GIC chairs panel on VR games at the Interactive Entertainment Summit

8 December 2016

Rick Gibson from GIC chaired a panel on VR Games at the Osborne Clarke IES in London. The Summit is run on Chatham House rules so we cannot tell you who said what, but a panel of 2 experienced VR games developers and a games angel. The main findings were that the angel did not believe the hype about VR, but sees a real opportunity in Mixed Reality. The developers were generally bullish about the state of the current and future VR games market, positive about exclusives funded by the VR platform and were split on the potential of MR in games.

Games as services, games monetisation, Mobile games

The promiscuous hardcore gamer: Does new survey data showing social is killing casual add up?

October 2011

As the ways that games are made, distributed and monetised transform some parts of the industry, change may finally have reached the bastion of the retail industry, the console gamer. New data on gamers’ playing and purchasing behaviour claims that many console gamers are spending time and money on social games. Is this data credible and what does it mean for console games studios, their route to market and platform choices?

The data from Kabam and ISG’s recent survey appears pretty stark. 82% of US ‘hardcore’ social gamers surveyed said they are console/handheld gamers with 360 the most popular platform closely followed by Wii. Of these, 78% said their spending on console was static or in decline and 88% said their console gaming time would stay flat or diminish, as a direct result of social gaming. In contrast, nearly 60% of the ‘hardcore’ sample said their spending on freemium social games would increase and nearly half expected to play more on social.

Two other recent surveys reinforce the findings. The (largely hard-core) gamers’ community Raptr measured top games’ share of playing time for its 10m players and found that the 4th largest franchise, after Call of Duty, World of Warcraft and Halo, was Zynga’s ~Ville titles, more than all the remaining core games franchises combined. Another survey, by RockYou and Interpret, found that 50% of 2,000 social gamers polled own consoles. While 2/3 of these companies have considerable vested interest in showing to investors how they are stealing market share from consoles, and some of the data needs a pinch of salt, one cannot avoid the emerging picture of changing consumer behaviour across multiple platforms.


Some of Kabam/ISG’s survey’s conclusions are a little too black and white. Despite August’s sizeable 34% fall in US software sales year on year, it’s becoming apparent that Nintendo in particular and sales in certain genres like music have taken much of the hit. Retail sales data for 360 and PS3, while not immune to falling sales and prices, appears considerably more buoyant and, while it would be a minor miracle if 2011 retail games sales hit 2010 levels, it seems highly unlikely that social is killing console, as some have interpreted, because it’s clearly not a zero sum game. In this peak sales season, it’s quite possible hardcore gamers’ expenditure on both retail and social gaming could grow at the same time. Some publishers are even trying to target them twice with the same franchise e.g. Dragon Age 2/Dragon Age Legends.


The hardcore social gamers profiled in Kabam/ISG’s survey are mid-core gamers on other platforms, or perhaps hardcore on Wii. Their demographics are not those of classic hardcore console gamers because they’re too female and Wii is too prominent. But these surveys do provide detailed evidence of a new promiscuity in many console gamers’ behaviour. Platform-usage stats in the ISG/Kabam data reveal a mid-core console gamer playing heavily on PC (79%), Wii (55%), 360 (54%), Smartphone (42%), PS3 (39%), handheld (36%) and tablet (15%) in the last 12 months. This demographic has started to use Facebook as a serious games platform, playing for many hours at a time and spending hundreds of dollars. Freemium content such as power-ups, extra resources and time-savers are popular and expenditure is on the rise.


Although some hardcore social games companies are spending millions per month on Facebook advertising, many are not, and overall players are clearly responding to new marketing techniques. Multiple hours on social networks every day exposes these mid-core players to marketing from social games companies sent to them by their own friends. These messages intrinsically link the social value of their friends with the value of free items redeemed on response. It’s the difference between a publisher’s marketer telling you ‘Go out and buy this game because it’s great’ and a friend saying ‘Play this game with me now for free and get this cool stuff’. They might look like a wall of spam, but friends’ recommendations within the context of specific games can be intrinsically valuable and highly effective marketing vehicles.


