I was recently doing some background research on the Gaming Industry as a whole. The numbers are mind-boggling. Video gaming industry was worth around $100 billion in 2010, and online gaming companies are catching up real fast, at around $23 Billion in 2010. I did some further research into Electronic Arts (EA) – (NASDAQ: ERTS) which is one of the world’s leading developer, marketer, publisher and distributor of video games. Here’s the break-up of the games available from EA as of now:
- Video-console games: 480
- Desktop games (PC & Mac): 270
- Mobile games: 220
- Online games: 24
This is completely understandable from EA’s point of view – since EA’s core competency is creating video games for consoles such as the Xbox, the Wii, and the PS3. Thus, this sector comprises of nearly half (or 50%) of the total number of games currently developed/marketed/sold by EA worldwide. But the question that invariably arises here is – for how long can Video-gaming companies like EA keep their cash-flows intact with Social Gaming catching up real fast, and the iPhone and other mobile devices breathing down the neck? Especially, since online gaming companies are coming up with superb online-only games, week after week; and a few of them exclusively available over the web through your favorite Social Networks (According to AppData, CityVille now has 16.8 million daily active users, compared to FarmVille‘s 16.4 million. Looking at monthly active users, CityVille is also ahead with 61.7 million users, while FarmVille trails behind with 56.8 million users – Courtesy, Facebook Game Developer Zynga).
Yes, we’re talking about Social Gaming – tightly coupled with Mobile. So, what is the FUTURE of Gaming?
Technically, the future of Gaming is Mobile. It’s a revolution that we have to accept – whether we like it or not. For video-gaming companies looking to make the transition into social gaming, here’s the top 4 long-term strategic outlooks:
1. Keep Your Core Business, But Acquire a Division for Online Gaming: In 2009, EA announced its acquisition of the Facebook/social gaming company Playfish for between $300-400 million. Thus, gamers of all ages enjoy titles like Pet Society, Hotel City and Restaurant City on social platforms like Facebook and others. Besides, EA has a division called “EA Interactive” which represents EA’s business in the emerging areas of online and mobile games. EA Mobile is the world’s leading wireless entertainment publisher – including the #1 app developer on Apple’s App Store — with award-winning games such as Tetris, Scrabble, Bejeweled, The Sims, and Need For Speed. Pogo.com is one of the leading casual gaming destinations on the Internet, with more than 1.9 million paying subscribers each month. EA Interactive is also home to EA’s growing business in the social gaming sector. (Web source: URL). What this all means is – in forth-coming years, we could see a range or new games and newer versions of already existing blockbuster social online games from EA. And other major game developers as well.
2. Acquisition is better: Zynga is having a great solo run. Speculations are and always have been ripe as to who would acquire Zynga? My best bet – either Sony or Microsoft. But whoever does finally decide to acquire Zynga – must pay a lot of cash since reportedly valued at $15 billion to $20 billion, Zynga filed with the SEC to raise up to $1 billion in an initial public offering on July 1, 2011. Zynga plans to have its IPO after the U.S. Thanksgiving holiday in late November, 2011. Thus, as per my predictions – social gaming company acquisitions are highly on the cards, which for social gaming, definitely is, a very positive sign. Microsoft is soon predicted to come out with their own version of Social Networking platform – Socl, and I wouldn’t be surprised if Zynga gets acquired by MSN. Will definitely give an edge over Google since Google+ really lacks social gaming features.
3. New monetization models need to be constantly worked upon: Older CPA models are good on paper, but heavily under-perform. Personally, am a great believer of f-commerce and if 2 things could be done, am sure, could raise considerable moolahs for the publishing platform and gaming companies as a whole:
- Coupling social games with deals/coupons/cash-back deals – i.e. essentially, selling customized, geo-targeted virtual goods. Play games, win points, use a calculator to translate the virtual moolahs into coupon deals/cash-back purchases and get benefits in real life.
- Coupling social games with f-commerce apps – i.e. essentially, allowing users to redeem their points for purchasing real items via e-Commerce sites with f-commerce apps on social networks. Much realistic in look-n-feel than the previous option – beneficial as well.
4. Apple App Store: You need it to survive in the long run. The question is how can the big three console manufacturers, Sony, Nintendo, and Microsoft, keep consumers engaged with expensive consoles and expensive games ($30 to $60 and beyond) when Apple offers a multi-purpose, portable media device that can download games for $0.99 a pop or, in many cases, free? Thus, video-gaming companies will need to make this transition into offering versions of their most successful games, either online, or absolutely new games altogether released in App Store as apps. Zynga’s Live Poker and Playfish’s Biggest Brain are prime examples of social games turned iPhone apps.
Here’s 2 excellent articles which gives a deeper insight into the future of Gaming.