Casual games market overview

Nov 10th 2008 at 15:38 by Alexander Lyskovsky

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This resulted in the emergence of the first professional teams specializing in the development, publication and distribution of casual games. According to research by the International Game Developers Association (IGDA) and the Casual Games Association (CGA), from 2002 to 2003, the downloadable casual games market rose by over 100%, reaching $115 million in North America alone.

In 2005, the worldwide turnover of the casual games industry reached $713 million (including $314 million in North America). In 2006, the size of the market was just shy of $1 billion. According to the IGDA, this figure will soon cross the $1.5 billion mark, with the North American share of the market being estimated at $690 million. Analysts at DFC Intelligence also note that the actual growth rate of the casual games market currently more than doubles the projected levels for 2004. On the whole, over 150 million people worldwide have downloaded at least one demo version of a casual game from the Internet.

The growth in sales of casual games resulted in an increasing number of companies becoming interested in the market. For example, UK-based Eidos recently announced the creation of its casual games label, SoGoPlay; France's Ubisoft is making strides i nto the casual games industry as well; and major video games publisher Electronic Arts has opened a special department dedicated to casual games.

The industry was especially attractive to companies located in the territory of the former Soviet Union, as the cost of development in ex-USSR countries appeared to be much lower than in Europe or the U.S. The average cost of developing a casual game in Russia is $20,000-$40,000, whereas the same undertaking in the U.S. would cost $50,000-$100,000. However, the cost of developing a high-quality casual game can be significantly lower if it takes place in Eastern Europe. At the moment, around 30% of the casual gaming content created worldwide is developed in Russia. And it's not uncommon for these games to become hits on the Western market.

Active development in Russia of products for the international market has an historic basis. The economic crisis of 1998 in Russia led to a slump in the prices of CD versions of games, and many developers from post-Soviet countries started selling small games that could be created quickly and sold online on the Western market. Russia's Alawar Entertainment, KraiSoft Entertainment and Puzzle Lab were the pioneers of this process. Currently, there are more than 100 developers and publishers of such games from Russia, Belarus and Ukraine.

Over the past few years, both the number of products from East European developers and their quality have increased significantly. It's remarkable that East European developers have already learned to create high quality products that have proven to be quite successful on the Western market and dominate the Top 20 lists of such popular portals as RealArcade, Yahoo! Games, Bigfish Games and others. A game's appearance on these lists directly affects its commercial success. According to the CGA, the world's top five casual games account for about 35% of the market's revenue; the top 10 games represent over 60% and the top 20 titles make up over 75% of the overall market. Therefore, all other games on the market represent a 25% share.

Another interesting aspect is the revenue distribution pattern and its correlation with the game distribution model. The shareware model, which is standard for the casual games market, is the main one, bringing in 43% of the total revenue. Following it is the ad model, with approximately 39.5%. Distribution via subscriptions accounts for about 17.5%.

The high quality of products from ex-USSR developers and the fact that the creation of a game is far less expensive in Eastern Europe than in the West (at the same level of quality) resulted in many Western studios ordering games from East European developers.

North America remains the biggest market for the distribution of casual games, with other markets capturing a 30% share of the overall revenue. Nonetheless, experts are forecasting the exploration by casual games companies of new regional markets that can potentially double today's sales. The Russian market is among the most promising ones, but despite the obvious success of Eastern European developers on the Western markets, their products haven't been properly represented in Russia.

Alawar started developing the Russian casual games market in 2004. The process was complicated by the fact that the distribution market in Russia had to be built virtually from scratch. At the time, the company faced an underdeveloped telecommunications and payment infrastructure nationwide, a small number of localized products and prices that weren't adjusted to the income level of potential Russian customers. Over the course of three-and-a-half-years, Alawar implemented a special pricing policy for the East European market and raised public awareness of the existence of casual games and the various means of paying for them. In particular, SMS registration had a significant impact on the growth of the East European market of casual games. This method allows users to purchase a ringtone (or any other mobile content) by sending an SMS message from a mobile phone and receiving a link to an audio file or a serial key for unlocking the full version of a game. This method accounts for over 80% of the total number of casual game sales in the country.

Intense development of the market did not elude the attention of other companies. Following Alawar, other experienced East European players entered the Russian market of casual games, including Realore Studios, Nevosoft and Absolutist. In addition, casual games are now featured on the largest portals of the Russian Internet, including Rambler.ru, Mail.ru and RBC.ru.

Apart from the largest Russian portals, game sections are now appearing on other kinds of Web sites, including the popular iXBT.com, accounting portal Klerk.ru, the official Web site of Cosmopolitan, Subscribe.ru (one of the largest informational channels online) and many others. While the owners of small sites are primarily interested in profit, larger portals use casual games to increase customer loyalty and draw traffic to their resources. As the number of online stores with casual games and customer awareness grow, sales in the Russian market and other up-and-coming local markets will increase accordingly. Today, the Eastern European market is growing at a terrific rate, increasing approximately 20-30% each month. As a result, by the end of 2008, the Eastern European market will likely have grown sevenfold compared to 2006 and will deliver $10 million in revenues in 2008.

Western developers and distributors have noticed the growth of the Russian casual games market. At this time, there are several games from Western companies on the Russian segment of the Internet, such as those from Oberon Media, iWin and Sandlot Games. The number of Western hits on the Eastern European market will increase in the future. This process will be stimulated by the growth of sales and the price per copy. Although casual games had been sold for 90 rubles per copy, at the end of 2006, all online distributors of casual games on the Russian market increased the price per copy to 140 rubles. As this step turned out to be successful and did not result in a decline in sales, there will be a steady increase of the price of casual games as the market in the Russian segment of the Internet continues to develop.

Alexander Lyskovsky is the president of Alawar Entertainment, a developer, publisher and distributor of casual games. To learn more about the company, head over to the website.