Thursday, May 20, 2010

Games - the gist

I was involved in a very interesting project about games for a few months. Here's a few learning points:

There is no single games industry. The skills needed to succeed as a company, the profile of target users and the typical budget to develop and launch a game vary wildly, with AAA console games (think Grand theft Auto and Gears of War) in one end, and casual, free to play in the other.

Product vs service. Launching a game, today, is no longer the end of a long developing process, now let's all go for a long weekend at the beach. It's rather the end of a short developing process and the start of a permanent state of alertness and reaction to user feedback. When they say games now are about the service, it's completely true. Because games now are online, they are being permanently updated and improved.

Online beats Piracy. Game companies learned with the music industry (maybe). You can pirate a CD, but you cannot pirate a live concert. Similarly, you can pirate a PS3 DVD, but you cannot pirate an online expansion pack or an online game server. Have you ever heard of a pirate FarmVille?

Brands are your friends. Remember when two guys in a garage could make millions selling iPhone Apps? Those times lasted for about one year. Now all best selling paid apps are from big brands. Why? Because when customers have thousands of competing offers, they need a way to help them make a decision, and a familiar brand normally does the trick. We are seeing the same effect happen now in Facebook games. Check out the largest gainers of every week and increasingly you will see known brands there.

Social games are nothing new. In other words, the image of the socially awkward teenager playing Nintendo alone in the basement is an exception. Games are inherently a social experience, the problem was that it took 30 years for technology to develop to the point as to allow video games to be multiplayer. Thinking back, even in the times of Donkey Kong and Asteroids, playing in the arcade in the mall was a social experience, wasn't it?

Don't take out your wallets yet. Social games are great. Zynga and its friends are making a killing. It's just like printing money. If they go IPO they will become gazillionaires. What's is wrong with this picture? One single thing: ALL of Zynga's businesses happen within another platform, namely Facebook. How was the saying about putting all your eggs in one basket? They are all trying to create separate platforms (such as, but so far to no avail. If Facebook is the one social networking to rule them all, maybe all the crazy multiples that Disney and EA have paid for Playfish and Playdom might prove to have been a mistake - maybe there are no such things as "social" games, but just Facebook games... Just to reinforce the point, I did a quick mapping exercise. As of March 2010, 9 out of 10 top Facebook game developers were located within a 20 miles radius of Facebook HQ.

Meanwhile, beyond Sillicon Valley... In the other hand, there is life elsewhere. Companies are doing very well by simply staying out of Facebook and going for other social networks and other demographics. Mentez and Vostu dominate Google's Orkut and the Brazilian Market. There is another company doing the same in Russia. Facebook? No thanks.

In short, there is a lot going on in the games industry. As a parting thought: Games is the only media industry that has not been disrupted by the internet. Instead, games companies - to different extents, of course - are riding the wave and learning very fast. The figures are there to prove the point: While TV has remained stable and newspapers, books and magazines have been shrinking, games have been growing at a CAGR of 5%.

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