Summary:

PopCap’s string of success building top-notch video games like Plants vs. Zombies and Bejeweled has won it a reputation for making premium titles. But as the gaming industry moves to become more social and emphasize cheaper games and in-app purchases, PopCap is learning to evolve with it.

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PopCap’s string of success building top-notch video games like Plants vs. Zombies and Bejeweled has won it a reputation for making quality premium titles. That execution — originally on desktop games but now on mobile and social platforms — has allowed PopCap Games to set higher prices on its games, enjoy profitability throughout its first ten years and position itself for an IPO later this year.

But as the gaming industry moves to become more social and emphasize more free-to-play and in-app purchases, PopCap is learning to evolve with it. While PopCap believes there will always be a place for high quality, big games that demand a $20 premium price, the company is increasingly looking at new business models that emphasize shorter content, virtual goods and freemium models. It shows how the market is forcing everyone, even the top players, to rethink their game plan.

PopCap, which reportedly pulled in $100 million in revenue last year, is still building most of its business off premium games. Bejeweled 2 and Plants vs. Zombies ranked among the top ten paid iPhone games in the Apple App Store last year. Bejeweled 3, a $20 title, hit the top ten in the paid rankings of the new Mac App Store. But PopCap has started to branch out from its model with apps like Bejeweled Blitz, a free Facebook app. The game eventually appeared on the iPhone bundled with the Bejeweled 2, which recently got a price drop from $2.99 to 99 cents. Bejeweled Blitz features a faster-paced experience and also allows cross-platform competition between Facebook and mobile, making the game more social.

PopCap in May also introduced the ability to buy additional coins for Bejeweled Blitz to provide players with in-game boosts. This feature alone pulled in $1 million in revenues within the first several months. Last month, PopCap released Zuma Blitz, another free Facebook app that builds off the success of Zuma. PopCap also updated its Peggle iPhone app in October with the option of buying Peggle Nights as an in-app purchase for $2.99.

PopCap’s Andrew Stein, director of mobile business development told me the shift in strategy reflects PopCap’s interest in meeting users’ changing tastes. He said the social, free-to-play games are now the fastest growing part of PopCap’s business. As a result, PopCap is actively looking at making more games available for free with monetization through in-app purchases.

“We are changing a lot of our game designs to reflect the way people are buying and consuming content,” Stein said. “It’s moving to lower price points with updatable content. If you look at the top 20 grossing (iPhone) apps, many of them are freemium. It’s something people are getting pretty used to. A year from now, we’ll have more of the freemium and more snackable types of content.”

PopCap has also been moving in this direction as it expands to Asia, where free-to-play and virtual goods are common. The company in September announced a multiplayer free social gaming platform in South Korea with NCsoft and partnered with Chinese social network RenRen in August.

Stein said it doesn’t make sense to build games with 20 to 30 hours of content when users are looking to play for free or pay a dollar or two for an app. He said that’s why Bejeweled 2 is now a 99 cent app after originally selling for $10.

Freemium, however, is more likely to work its way into new games instead of being built into existing titles. Stein said developers have to be careful not to alter the experience of the game by incorporating in-app purchases. “Freemum is a different experience,” he said. “To be successful, you have to start from scratch with a freemium game in mind. You can’t retrofit that on to Peggle or Plants vs Zombies without changing that a lot.”

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