Exclusive: A Primer On Monetization Of F2P Games

BY

By Alex Konda

I was lucky enough to intern at Ayzenberg over the summer. The reason I chose to intern there is that it’s an ad agency focused on youth marketing, and with deep roots in the video game industry. Many of the senior executives there have worked at major game publishers and developers, and Ayzenberg has even launched its own digital game start-up in [a]list games. I want to be a marketer in the game industry, and so it was a perfect fit for me. As part of my internship, I was able to leverage Ayzenberg’s experience in the free-to-play (F2P) game category for my undergraduate thesis. The agency is one of the first to launch major campaigns around F2P, introducing Nexon’s games in the West, and launching titles for F2P game makers such as NC Soft, Perfect World and Turbine.

I chose F2P as the topic for my thesis through a recommendation from Craig Mitchell at WB Games, whom I met at E3 2011. I then came across Michael Pachter’s keynote at Ayzenberg’s [a]list Summit San Francisco (incidentally through a piece posted here in [a]list daily), and soon decided to focus on the monetization strategies of F2P.

This article contains the main points of a presentation I gave as my final project at Ayzenberg and based on research that I conducted there. It’s the basis of my thesis, and a primer for anyone — game maker, marketer or player —  curious about the economics of the F2P game category.

What is the Free-to-Play Business model?

Free-to-Play (F2P) is more of a service than a product, with some people categorizing them as “games as a service.” As a business model, free-to-play is a digital hybrid model usually consisting of freemium, microtransactions, and a virtual economy.

Freemium is simply giving a full product for free and offering a premium version, which usually needs to be subscribed to. Microtransactions involve transactions of small value, and this is usually the main source of revenue for Free-to-Play games. Virtual economies is broader implementation of microtransactions, for instance a platform where players in a persistent world game such as an MMO can continually buy, sell or exchange virtual goods. The beauty of a virtual economy is the fact that you can retrieve real time data and know pretty much what is actually going on in your economy rather than estimating what it’s earning. What a F2P game earns can be broken down into soft currency (earned by playing) and hard currency (earned through real money).

Psychology and Free-to-Play

Knowing the mind of the consumer is very important in a F2P game, whether knowing their motivations to keep coming back to your game, when to upsell, or how they view game balance (i.e. whether they perceive it as fair or pay-to-win).

For this, the following two psychological principles, one being a theory, are very important to know when approaching monetization strategies.

  • Flow Theory

Introduced by Mihaly Csikszentmihalyi, flow theory is something all gamers have been through. It’s that feeling of being fully immersed in a game not knowing how much time has passed. Flow theory can be defined as a state of positive immersion in an activity. Its components are full absorption in that activity, clear goals, a high degree of concentration, and a distorted sense of time.

I believe flow theory is a state that can lead to impulse purchases due to the player being fully immersed in the game. It forms one basis for why monetization must be considered part of the game design process throughout the development of a F2P game.

  • Impulse Purchases

Purchasing virtual goods largely relies on impulse buying, as there is little planning involved. Players usually purchase virtual goods after playing the game a certain amount of time and this differs for each game. There are two factors with impulse purchases. First is seeing the product and its value. An example of this is Team Fortress 2, where when players get killed they see what weapon their opponent had equipped at the time. The second is convenience, where items are clearly defined as ways that will make the game easier or enhance the experience by making the player more powerful.

Virtual Goods

Now that we know what motivates players to make in-game purchases, let’s look at virtual goods categories that have proven to be the most effective. These goods can be divided up in four categories.

  • Vanity Items

Vanity items provide purely aesthetic purposes, such as items that can change the look of an in-game avatar. They serve no functional value, yet they have a value to players for whom self-expression and displaying their style is an important part of their experience.

  • Power Enhancements

Power enhancing items elevate the player’s abilities in the game, and therefore affect game play overall. The most common examples are upgrades to weapons and attacks, enhancement to character health and stamina, or quicker progression of game elements that make the player more powerful. These types of items must take overall game balancing into account before being introduced into the game.

  • Boosts

Boosts accelerate progression or make the game easier to play by speeding up game play elements, such as making it faster to build or repair structures in a tower defense game. Balancing is also an important consideration for boost items.

  • Consumables

Consumables can technically fall into Power or Boost categories, as they can give the player the same kinds of upgrades. However they are one-time or limited use items.