With social maligned, muzzled or at the very least misunderstood by the console platforms, none have mounted a clear defence against this changing customer behaviour. Nintendo in particular, its plate already brimming with market fears, appears to have grounds to be worried by the promiscuity of its players. Perhaps it’s time for Nintendo to reconsider its ‘anti-social’ position and grasp the opportunity?


video games

Nintendo doom-mongers beware

August 2011

 Recently, an anonymous publishing exec declared publically that 3DS is “definitely dead” unless Nintendo generates good sales this Christmas. The surprising finality of this proclamation, even allowing for the ‘unless’ parachute clause, is by no means singular. Industry history is littered with flawed prognoses of doom for games platforms, which seem to come thicker and faster in times of change such as these. This month I’ll explore what makes senior industry execs (and journalists) so unafraid to risk their reputations with such bold predictions of outright failure.

Sony’s PS3 launch was widely described as a “failure” in the games press, as seemingly slow hardware sales after launch week triggered overblown, doom-laden declarations from senior industry figures. “The PS3 is a total disaster”, said one of the industry’s most vocal and successful CEOs in 2007, advising Sony that, “they should just cancel it and do a do over”. While Sony would undoubtedly have welcomed higher sales in its first 12 months, it was far from the disaster so many declared and with over c. 53m unit sales since then, the doomsayers now simply look naive.

Many went astray by erroneously extrapolating a short-term trend into a long-term one. Despite this being Sony’s third (TV-based) console launch, the doomsayers ignored Sony’s track record and, more relevantly, the same sluggish starts to all its previous consoles’ lives. Sony pioneered the 10-year console lifecycle with the first PlayStation, then extended it with the second and should accomplish the same longevity with PS3. To achieve this, Sony sensibly views console sales as a marathon during which an explosive early sprint (i.e. through aggressive pricing) is not only commercially inappropriate but would have proved detrimental to performance later in the race (leaving less room for later sales stimulation by price cuts). These are lessons that all of the console manufacturers have begun to take on board.

Besides this commercial myopia, the other explanation for these outbursts derives from publishing execs panicking about their massive investment in new platforms not being sustained by sales in a particular month or quarter and simply seeking someone else to blame for their company’s underperformance (and their over-estimates). This self-interest lies at the heart of many world-ending pronouncements for broader sections of the games industry. Retail gaming and the console business as a whole have been declared dead or facing an imminent fatal demise so many times they should be regulars in George Romero movies. These terminal diagnoses are usually given by those with vested interests in their death: for example, digital distributors or mobile games developers. Console-oriented companies give as good pessimistic hyperbole as they get – take the still common (and frankly risible) claim that social is just a fad.

Although there certainly are examples of complete commercial failure for certain platforms, most have proven extremely resilient. A great example of this was the PSN outage earlier this year which generated the full gamut of reactionary headlines and even poll research which quantified the extent to which Sony would experience an exodus of customers. “55% said the PSN breach would put them off buying future Sony consoles” claimed one article. “Gamers will simply no longer trust Sony” stated another. The truth was that the PSN outage of April and May plus the accompanying consumer and media furore has had absolutely no negative impact on the ongoing sales of PS3 hardware and retail software sales. Hardware sales between April and June were actually higher than the previous year as were software sales which even experienced a noticeable upwards spike in May and June. In the 3 months since it was restored, PSN has seen 3m new registrations and digital sales that are already above pre-outage levels.

In this case, those carrying their ‘The end of the world is nigh’ placards forgot that most PS3 owners have little choice when it comes to high-end gaming (owning no high-spec PC or other consoles), that there is a sizeable core of console owners whose loyalty survives such tests, and that most players are oblivious to, or simply not interested in, such industry travails.

