The 2009 LA Games Conference was held this week, at the Hotel Roosevelt, in Hollywood, CA. Developers and industry experts gathered here to discuss the latest trends, issues, and topics surrounding the video game market.
Most of the presentations were conducted in a panel round-table format, allowing each industry expert to contribute to a variety of questions asked by either the moderator or members of the audience.
Discussions ranged in topics, with each panel speaker citing research data and sales indications, providing insight into the business-side of video game development. The speakers often referred to recent case studies to demonstrate intriguing points on game marketing and sales strategies.
MARKET ANALYSIS
Nick Williams, Director of OTX Research shared with attendees the phenonenom of internet hype with his discussion of Mad World, which was published for the Nintendo Wii. His firm tracked the popularity of Mad World among internet users, and found that prior to launch, this title was wildly popular, yet Wii owners were virtually unaware of the existence of Mad World. Subsequently, Mad World really did not sell.
This appears to have been a case of misdirected marketing, and though the strategy for Mad World managed to raise a tremendous amount of hype, the marketing was targeted towards the wrong audience.
Williams then provided analysis of the marketing for Infamous and Prototype. Both titles are going to be published for Sony’s PS3, but Infamous is an exclusive on the PS3. Williams admitted that it is difficult to capture how well a new Intellectual Property (IP) will do, but with tracking data and polls, OTX Research was able to plot some prospective data.
Both games are extremely similar, both in gameplay to art design, and the target potential consumers are also very similar. However, while 75% of interested gamers indicated they would actually purchase Infamous, 85% indicated that they would purchase Prototype. Moreover, more than one in three Infamous buyers stated that they will purchase Prototype, whereas only 22% of Prototype buyers said they would purchase Infamous.
Releasing both titles to the market simultaneously would negatively affect sales of Infamous, and publishers wisely altered its release date to avoid a conflict.
Similarly, Halo: ODST and Modern Warfare 2 are comparable games, with similar target consumers. However, Modern Warfare 2 has garnered a higher pre-order intent among potential consumers.
Another upcoming title, Mass Effect 2, has perplexing figures, with a much higher pre-order intent than purchase intent among interested consumers.
Finally, Williams noted that in order to maximize sales for a title, co-op gameplay is necessary. The caveat however, is that companies should be sure to include it with the retail game, and avoid releasing it as a separate downloadable content purchase.
Greg Short of EEDAR, a research firm specializing in video games, also shared some fascinating statistics. EEDAR studies over 15,000 aspects of a game, from IP, camera angles, art styles, multiplayer, achievements, to business models. Essentially, Short’s firm can take data and make it actionable, effectively creating accurate predictors of a video game’s sales potential.
One distinction Short seemed to make was that generally video games are divided into two main categories: mainstream games and social games. Short challenged the notion that mainstream games will generate a greater amount of sales compared to social titles. Among these social games, which includes music titles, simulation games, and general entertainment games, the Nintendo platform dominates in terms of software sales. Moreover, social game sales are increasingly cutting into the mainstream game market, with downloadable content growing exponentially.
And on the subject of DLC, Short cited his firm’s case study on Call of Duty: World at War. His research indicated that selling the first map pack DLC instead of releasing it for free and releasing the second map pack for free would have been more profitable. That said, it seems obvious that never releasing any DLC for free would result in increased profits. Short’s point however, was that the publisher should have considered the free DLC strategy while taking into account the sagging market for the game.
Before Short left the podium, he addressed a question regarding game demos. He stated that if game is really good, a demo will only increase sales. If game is mediocre, releasing a demo could allow the market to go either way. However, if game is bad, it would be advisable to skip a demo that could kill any potential sales and stick with a non-interactive trailer as a preview.
Another research expert, Ethan Titelman, of Penn, Schoen & Berland, emphasized the importance of multiplayer in today’s market. Titelman noted that nine of the top ten games in terms of sales have some sort of multiplayer component as a feature. Further, 60% of gamers play games together in person. In order to increase sales, clearly, multiplayer appears to be a must. However, Titelman did not expand his discussion to determine whether the benefit would outweigh the costs of development.
In terms of market trends, Titelman indicated that new peripheral sales are up, and in today’s economy, consumers are more interested in value over price, as used game sales are also up.
Titelman then went into the relationship between critic reviews and software sales. Low metacritic scores did not mean much for sales of Wii or Nintendo DS titles. Indeed, Titelman contended that reviews merely confirm opinions; they do not necessarily correspond to sales. Titelman referred to a case study between previous gen titles, Black and Gun. Black had much more advertising, and Black far outsold Gun, despite the reviews of either title.