Monetization Strategies

Now that we know what to sell, how do we sell it The most basic necessity is having multiple ways to pay to remove any friction and help increase conversion of non-paying to paying players. According to a PayPal sponsored survey, just adding one alternative payment method can increase conversion by 14 percent.

Retention is also very important. The longer a user plays, the more likely they will pay. And the best way to retain consumers is to get them to pay, which is why it’s important to know the right time to upsell (which is different for each game).

Other strategies include having a store that’s simple to navigate and constantly checking metrics. The latter is a must. With cost per acquisition (CPA) to bring players into F2P games on the rise, it’s critical to continually evaluate whether players’ lifetime value (LTV) is higher than the game’s CPA.

The Old Standby — Subscription Fees

Offering subscriptions can be part of almost any monetization strategy, and it offers great flexibility. Subscribers are power users. They are not whales, but they could be. It is important to pay attention to these users, since they will usually be the ones who keep playing and keep coming back, given that they have a financial stake in the game. Offering discounts, giving hard currency each month, having subscriber-only events, these are all ways to create more value and give players incentive to become subscribers.

Virtual Currency

Let’s look at virtual currency. As stated, virtual currency can be divided into soft currency earned through game play and hard currency that involves spending real money. The point of soft currency is to drive retention. It rewards players for just playing the game, and the ways to earn it is up to game design. One example is picking up coins in Offensive Combat after getting a kill. Hard Currency offers the ultimate convenience for players. Instead of having to grind through game play to acquire items, they can just buy them with real money. One way a game can encourage players to spend real money is to introduce items that can only be bought through hard currency.

Worth noting, when it comes to exchanging currency for hard currency usable in the game, it is beneficial to give users a greater perceived value for the money they spend. Take the currency conversion table in Tetris Battle:

There is bonus currency for nearly every purchase, and the more you spend the bigger it gets. Valuating virtual currency differently than real world dollars can influence purchase decisions because players see items priced with the game’s arbitrary values rather than real currency. A good example of this is Microsoft’s pricing scheme for Xbox Live.

Perfect Price Discrimination

Also known as dynamic pricing, perfect price discrimination revolves around having consumers pay the maximum value that they see in the product. The best example of this pricing model is in the airline industry, where booking later will give you a higher price due to the fact that the purchaser has more of a need for the ticket. Though this pricing model is sound, it’s difficult to implement because it relies on continuous data. Yet a F2P game’s virtual economy, where you can attain a steady stream of granular data, this pricing strategy can be effectively applied.

Economists argue that dynamic pricing can only work in a pure monopoly. I would argue that a F2P game is a pure monopoly, in the sense that inside the game the store itself is a monopoly on its own. It’s worth noting that factors for dynamic pricing to work will have to be created by game designers, for example having in-game events.

Here is a comparison between regular pricing (left) and dynamic pricing (right), where you can see the benefits of being able to implement dynamic pricing.

Scarcity & Luxury

Scarcity is very straight forward. It comes down to only selling a certain amount of items to increase demand. With scarcity, there is also a dynamic pricing opportunity as well, where an item can have a low starting price and limited quantity with price increases as it gets close to selling out.

While not for every game — and more importantly, not for every game community – overly expensive luxury items have been known to generate money for F2P games. The strategy behind these items is to price them prohibitively, for instance thousands of real world dollars. These are intended for players whose passion for the game and access to expendable income is boundless.

Rentals

Since F2P games should be constantly updating and delivering new content (operating the game as a service), rentals are very useful. With new items constantly released, players can quickly feel what they’ve purchased is out of date. If they can rent items, they won’t get this feeling, and they will be more inclined to rent the next batch of new items.

Also, rentals can help lessen buyer’s remorse. Even though most in-game transactions are usually for small amounts of money, many of them are impulse purchases and buyer’s remorse is a common and un-favored byproduct.

Seasons

Using “seasons” to introduce new tiers of items is a concept introduced to me by Steve Fowler, who heads up [a]list games at Ayzenberg. [a]list games is a division at the agency focused on digital, mobile/tablet and F2P games.

The basis of the “seasons” concept is releasing batches of items according to a calendar and making them available to different tiers of players. Say a game is in its fifth season and has elite or high-end items that can only be purchased through soft currency. These are priced so that they’re only accessible by top players (because hey, they earned it). When season 6 items are released, and assuming those top players have continued to rack up soft currency, they’ll be able to quickly upgrade. Meantime season 5 items will then go on sale for hard currency, incenting lower level players to spend real money get their hands on them even as they try to earn the newest items through game play and soft currency.