So, is the anonymous publisher correct in his comments about 3DS’s prospects? No format enjoys weak holiday sales, so his ‘parachute’ is banal. This ‘few months to live’ prognosis seems remarkably misguided – as if Nintendo would abandon such a major new format after just 9 months on sale. 3D has its flaws and Nintendo its challenges, but 3DS has several tactical tricks to play before giving up the ghost. Whatever you believe, these panicky views are best taken with a pinch of salt and a longer view.


games monetisation, Publishing, video games

Console microtransactions  

August 2011


One of the most lucrative ways that developers could make money in future – microtransactions on console – represents a truly vast commercial opportunity and one that is well suited to the UK games development industry with its long and strong console games development history. However it is an opportunity that is largely untapped and faces some significant hurdles before it can fulfil its enormous potential. This month I want to explore why it is so promising and what is inhibiting it.


Consoles, using a number of metrics, house the most concentrated and valuable collection of gamers in the industry. Every platform (Wii included) contains a sizeable nucleus of hard-core, typically male, players who spend many hundreds per annum on their hobby. An almost identical demographic is playing MMOGs and other online games. While, globally, they don’t spend as much online as console gamers, they are playing in greater numbers with growth being fuelled by microtransaction games not just in Asia but also in North America, and in particular, Europe. As a result, microtransactions have become the standard for almost all new western MMOGs.


But microtransactions do not need an MMOG to be effective. They often work best within freemium and multiplayer games services but neither are necessary. In the very few instances where they have been employed on console, they have been hugely successful. EA’s FIFA Ultimate Team football trading card/management hybrid has been included with the last three FIFA releases (on XBLA and PSN) and allows in-game currency to be topped up with real money purchases. The game was charged for separately but became free with FIFA 11 and generated revenues of $15m (FIFA09) and $30m (FIFA10) while FIFA11’s free version has dramatically accelerated revenues to $1m – $2.5m/week, during its first 5 months. Given the simplicity and low cost of the game, this strong performance produces remarkable profits for EA.


Another fascinating example of the potential of console microtransactions is Sony’s Home service. Home has become a genuinely lively hub for microtransaction gaming, supporting 100+ developers creating virtual items, spaces and games. Not only are the leading games generating 7 figure gross revenues from microtransactions, but they are doing so from what appears to be a noticeably more diverse audience than is found at retail for PS3. The top 10 best-selling virtual items on Home in the USA in the last six months have included an array of casual games related and female fashion items, although you’d be surprised at how common it is for some core male gamers to enjoy putting on virtual frocks.


So, why are there so few examples of console microtransaction games? The single biggest block is that two of the console manufacturers have been wary of microtransactions and freemium. Both Nintendo and Microsoft outright reject the idea of freemium. One console manufacturer’s most senior execs told us at E3 that their “publisher partners are simply not interested in providing a game for free”. There also remains the view that microtransactions are “interesting but not suitable for our audience”. However these offhand dismissals hide some more profound questions. Console manufacturers clearly fear the destruction of a consumer value proposition rigidly based on prices guided by the console manufacturers and set by the publishers/retailers. This would be replaced by a value proposition based on consumers setting their own discretionary spending limits. In addition, microtransaction games are typically updated frequently, which console manufacturers may struggle to QA in time. Some of the other features of microtransaction games, like analytics, rich customer usage data, viral recruitment and so on, are so far lacking. Let’s not understate this, widely supporting microtransactions would necessitate a fundamental change to the way console manufacturers run their businesses.


But they could also transform their businesses at a time of decline in the retail channel. Sony is comfortably the most progressive, being open to microtransactions, MMOGs and freemium in one corner of its service. Yet it has attracted only limited developer interest. Some developers want to large install bases across multiple platforms but we have seen dozens of microtransaction games on other platforms thrive with relatively tiny user bases.


Nintendo will probably remain a dead-end for microtransactions for the foreseeable future, but Sony is looking more promising. Foremost of these new microtransaction console games is CCP’s Dust 514, which could kick-start more microtransaction PS3 game releases, and open Microsoft’s eyes to their commercial potential, perhaps even changing their mind. In the meantime, EA has demonstrated that microtransaction games do not need MMOG-level investment or design complexity, can be launched on PS3 at least and can attract hard-core and high-paying audiences.