In his closing, Titelman exhorted that gaming publishers need more emphasis on marketing, which should be creativity-driven. Publishers need break-through marketing communications and a clear position while using consumer insights throughout the entire marketing process. Titelman added that it would behoove all publishers to realize that there is a new socialization in society: Gaming is social, much like the arcade experience in the 1980’s.
HOLLYWOOD AND THE GAME INDUSTRY
During another panel discussion, a few movers and shakers who tread the line between Hollywood and gaming shared their views on breaking down the barriers between Hollywood and the game industry.
Spencer Hunt, from Sony pictures asserted strongly that games are no longer just a marketing afterthought; filmmakers and artists are thinking of games much sooner in the film-making process. Filmmakers have gone from being reluctant to allowing their projects to be manipulated and turned games, to asking “Where’s my game?”
In the world of Hollywood-based video games, Hunt shared that a film’s producers, director, and writer must be reached out to during the development of a game for approval (the writer’s approval isn’t as crucial per se, but no studio wants to upset a writer by leaving him or her out of the loop). And another tidbit of information Hunt mentioned was that games based on older, catalog titles are gearing more towards trivia-based games.
Steve Goldstein, of Stubbs Alderton & Markiles, LLP, identified three main factors in game development: IP control, money, and time involved in the project. Any game based on a film must measure and consider these factors judiciously. Dave Long, of Exponential Entertainment, added to the discussion the example of King Kong, where even before the script was written, Peter Jackson wanted to make a game that told the story from both the humans’ and Kong’s perspective. Studios today are more willing to work with game developers to create quality game titles.
NBC Interactive’s Bill Kispert interestingly pointed out that while most publishers set a goal release a game on the day and date of the companion movie’s release, a secondary release window could result in higher quality of games.
At the end of the discussion, all of the panel members seemed to agree that the future of Hollywood-based games will be focused on social networking games, like those found on Facebook, for example.
KEYNOTE: FINDING MONEY IN GAMES
For the keynote address, Mitch Lasky discussed his insights and expertise as a former executive at Electronic Arts, and as current General Partner at Benchmark Capital. Lasky began by identifying the premise that the future of the gaming business was in electronic distribution. Citing the examples of the Xbox Live Marketplace and the iPhone App Store among other “casual game portals,” Lasky indicated that these proven avenues is the solution to one of the most basic questions of the gaming business: How do you get games into peoples’ hands and get money back from them?
On the subject of social gaming, which Lasky defined as any kind of game built around the concept of social interaction/networking (World of Warcraft is, according to Lasky, marginally within that definition). His affirmations of social gaming was certainly consistent with the previous speakers’ sentiments. But while session-based “casual” gaming is huge in teh Korean market, it fails in the United States. Lasky admitted that he was not exactly sure why, unfortunately. The casual audience has not quite gravitated to that type of gaming yet. Instead, Lasky predicts, the US market will be cracked by core games instead of the casual type games, such as Team Fortress and Riot.
Lasky identified several critical areas of enourmous potential for game developers and publishers. First, there is a great opportunity in forging what Lasky calls, Sports 2.0. EA has scared a lot of companies out of the market, particularly when in comes to online features. However, Lasky adds that there is no reason why sports games should not be subscription products. After all, according to Lasky, there are only fairly minor updates to EA’s sports titles each year. Lasky predicts that EA will find it difficult to abandon the “shiny $60 disc busines,” leaving a real opportunity for an ambitious contender.
In concluding, Lasky provided a few remarks about OnLive, and from his experience with it, Lasky found it to be “really cool,” and remarkably free of latency, which has traditionally been the achilles heel of a cloud computing type of business model. Lasky jokingly added that if OnLive succeeds (which Lasky believes it could succeed, in either a rental or subscription model), this would be yet another reason why investors should not own stock in video game retailers. Essentially, Lasky stated that the OnLive infrastructure alone is extremely expensive to deploy and get to work – it is a big bet, but he was certainly fascinated by it and will be watching it very closely.
OTHER HIGHLIGHTS
Other highlights from other speakers during the Conference included discussions on the music game genre, and gaming on mobile phones. The upcoming Scratch Ultimate DJ game is looking to expand music game genre by allowing creativity and expression of the gamer’s tastes and personality. Social gaming seemed to be brought up by nearly all the speakers, clearly identifying a huge area of growth for the future. A running joke about how OnLive could mark the end of a necessity for a retail middleman distributor was shared by several speakers, and met with excitement and nervousness by many among the audience. Discovering how to best market and distinguish Apps from “Crapps” in the iPhone App Store, and figuring out the best, most profitable transactional business model were among the topics discussed by the Mobile Phone panel.
CONCLUSION
The day was filled with analysis from top industry experts and exchanges of ideas, and ended with a cocktail hour in the beautiful pool-side courtyard of the hotel, capping off what was surely one of the most insightful business conferences for video game professionals.
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