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Summary:

We’re playing more online games than ever before, but we’re paying less for them, interactive marketing firm Future Ads said today. Of the 8,000 online casual gamers surveyed by the company this spring, 61 percent reported gaming more than last year, while nearly 80 percent of […]

We’re playing more online games than ever before, but we’re paying less for them, interactive marketing firm Future Ads said today. Of the 8,000 online casual gamers surveyed by the company this spring, 61 percent reported gaming more than last year, while nearly 80 percent of those who also own a video game console said they’ve been making “significant” spending cuts in console-related purchases due to their cost. (Separately, NPD reported a drastic dip in May 2009 video game sales, down 23 percent from the same month last year.)

GamevanceSurveryResults531091
These results are bad news for game developers that still depend on traditional retail sales or monthly subscriptions (especially during this recession). At the same time, they offer further evidence that gamers are increasingly turning to interactive entertainment that’s cheap (as with bestselling iPhone games that usually sell for a few bucks) or free (as with incredibly popular social games like YoVille.) It may also be conveniently good news, it should be noted, for Future Ads, which owns ad-driven casual gaming site Gamevance and game hub PlaySushi. Then again, with online advertising revenue also down, ads are far from a reliable panacea for game developers anyway.

The survey’s macro trend, however, is undeniable, and one to which major game publishers are finally adjusting. After years of developing retail and subscription-based MMORPGs, for example, Sony Online Entertainment last April put out Free Realms, a freemium, casual gamer-friendly title, and was duly rewarded with some 3 million registered users in less than two months. (Sony hasn’t disclosed how many of those converted into paying customers; an educated guess is about 10 percent, paying around $2.4 million monthly.) Other freemium online games from big publishers, like Electronic Arts’ Battlefield Heroes, are on the way; if they replicate Free Realms’ success, they’re likely to shape consumer spending patterns even after the recession. Since they’re produced on lower budgets, freemium games can’t offer all the flash of a game retailing for $60. But if the history of the Internet is any guide, great-but-expensive almost always gets beaten out by OK-but-cheap, or better yet, free.

Image courtesy FreeRealms.com.

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  1. Remember, though, that many of the free to play MMOs sees some account created and then abandoned after the person decides the game’s not for them. In the case of freerealms some of those 3m accounts will never be logged into again. It’s as if Blizzard counted the 10 day trial accounts as accounts even though some percentage of those people don’t continue past the trial period.

    What will be interesting is to see if free games can attract enough scale and get enough revenue to justify continued development. If not, then they’ll expand, hit a ceiling and slowly die as the company can’t justify creating new content for them.

  2. Will Robertson Monday, June 15, 2009

    Maybe OnLive can change this! I just wrote a report on the company for a course I am taking. I found that IF their system does work well, performance-wise, they could really shake up the gaming industry. This always connected type of game opens up some more revenue streams to traditional game publishers too. Many more opportunities for in game advertising.

    Once all games are considered “online” I think the lines between the two will be very blurred.

  3. Will Robertson Tuesday, June 16, 2009

    Maybe OnLive can change this! I just wrote a report on the company for a course I am taking. I found that IF their system does work well, performance-wise, they could really shake up the gaming industry. This always connected type of game opens up some more revenue streams to traditional game publishers too. Many more opportunities for in game advertising.

    Once all games are considered “online” I think the lines between the two will be very blurred.
    OH! You’re my new favorite blogger fyi

  4. Daniel James Tuesday, June 16, 2009

    Aye aye. Echoing Rick’s point; 3M registered users is not a particularly useful metric. Sony has obviously spent a *lot* on launch marketing for Free Realms — it’s still plastered all over most of the Flash / kids games portals and for a while had takeovers etc. I’d estimate at least a $5M launch marketing budget (which is not necessarily a bad idea for what I would guess is a $20M+ game), so you’d expect a good few million registrations from that.

    That said, the registration process takes place in Flash ahead of the 70MB download and install, which makes me suspect that a large number of accounts never actually played. I’m afraid I think your 10% guess is very optimistic, too, but you never know! Stranger things have happened at sea.

  5. It’s always difficult to assess online games and their success right away. One big problem as you guys have noted is you can’t always go based on the subscriber base. In a way, game subscriptions are a lot like the gym business. They get people to sign up (especially the “traditional” MMO model of giving away the first thirty days) then people let their credit cards get dinged for a little while until they realize they’re not playing anymore and they ditch. Sure the company’s still making money but it’s due to inertia which just prolongs the feeling that they’re succeeding when in fact they’re failing.

    I remember a statistic from the gym business where they added 1.7 million members in a year…but lost 1.4 million. I liken it to baling out a sinking boat. You’re doing enough work to stay afloat but just barely. Might be better to fix the hole and stop wasting time trying to just stay afloat.

    As far as the “report”, I think it’s no coincidence that the source of the report is Future Ads as Wagner touched on. It doesn’t take an analyst or a research firm to tell you that three fundamental truths are always going to be at work in online gaming:

    1) People want to be entertained, especially when times are tough.

    2) People don’t want to pay a lot of money for said entertainment.

    3) People are extremely fickle when it comes to entertainment.

    All the non-free-to-play games out there are going to suffer a bit but depending on how invested the gamer is you’re not going to see mass exoduses away from WoW or the like. Casual games by their nature will see a lot of churn (you make a game that’s easy to drop into and start playing…it’s going to be easy to leave too). Kids games are already well-known to be very fluid market. Kids whims change even faster and all it takes is for a couple of friends to hit the next big/fun game out there and you’ve lost another 5-10 accounts.

    The reality, in my mind at least, is that this is a great period for someone to deliver a solid game with a lot of perceived value. The real danger for the game industry as a whole is the feeling that they need to reduce prices or give away their products in order to sell in this climate. That’s a mistake. Sure, people don’t want to pay $60-70 for a console game (I never got this concept…always $10-20 more than a PC game for a platform with less customer service issues to worry about since the configs are the same and a larger market) but free-to-play only works if you have a really compelling reason for people to dive into the microtransactions you’re hoping to make money on (don’t even talk to me about advertising in games). I think a couple companies are going to make this mistake before the recession starts to turn.

  6. renaissance chambara alias Ged Carroll – Links of the day Tuesday, June 16, 2009

    [...] Online Gamers Playing More, But Paying Less: Report [...]

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