With seasons, rentals are very useful. It goes back to players wanting to feel up-to-date. Seasons are meant to increase purchase frequency and make sure the game doesn’t start to feel old, and thereby help player retention.

Looking Ahead

There is still a lot to understand and discover about the F2P category, and a few trends are just starting to emerge.

The percentage of players who become paying customers in F2P games varies but is generally below 10 percent. Finding alternative ways to monetize the other 90 percent without the use of advertising, which is costly, is key. Market saturation is making discoverability challenging for new games, with some game makers struggling to find alternative ways to get their products known. Both of these are challenges that game makers working hand-in-hand with marketers need to creatively overcome.

Other trends point to a bright future for F2P. More and more AAA quality games are now attracting more hardcore, mid-core and traditional console gamers to the category. F2P titles on consoles will also help broaden the audience for these games. The business model is also being used to penetrate global markets like Brazil and is being looked at to be used in countries like India and Africa.

On the technology side, better optimized cloud gaming will give more players access. And NoSQL Databases capable of collecting more data, including scattered/de-normalized data, will allow for micro-segmentation within F2P games.

The F2P space is quickly growing. It will be very useful for marketers — even hopeful future ones like me – to understanding its monetization strategies and the category in general. As part of my studies, I will be defending my thesis on this topic for the Barrett Honors College at Arizona State University in fall 2013. In it, I will be exploring different strategies for different types of F2P games, such as social, mobile, or MMO, and how to best monetize players in these types of games.

In closing, I would just like to give a big thank you to everyone at Ayzenberg; I enjoyed my time there and learned so much.

—

About the author:

Alex Konda is currently a senior at Arizona State University majoring in Marketing and Computer Information Systems. You can find him on LinkedIn or reach him at kanishkonda@gmail.com.

Exclusive: Pachter Examines Zynga’s Flailing, Sees Wii U Failing

BY

Moments before our interview at [a]list Summit Seattle, Wedbush analyst Michael Pachter looked down at his phone and started walking.

“Something’s happened with Zynga,” he called back and disappeared around the corner.

Michael Pachter

Zynga had just revealed that it expected a net loss of about $100 million for the third quarter despite beating revenue forecasts. It blamed costs of up to $95 million related to its acquisition of Draw Something maker OMGPOP.

Zynga purchased OMGPOP for $180 million in late March of this year. Notoriously, the company’s biggest hit Draw Something began bleeding users from its peak almost immediately afterward. In the month following the acquisition, the game’s daily active users (DAU) fell by more than a third. The write down on the deal represented yet another open wound in Zynga, a company that seems to be punctured head to toe as it deals with plummeting share price, shrinking market cap and its now legendary senior management exodus.

Just last February, Pachter had delivered the keynote at [a]list Summit San Francisco where he countered the notion that Zynga’s earlier success could represent a social game bubble.

We warned him we would be asking for currency on his take on the company. We never imagined something else in Zynga would pop before our interview. Being the unflinching and always accessible pundit who he is, Pachter agreed to the interview anyway. Besides Zynga, we also got him talking on the upcoming launch of the Wii-U.

[a]list: Do you stand by your earlier take on Zynga or do you now think there’s something fundamentally wrong with their business?

Michael Pachter: I think the problem with Zynga is they’ve given us way too much choice, way too much quality and satisfaction, and less of a reason to spend money. So where I was wrong was, I thought they would continue to monetize and hook people. Their strategy backfired. They’ve given us so much choice we don’t have to spend money.

[a]list: Can they turn it around?

Michael Pachter: I think that Zynga’s biggest problem is they started out as a free to play company, and so as they grow users they don’t necessarily grow revenues. They have to figure out how to monetize every user. The simple way to do that is advertise. Make this commercial supported gaming. If you don’t spend money you have to sit through ads and if you spend money you don’t. So the Words with Friends model, where you can pay three bucks and opt out of ads, I think that’s fine.

