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Casual Games

Foldit – crowdsourcing disease solutions using games

By | Business models, Casual Games, free | No Comments

Crowdsourcing and third party monetisation (aka the trend to ‘free’) are a couple of my favourite themes and Foldit combines them both to help solve biology problems that have applications in cancer, HIV and Alzheimers.  Brilliant.

Foldit have released a puzzle game in which the solutions that the players come up with are real world possible solutions for how proteins might fold.  That is signifcant because there are many, many ways in which proteins might fold and finding the optimal solution is one of the hardest problems in biology, and more importantly one that can’t be solved cost effectively through the use of raw computing power.  It is important because understanding how certain proteins fold is on the critical path for combating the diseases listed above.

You can download the game from Foldit’s site, and if you play you will see it is a game with similarities to some of the iPhone based puzzle games.  It is a little rough round the edges, but both the concept of what they are doing and the practical implications are very cool.

Thinking ahead, this idea of using games to crowdsource solutions to difficult science and engineering problems could be a way to finance free to play games.  The idea could even be extended to non-scientific problems like testing the response to advertising campaigns or product ideas.  Foldit feels like it has been put together by the people looking for the solution, but there is no reason why the problem couldn’t be defined in the abstract and offered up to third party developers who would then design the game in return for payment based on the value of the solution delivered.

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iPhone takes major market share in mobile games

By | Casual Games | 4 Comments

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As this graphic from Flurry Analytics shows the iPhone OS is killing the Nintendo DS and PSP in the portable games market – original story on Techcrunch. To put some numbers around that, Flurry believe that $500m of iPhone games were sold through the App Store in the US last year, up from $115m the year before.

The games market has historically been a corner of media world where standardised platforms have played second fiddle to purpose built devices, in both fixed and mobile.  Maybe that is now starting to change.  What is exciting from a games point of view is the ability to take advantage of iPhone features that it wouldn’t have been economically viable to build into a pure play portable gaming device – that ranges from the obvious benefits you get from an accelerometer today to maybe augmented reality games using the camera and GPS in the not too distant future.

Looking even further forward I expect a range of other sensors to get built into smartphones, including biometric sensors.  If I’m right then games developers will find new and exciting ways to use them and the iPhone and its ilk will continue to take share from Nintendo and Sony.

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Games publisher value add in an iPhone world

By | Casual Games, Venture Capital | 2 Comments

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At the GDC conference in Cologne this morning I attended a panel session which was addressing the question of how games publishers add value to games developers in the iPhone ecosystem.  This is a topical question because in traditional games publishing the ability to deliver retail shelf space was beyond most developers and so they had little choice but to work with a publisher.  In the iPhone world this critical gating function has simply gone away – when Apple launched the App Store they announced that they would take submissions direct from developers and release everything that complies with their fairly simple guidelines.

As you’d expect the panel participants, which included representatives from leading iPhone publishers Chillingo and ngmoco as well as leading iPhone developers Subatomic and Fishlabs, had lots of ideas on the topic, which more or less fell into the following five areas (please shout if I’ve missed something):

  • Money
  • Marketing services
  • Advice on how to price the app (what level to start at, when to reduce it)
  • Advice on how to make the game better
  • Software the developer can use to make her game better and drive distribution (e.g. stats and social features)

I think that the last item on this list could well become the most important over time but it is largely a thing for the future.  The company furthest ahead in this regard is ngmoco and they released version one of their plus+ software only very recently, and Chillingo who are probably in second place have announced their first version of their Crystal SDK will be released shortly.

So the panellists talked mostly about the first four items on the list and the debate reminded me of discussions about VC value add to startups.  There is the money element and then there are the other things which are slightly intangible and which a startup or developer could do for themselves, but where a VC or publisher benefits from exposure to a much greater number of projects and might have more experience and/or contacts to bring to bear.

The fourth item on the list, that publishers help make games better, is perhaps the most contentious with Sergei of Subatomic (whose Fieldrunners game I love btw) saying openly that his company has all the creative skills they need and that publishers trying to help might not actually be helpful.  This of course has parallels in the VC world where some entrepreneurs will argue that they don’t need any help from a VC.

In the end this all comes down to the individuals and funds/companies involved.  Some startups will have enough experience and connections that however much a VC brings to the table it won’t make that big a difference to the eventual outcome and I’m sure the same is true of developers.  Sometimes though, and I would argue most of the time, the reverse is true.  When there is a good chemistry and alignment of thinking between the key individuals at the project and the investor you get a real 1+1=3 effect which goes way beyond the money.

