li></ul><ul><li>Buy 1–3 games a month. </li></ul><ul><li>Select games according to genre (69%) and the description on the Web site (33%). </li></ul><ul><li>Like puzzles and logic games most of all and arcade games the least. </li></ul><ul><li>Do not know the price of a game (believe it to be 150 RUB) </li></ul><ul><li>Are prepared to buy old games with a 50% discount. </li></ul><ul><li>Want a special button to minimize a game to the taskbar. </li></ul>

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<ul><li>Thank you for your attention! </li></ul><ul><li>Questions? Write [email_address] ! </li></ul>