I have to say, I actually think the right model for them would be if you pay a dollar, and the dollar goes as a credit in the game so you can spend it on in-game items if you want to, but if you deposit a dollar each quarter, no ads for three months. If you got four dollars a year out of each of their 311 million actives, that’s more revenue than they’re making now. That alone I think would solve their problems, and then the whales would still spend — you know, two percent of them would still spend $100 each. I don’t know why they don’t do that. I think that’s the fix. I think the reason it hasn’t been fixed is, nobody wants to be first to do that.

If the alternative to spend a dollar is watch a dollar’s worth of ads over 90 days, I mean again, if you deliver the ads with the frequency — call it a penny per ad impression — which really is something they could do, that’s one ad per day. If it’s a tenth of a cent per ad impression, it’s ten ads a day. If you’re going to play the games as often as most people do, that’s just not that hard to sit through.

The crazy thing, I play Words with Friends and the ads come after I play my word. Well after I play my word, I’m done. The only reason I need to sit around is I might want to move to the next game, because I might have multiple games going. I don’t get why there’s not an ad when I load the game. To me, that’s just lame. Make me sit through the ad before I play my word because I’m there, you know? I’m going to play my word. If I want to play one game, I can close it out. And if I load it up again I can play the next game. I’m not sure they’re particularly thoughtful about ad delivery, but I think that’s the big opportunity.

[a]list: Nexon has done well for itself in free to play social and mobile games, and they’re experiencing continuous growth in the category while Zynga’s headed in the other direction. What would you define as the core difference between these two companies and why one’s thrived while the other is struggling to find its business model?

Michael Pachter: I think Nexon probably derives 85 percent of its revenues in Asia, and Zynga probably derives five percent of its revenues in Asia. That’s the primary difference. Nexon is significantly less successful in North America and Europe than Zynga is. I think Nexon has a great Asian model that I think they’re doing a very effective job of exporting to the West. But they started with the Asian model, and they designed their games for Asian markets, so they’re far more effective and they’re set up differently. There’s room for both. Zynga doesn’t have any games that are like Nexon games. Nothing. They’re different models.

[a]list: The Wii U is priced and ready to ship. We know you have strong opinions on the console and Nintendo’s hardware strategy. We’d be remiss not to ask you for final thoughts with their next launch on the horizon.

Michael Pachter: I’m not a fan of the console. Essentially I look at the GamePad and the television, the two screens, and I see a DS that’s disaggregated. It’s very similar to playing a DS game. The difference is, with the DS your line of sight is on both screens. It’s easy to toggle back and forth. With the GamePad on the Wii U you have to look back and forth, and that’s not natural.

I understand the console is going to be way more powerful than the DS. It’s entirely possible you’ll get great experiences that are console-like but take advantage of the touch screen. But I think most developers look at the GamePad as either a gimmick or very DS like, and they don’t want to incorporate the touchscreen features because the games aren’t any better for them.

Nintendo will pioneer, they’ll do a far better job than anybody of exploiting the console and the control scheme, and I think others will learn from them. I’m afraid we’re going to have a repeat of the Wii cycle from the publishers’ perspective and the developers’ perspective, where very few people will support it. Then if it’s successful they’ll come in, and they’ll fail. When they fail, they’ll go away again. The reason I think they’ll fail is, I can’t think of a third-party publisher that did well on the DS. I mean, Scribblenauts, so there are a handful games and you can count them. Nobody did very well on the DS, and I don’t think anybody’s going to do very well on the Wii U.

So my advice is, it will sell out until the hardcore Nintendo fan base has all their consoles, and I don’t know what that number is. They sold 90 million Wii’s, it’s certainly less than 90 million hardcore fans. I would guess it’s between seven and ten million, and it could be 20 million but they don’t all have $350. When the hardcore fans are satisfied, I think sales are going to drop precipitously because I don’t think the thing is priced competitively with what most people think is a comparable console, Xbox 360 or PS3. I think that this thing, rather than launching and being the cheapest of the three consoles, which the Wii was, and very novel because no one had ever seen motion control before, this console is launching and it’s the most expensive of the three consoles and it’s not novel because it’s very much like the DS.

The final complicating factor is, if you’re a gift giver, you have a choice of giving somebody a Kindle Fire in HD for $199 and standard def for $169, or perhaps an iPad mini which I’m guessing would be $299 but probably not more than the $349 price of the Wii-U, or a smartphone which is a couple hundred bucks if that. I think there’s a lot of competition at that price point for gift givers so I’m not sure this is the best solution for most people. I don’t think it’s going to succeed after its first six months or so, I think once it’s done selling out it’ll really surprise people and its price will have to come down.

