At the LA Games Conference 2010, industry leaders discussed the current state of the games industry as the business continues its transition towards a digital future. Focusing on questions like: What does it take to make a blockbuster game these days? What trends and developments are leading the industry? Does the industry need to take more creative risks in breaking new styles of play? What players in the games space will push the creativity? How do you make money in this more and more complicated gaming universe with new digital platforms now competing with the time and pocketbooks of consumers? Who will be the winners and losers in the years to come?
The panelists at the conference were:
Michael Pachter, Man. Dir., Ent. Research, Wedbush Morgan Securities
Nanea Reeves, SVP & COO, Global Online, Electronic Arts
Brian Ward, SVP, Worldwide Studios, Activision Blizzard
Teemu Huuhtanen, EVP, Business Dev. and COmmunications, Sulake Inc. (Habbo Hotel)
Phil Rosenberg, SVP, Bus. Dev., Sony Computer Entertainment America (PlayStation)
Moderator: Eric Goldberg, Managing Director, Crossover Technologies
Michael Pachter opened the session by observing that we are in a state of flux right now. Games used to be in a packaged goods industry, but the digital side is growing fast. It has gone from 0 to billion in the last 10 years. Packaged products are experiencing 2-4% growth. Digital is growing at 25-30% rates and will quickly over take the packaged goods business.
Nanea Reeves is the SVP/COO of EA’s Global Online team that centralizes many of the online services used across the company. From her perspective, they have made a significant investment in digital. In aggregate, the EA online business is now 0 million and should be at b by end of 2011. Most of that comes from a player putting a disc in a tray. One of the challenges is to find other ways to connect and acquire customers.
Teemu Huuhtanen says that Habbo Hotel is now on Facebook. The next big thing will be a Facebook game that can get to 150 million users. Habbo is now at 20 million. He is somewhat cautious about Facebook. He says you need to be careful with Facebook because you can never predict what they will do. He says that it can be a great source for acquiring customers, but can be unpredictable if you run 100% on the Facebook platform.
Next generation blockbusters in the console world are defined differently in the packaged world where it takes 1 million units to ship to be a real blockbuster.
The digital blockbuster of tomorrow will come from big revenue – (0 -300 million). 15 million unique users per month is the target for digital blockbusters in social games (at per month per user). Zynga for example is running at 0-600 million.
The growth of the online side will lead to much more focus on measurement and mining the data to understand sources of value and how you manage the value drivers. Habbu always knows cost of acquisition, acquisition cost by source etc. That means that they can be much more focused on how to drive value.
The largest audience has been teenagers through young men. The second biggest market is 30-50 year old women. Game mechanics are critical to getting women more involved. The bottom line is that women and girls like “good games”, even WOW and Call of Duty should be appealing to women.
We are in the midst of a social sea change with games like Farmville opening up more of the market with much simpler games, although this may not be appreciated by the developers of “hard core” games.
Facebook has been a big open market, although it is getting harder to market there. Pachter says that the Android market is exploding and with HP acquiring Palm there may be another platform available for developers.
Lessons learned about sales from subscription users after the digital download include timing of releases of upgrade packs and how to test new IP experiences. Some of the other big lessons have come from improvements in measurement, such as being able to identify the core customers within the first 7 days of online play.
Overall, the panel was quite positive about the state of the industry and the future ahead. Good news for gamers.
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