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.

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.

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

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

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.