[a]list: Thanks, Michael.

Exclusive: Publisher 2.0 — Did The Social Bubble Just Burst?

BY

By David Cole and Steve Fowler

At the [a]list summit in February, keynote speaker Michael Pachter took exception with an observation by DFC Intelligence president and principal analyst David Cole. Cole’s statement that there is a “bubble” in social games was used in the summit’s opening address, presented by your co-author of this piece Steve Fowler.

“I think David Cole said something that’s wrong,” Pachter, research analyst at Wedbush Securities, told summit attendees. “He said there could be a social bubble, because all the games are copycat, there’s no originality… you could absolutely say that about first-person shooters. You could. They’re all the same game. Except they’re not. I would say that about Hidden Chronicles and Gardens of Time.”

“I love Zynga games and I get why they’re doing them,” Pachter continued, then followed with a double-edged compliment, “Zynga actually does a great job with their games. Even when they rip somebody off, they do a better job than the person they ripped off.”

That’s one quote that Zynga probably won’t be using in their marketing materials.

(Watch the video clip of Pachter’s keynote: http://www.youtube.com/watch v=4cgqdc1tikg) {video no longer available}

That was February 23 of this year. At that time Zynga stock was trading at $12.80 and on its way to an all-time high of $14.69 one week later.  Cole looked a bit over matched by the Wedbush analyst.

Fast forward to today and it is a whole different story. As of this writing, Zynga is trading under $3.00.

What did your other co-author, Cole, see coming that Pachter didn’t?

Suffice it to say, this piece isn’t going to be a long dissertation for who was right and who was wrong. We’re going to explore the reasons for Zynga’s slide, whether they can dig themselves out, and whether they are, were or ever will be the model for Publisher 2.0.

What Zynga created on Facebook was a new distribution channel for games, but they did not create a new type of game.  The game mechanics of Zynga games had been around in strategy, simulation and role-playing games.  What Zynga added was a virtual item business model based on free-to-play games, and one that leveraged the communication power of social networks to rapidly bring in users.

An immediate apparent problem for Zynga was that their games were not strong at maintaining the users they brought in.  Retaining users for an extended period of time is a critical component of success in the free-to-play market.  By the time Zynga filed for an IPO, its prospectus made clear that the numbers did not look good for long term success.

But why didn’t Zynga’s games have staying power? Is the entire social network game category dead? If it’s not dead what needs to be done to correct it?

At DFC Intelligence, the belief is that Zynga did some very specific things that were not conducive to long term viability.  Some companies are likely to learn lessons from Zynga’s experience that allow them to “reinvent” social network games and grow the overall category.  This is much like what occurred after the video game bust of the mid-1980s.

The Atari 2600 pioneered a cartridge based business model where they sold a game console and made money from consumers buying expensive individual games for that console.  This created the modern video game industry in the late 1970s and early 1980s.  However, by 1985, the game industry was all but dead because game companies focused on throwing 1,000s of poorly conceived products at consumers.  Consumers got frustrated and left many products sitting on shelves.  Retailers abandoned the industry under the belief that video games were a fad that had come and gone.

Clearly video games were not a fad, and Nintendo revived the retail cartridge model in the late 1980s.  Ironically, it was characters from Donkey Kong, an old game from 1981, which Nintendo used to rebuild the market.  Nintendo clearly understood the power of branding, and their iconic characters such as Mario and Donkey Kong brought consumers to Nintendo in droves. They continue to do so decades later.  To be fair, Nintendo does make some of the best games, but the secret to their continuous 25-year success (despite notable ups and downs) in the turbulent game industry has been mainly because of their understanding of the importance of branding and marketing.  This is something that has clearly been missing on most social network games to date.

Video game consumers are passionate about their brands. The secret to building a long-term business in this industry has been all about building a popular branded franchise over years. Products that keep a solid portion of existing users while steadily adding new users are generally the ones to bet on.

Zynga’s approach has been in sharp contrast to the tried and true method for video game success.  As the pioneer of a new distribution channel, Zynga, with the help of Facebook, was able to control the channel and lock out many other would be players.  However, Zynga has struggled to capture loyal users for their individual products.  Long before its IPO, it seemed clear their pioneering days were over and it was obvious that unless the company could reinvent itself, it was done.  As one misstep, it seems easy access to data in their digital games drove them towards analytics as a more important metric than brand affinity. It’s a pitfall we covered here in our second “Publisher 2.0″ article, where digital game companies can get caught up in the race to the bottom in their cost per acquisition (CPA).