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Gaming – web beating consoles and distributed just getting started

By | Casual Games | One Comment

Comscore data out on Friday shows that online gaming audiences grew 22% in the 12 months to May 2009, which contrast sharply with the 17% drop on console game sales over the same twelve month period.

Console gaming has long been the one area in which closed proprietary platforms have won over the long term against open standards based platforms.  If this trend continues then that anomaly will come to an end – which is what I think will happen.  It is impossible to separate out the effect of the recession in pushing people towards cheaper web options, or to know if once people have switched for cost reasons they will switch back when their finances get stronger, but my instinct is that PC experience is more than good enough now, and hence for many the shift will be permanent.

Furthermore, the trend towards more and more social games plays to the PC as the natural home for comms and social technologies.

Online games is a pretty mature business now – as you can see from the table below the reach is c50% of US internet users and four of the five largest players are big established companies.

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Distributed gaming, by contrast looks much more open from a startup perspective.  As you can see from the table below there are no established companies playing in this market and MochiMedia is the only one with greater than 1% reach.

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The problem with hit based models

By | Casual Games, Content | 7 Comments

This article from Slate captures the problems with the games industry brilliantly.  It describes how despite record sales of around $32bn last year all the leading games publishers are now losing money (including Activision-Blizzard, owners of World of Warcraft).  Then comes the (obvious) explanation:

So how can publishers lose money amid such incredible sales and record growth? The answer is simple: They’re spending more than they’re bringing in. Game development budgets have ballooned, and publishers are reeling because they can’t keep the costs under control.

As we know, this wasn’t always the case, I remember when my uncle wrote a flight simulator game for the ZX Spectrum in his spare time, made £5k and bought a new car, or as Slate puts it:

Games weren’t always expensive to make: In the early days, a boy with an Apple II could rule the world.

As has happened across many different games genres and formats development costs went up as publishers and developers looked to compete on quality.  No news there, but reading the Slate article got me thinking if there is a weakness in the human psychology which makes us over estimate the chances that our pet projects will be one of the big winners, one of the few blockbuster successes.  That would explain why games companies have let development costs spiral out of control.

The latest format to go down this path is browser based casual games where average costs are rising from the low sub $50k to $700k for Bookworm Adventures.  iPhone games are the new black though, and people are releasing games that cost next to nothing to make and bring in thousands of dollars per day – it won’t last long though as big games companies pile into the market and games industry vets form startups in this space that I’m sure will soon be venture backed.

Experience in Asia suggests virtual goods is the biz model for social media

By | Business models, Casual Games, Facebook, MySpace, Virtual Worlds | 7 Comments

This post by Bill Gurley of Benchmark in the US gives a great comparative analyis of how social media sites are monetising in Asia and the US.

The headline is that the leading western socnets Myspace and Facebook are generating reasonable revenues (Bill estimates current run rate is $650m and $450m respectively), but that if their Asian equivalents are anything to go by they could be generating much more by bringing virtual goods and casual games more firmly into the mix.

TenCent is the leading example – it is a Chinese IM business that has 355m users, $1.2bn in annual revenues and a market cap of $11.2bn.  When adjusted for the cost of living in China TenCent makes as much per user in advertising as Facebook and Myspace AND then makes a further 8x that from other revenue streams, primarily virtual goods and casual games.

There are similar stories at DENA and GREE in Japan, although these companies are smaller.

Read Bill’s post for the full analysis.

Bill thinks that western socnets haven’t capitalised on the virtual goods opportunity as much as they should have in large part because the execs over here don’t really believe deep down in virtual goods and the value they have for consumers.

This last point certainly rings true with me.  Discussions of virtual goods business models are all too often met with a rolling of the eyes over here, and pointers to the success of Asian virtual goods businesses are met with looks of incomprehension and questions about whether things are simply different ‘over there’.

As Bill points out the fact that here in the west we are happy to embrace real world brands to establish our identity, often at vast expense, suggests that we ought to be able to translate that to the virtual world.

However, as Bill points out, there is a right way and a wrong way to do virtual goods, and simply launching them as an offering is unlikely to succeed.  As with everything else bringing in execs who have relevant experience will help and constant iteration and evolution of the product will probably be required before you hit upon the magic formula.

