Industry Roundtable (Part 2): Is casual recession-proof?

CasualGaming.biz asked some of the biggest companies in the sector one question – Do you think the global economic recession will have an adverse effect on the casual games sector?

Here, Muskedunder, PopCap and PlayFirst tell us what they think…

Magnus Alm – CEO, Muskedunder Interactive

No, rather the opposite. Low price point titles will benefit from a lower spending per household on entertainment. Casual games depending on advertisement business model will see initial drop in CPM. It will be possible to find a larger user base who are getting more and more used to free entertainment – therefore the ad-based business models will win in the long run, when the economy swings back on track. Business models based on microtransactions will also benefit from the financial climate, as it’s easier to spend a dollar here and there, rather than sign up for a large and expensive package.

PopCap spokesperson:

In terms of your question, we are hearing this one a lot of late. We at PopCap are relatively optimistic. When economic times are tough, the most broadly appealing, cost-effective forms of entertainment tend to not only survive – but thrive. A good example of this is the rise of the feature film during the great depression.
 
We at PopCap believe that casual games are about as “recession-proof” as any entertainment-oriented product or service. While casual games typically cost £15 or less, they provide hundreds of hours of entertainment for virtually all household members. If you compare this to the purchase of a traditional ‘hardcore’ video game that provides perhaps 50-80 hours of entertainment (and usually for only one or two members of the household/family), then it’s pretty good value.

To return to the feature film analogy… you can get PopCap’s Bejeweled and Peggle on your mobile phone or iPod for roughly the same price as renting a movie – or buying a bargain basket one. But Bejeweled and Peggle will give you hundreds of hours of entertainment while the movie will only give you two...maybe four if you don’t mind watching it on repeat.
 
Casual games represent great value and offer a fun, stress-free distraction from the worries of the day and with nearly 90 per cent of PopCap customers say that playing our games helps them relax and feel less stressed, that can’t be bad.

John Welch – President and Co-Founder, PlayFirst

I do believe the economy is already having an adverse effect on the casual games sector because the lack of investment capital flowing into the sector will strain businesses and therefore reduce the amount of content developers are able to produce. Add in the competitive pressures squeezing margins in casual gaming and you see a further reduction of available content. As this comes on the heels of a gold rush a few years back that led to a glut of copycat content, a diminished supply might actually be a good thing. But I fear the recession could bring a diminished capacity to innovate breakthrough content and expand the sector. Time will tell – there are still a lot of great companies with passionate people putting out new games.
 
Casual gaming will likely be more insulated than other industries because it offers consumers value-oriented entertainment. It’s cheaper to buy a game on playfirst.com than to go to a movie. The sector continues to grow as new consumers discover our products. While there are certainly adverse effects, down markets also offer opportunity for companies with the right mix of smarts, guts, and, admittedly, luck.

To that last point, PlayFirst closed a big venture round a year ago, so we are very well capitalised. The lack of funding for competitive companies only helps us from a competitive perspective. Similarly, the lack of public Wall Street money in large companies means slower consolidation and more time for companies like PlayFirst to continue improve our position. As the first publisher focused exclusively on casual games, we had little competition in signing developers to our label for the first year or so – but there weren’t that many developers. Then it got really frothy for a while and deals became very competitive. In 2009 we could be approaching a point of equilibrium in terms of supply and demand, risk and return.
 
What does this mean for our business? Going into our fifth year, PlayFirst now understands the anatomy of a hit game. The next stage for PlayFirst, now that we have made quantity, quality and brand building a way of life, is efficiency. Not that money wasn’t a factor in earlier years, but it wasn’t enough of a factor. Our goal in 2009 is to contain costs while also expanding our publishing output, which will bring us to profitability later this year. The expansion in capacity allows us to continue making sequels and line extensions while also investing in a new IP for release each quarter.
 
I’m a “glass half full” guy, and I try to spread that sentiment around the company. It’s just a heck of a lot more fun that way. We see the challenges, and we don’t ignore them, but we view them as bumps in the road and we’re more excited than ever about the destination and the stops we’re making along the way. Speaking of which, check out Chocolatier: Decadence by Design, which launched a few days ago, and stay tuned for Emerald City Confidential, Diaper Dash, and our big new IP Wandering Willows later in Q1.