Darren Herman

I spent part of my Sunday afternoon reading a presentation given by Paul Heydon, Managing Director of Avista Partners.  The purpose of the presentation was a strategic overview of the space for M&A purposes.  Being in the industry, I found most of the information redundant, but I did like how he highlighted the following:

Trends in Industry

• More developers are switching from high end console to casual games
• Game portals/aggregators growing in popularity with consumers; watching less TV; advertising is a major source of revenue
• Mix of ad-supported, casual games and paid premium games
• In-game advertising is a new source of revenue for developers/publishers
• Casual MMO’s will grow (i.e. Runescape)
• Business models selling items in game growing quickly (i.e. Bigpoint)
• Social 3d chat games will grow (i.e. Second Life, Habbo Hotel)
• Micropayments

Opportunities for Casual Games

• Acquire or be acquired
• Raise money to grow and/or acquire
• Build D2C business on own websites with a focus on community
• Monetize across other platforms by licensing or in-house for mobile, console, in addition to PC in-store
• Sell items in-game
• Publish games by episode
• Build advertising revenues
• Localize sites for key non-english countries
• Outsouce seelct development pieces overseas
• Develop game widgets for social networks (i.e. Bunchball)

Also, there is one area of the presentation I do like… Paul talks about how World of Warcraft is NOT the holy grail of online games.  Reasons for this is that WoW attracts only hardcore gamers and not the mass market.  Of WoW’s 8 or 9 million subscribers, that’s a distant second or third compared to the 50 million users worldwide of Maplestory or the 66 million users of Habbo Hotel.  He also points out that the lifecycle of most MMORPG’s have a life cycle of less than five years.