Strategy decay in the film industry

By | Casual Games, Consumer Internet, Video | 9 Comments

At the Library House Mediatech conference yesterday there was a presentation from a company called Slingshot Studios which could be described as a ‘Film2.0 business’.

They described how Hollywood has chased up film budgets to an average of $70m on production and a further $50m for distribution by focusing on the very limited strategy of having big stars and getting great reviews.  I’m sure these are drivers of film success, but to what extent I’m not sure – other harder to control variables like quality of plot and dialogue might turn out to be more important. 

It is a common strategic error to focus on the levers of a business that are easy to control and ignore the ones that are more difficult, even if they would have more impact.

The Slingshot guys also made the point that Gen Y’ers care less about stars and reviews than the rest of us, so the market is moving against the Hollywood strategy.

I buy all of this, and see the periodic huge success of low budget movies like My Big Fat Greek Wedding as evidence.

Slingshot describes itself as ‘an all-digital, British film company that is dedicated to making good films, differently’.  They have released six films, with seven more in the works.  I’m not sure what the budgets are, but given they are VC rather than hedge fund backed I’d be surprised if they were more than a small fraction of the Hollywood averages.

This trend towards bigger budgets based on more of the same across a couple of key dimensions has parallels in the game industry where console manufacturers have chased up budgets to similar levels by focusing on better and better graphics and ever more intricate and involved game play.  This created a large opening for casual games which had much simpler game play, less sophisticated graphics and were much cheaper.  Maybe something similar will happen in the film industry.

From LibraryHouse Mediatech presentation by startup Slingshot.

Average Hollywood film costs $70m to produce and a further $50m

Recognise themselves in the films not caring about stars or reviews

Film industry has been chasing its budgets up in pursuit of always doing better with an established formula – stars, often special effects etc.  Just like hardcore games – opportunity is for equivalent casual games

Slingshot movies are cheap and focus on what research shows works

investment keeps flowing into virtual worlds

By | Casual Games, Virtual Worlds | No Comments

Copied from a VWM press release (from Blackberry so no link or formatting);

London, England – October 15, 2008 – Virtual Worlds Management, the leading virtual worlds trade media company, has announced findings from a comprehensive study of accountable transactions showing that venture capital and media firms have invested more than $148.5 million dollars in 12 virtual worlds-related companies during the third quarter of 2008 with participation from many more VC firms and angel investors. The total investment in the virtual worlds space for 2008 is now over $493 million. The news was announced just prior to the upcoming Virtual Worlds London conference which takes place October 20-21, 2008. Individual investment details including companies and investors can be found at http://www.virtualworldsmanagement.com/2008/q3.html

The bulk of the investment is in the entertainment space, with all but $22.4 million going to developers of worlds with strong gameplay elements, ties to media brands, or the youth sector. As we’ve previously reported, youth worlds are constantly on the rise, and investors remain interested in backing them as long as they can find unique propositions.

“Many smaller investments were made across a spectrum of youth-oriented virtual worlds,” explained Joey Seiler, Editor of VirtualWorldsNews.com. ” $35.64 million was invested in seven virtual worlds aimed at kids through teens. That’s up significantly from Q1’s $16.03 million in eight youth virtual worlds and Q2, which saw no investment targeted at youth worlds.”

The numbers overall are down from earlier quarters this year, but that’s true of the larger venture capital space as well. Investors, while still remaining active, are warning portfolio companies that future rounds may be even tougher to pull in. Socializing, entertainment, and games remain strong among consumers, though, as well as investors.

Thanks to Nick Parker for the tip off.

Massive investment into social games and virtual worlds

By | Casual Games, Virtual Worlds | 8 Comments

Jussi Laakkonen of social gaming stealth startup Everyplay has a great post tracking investment in the social games and virtual worlds space.  The simple message – there is a whole heap of activity, with roughly $2-5m being invested per week, and some large individual deals, including Balderton‘s investment of $87m into Big Fish Games.

Check out the post for the long list of individual deals.

Jussi makes the point that all this investment activity is a sign that the sector will generate massive profits in 4-7 years.  Anyone who reads this blog regularly will know I share that view.  What I am starting to worry about a little though, is that the amount of investment is getting out of kilter with the size of the opportunity, which might lead to what one of my partners has described as venture fratricide.

That said, most of the investment is US based and I think some of these plays will turn out to be geographically/culturally focused – which makes me more optimistic about the prospects for future investment in this space in Europe.