Gamification, Uncategorized

Learning to love gamification

July 2011

After nearly 3 years working on a large scale gamification project, Rick Gibson shares his thoughts on this widespread trend.

To find an example of how deeply games are influencing our culture, look no further than gamification, which is rapidly spreading into multiple, highly disparate industries. Gamification is being used to persuade us to watch more television, drink more coffee, brush our teeth more frequently, join the army, even educate our kids more effectively. Is there a real market there or is it just hype?


Surely the clumsiest and least appropriate of recently minted industry words is gamification, which doesn’t describe the actual practice. Gamification is patently not about turning something non-games related into an entire game – that’s the domain of Serious Games (and, as I’ll argue, its fatal flaw). Gamification cherry-picks discrete elements of games – gameplay mechanisms, community-building principles, marketing methods, analytics – and applies them outside of games.


This vibrant new sub-sector of games would not exist without the disciplined genius of designers, who have defined the market to date and loudly debate extrinsic and intrinsic rewards, the evils and impending doom of pointsification (snap), and the proper / improper use of games design. This noisy debate sometimes looks equally about ownership as design principles, perhaps the consequence of gamification slipping from the control of designers (who are essential for gamification to be compelling) and into the hands of the marketers (who are arguably essential for gamification to spread far and wide). The marketers are best characterised by gamification companies like Bunchball and Bigdoor, around a score of whom have sold white label gamification layers to blue chip giants like FMCG and food manufacturers, TV and mobile networks.


While the marketers can be accused of short-termism, rinsing and repeating off-the-shelf systems based on points, rewards and leaderboards, they have introduced disciplines essential for the growth and commercial success of gamification. They’ve taken tips from casual games communities, which have evolved highly sophisticated marketing methodology and incubated huge games communities targeting specific demographics. They have learned from social network gaming, utilising social graphs, iterative development and virtual goods. The best embed the analytics that underpin many online games to ensure they deliver stuff audiences actually use.


This magpie-like approach is one reason why gamification is not simply the latest incarnation of the serious games industry, which typically builds whole games (engines, art, physics, the whole shooting match) for non-entertainment purposes. Serious games have failed when bolted onto completely inappropriate subject matter. No worse example is the UK Department of Transport’s ill-judged $4m bet on a fully-loaded fantasy MMORPG designed to encourage – pause for comic effect – crossing the road safely. That car crash was predictable.


The other crucial difference is that gamification can scale when, arguably, most Serious Games cannot. Serious Games have been about to boom for decades but, excluding brain training, fitness games and some military applications, most have not progressed from academic case studies with a few thousand users to large scale usage. The ‘whole game’ approach with its roots in boxed product development may be to blame. When pitching entire, substantial games on single subjects to non-games clients like governments, serious games companies are effectively asking deeply risk-averse organisations to bet on potentially short-term hits as if they were risk-aware games publishers. With apparently few willing to repeatedly fund such punts, this has resulted in a consistently low-value market. Gamification has reached much larger numbers of players and companies faster and with more tangible results. Tell broadcasters that gamification has increased viewing figures by 40%, e-commerce websites that it has reduced friction in the acquisition funnel by 90% or driven up user registrations on community sites by millions for fairly modest expenditure, and clients have proven more likely to pay up.


But beware analysts telling you that gamification is worth $XXXm. These are simply guesses based not on hard data but instead on hyped-up sales projections of the aforementioned marketers. See our recent tweets on the subject but no-one will ever scale this market accurately because it is impossible to track so many different industries trying gamification.


Nevertheless, gamification has demonstrated that it can scale, and generate substantial value. As gamification appears on every device (i.e. FourSquare on mobile), the mother load of all gamification projects could finally arrive – education. To date governments have failed to use children’s favourite entertainment mechanism for teaching, but the gamification of an entire school’s syllabus has taken place in New York, funded by the state, with fascinating results. Games designers, who are fundamentally tutors as well as entertainers, could yet play an even more central role in our culture.


[Rick Gibson is a director at Games Investor Consulting, which provides strategy and research consulting services for games, media and finance companies, plus commercial check-ups and online game optimisation for studios.]