A knowledgeable person looking at the Zynga prospectus should have seen all kinds of warning signs. Revenues were soaring for 2011, and the average revenue per active user had increased from $1.01 in the fourth quarter of 2010 to $1.35 in the latest quarter (September 30, 2011 in the prospectus). The revenue per unique payer also had shown a nice increase. On the surface things looked good. However, a deeper look should have raised red flags.

First, the overall number of daily active users was stagnant and the number of unique payers also appeared to be leveling off.

More trouble signs in the prospectus were shown in some of the big games the company highlighted, most notably FarmVille, FrontierVille and CityVille. Zynga noted that FarmVille had 32 million monthly active users and FrontierVille had 11 million. However, this was down substantially from the start of 2011 when the former stood at 54 million and the latter was at about 30 million. CityVille, which launched at the end of 2010, was the star at the time with 61 million monthly active users but this was down from a peak of nearly 100 million users in early 2011.

Based on user trends alone, this looked like a bubble ready to burst. And looking at the supply side of the equation also raised alarming trends.

In 2011, Zynga did a great job of solidifying its solid leadership position on Facebook. But Facebook had just started its Facebook Credits program and was getting ready for its own IPO. Clearly Zynga was locked into Facebook as its distribution channel. It’s always a warning sign when a content publisher is dependent on a single distribution channel it cannot control.

There was also growing competition from companies developing better Facebook games as well as new platforms including both other social networks and emerging ones such as mobile. Zynga claimed that they would build their own game-focused social network outside of Facebook, put effort towards making major improvements in game quality, and turn their attention to mobile platforms in a major way. However, these were all serious challenges, ones where it was uncertain if the company’s one successful endeavor on Facebook would give them any advantage. One thing was certain, that it would be expensive for Zynga to pull it off.

Zynga expenses were already starting to soar at the time of their IPO, and they only continued to do so into 2010. Research and development costs for 2011 were up 385 percent, while marketing costs doubled. Arguably this might be expected from a company growing so fast. However for the first six months of 2012, research and development costs were up 114 percent while revenue from online games was increasing at an anemic 18 percent. Furthermore it doesn’t appear that revenue growth came from more efficient marketing, as sales and marketing costs were up 45 percent.

The fact that Zynga is struggling has many people assuming the concept behind games on social networks is flawed. This is throwing the baby out with the bathwater.  DFC’s belief is that games delivered via some form of social network will have strong growth potential. In North America, DFC sees the market doubling to more than $2 billion by 2016. It just doesn’t necessarily mean that growth will come from Zynga and Facebook.

It is important to look closely at Japan, where in-app purchases of games using social networks have boomed in the past two years.  Trends in gaming in Japan are often precursors to trends in North America and Europe. This has been true for both major game platforms and many mass market casual game trends.

In DFC’s recently published report “The Secret of Gree & Mobile’s Success” {link no longer active} there is a detailed look at trends in in-app purchases via social networks.  This report notes that there is a big difference between social networks and how well they do with gamers.  Mobage and Gree had less than half the overall users of other social networks such as Facebook, Twitter and mixi, Japan’s most popular social network. Yet they attract an audience that is dedicated to games.  Gree and Mobage attract a higher percentage of paying users, and their paying users spend more on average.

Mainly from delivering virtual item-driven games to Japanese consumers, Gree and DeNA, Mobage’s parent company, are both on track to reach $2 billion in annual revenue. At the very least, these companies have proven that a big market is out there. While both Gree and Mobage face many of the same challenges of Zynga, including market saturation, there is no doubt that they were able to tap into demand that generated a huge new source of revenue by getting consumers to spend money in new ways.  Most importantly, they show that Facebook may not be the ideal social network for gamers.  In fact, DFC believes that specialized social networks will become a big growth area, especially for games.

A big issue with both Zynga and Facebook is that they targeted raw user numbers instead of looking for quality of users.  The Zynga IPO came right at the time of Nexon’s IPO in Japan.  Nexon is a Korean free-to-play game maker and distributor that, on the surface, looks similar to Zynga. The companies are extremely different. Nexon focuses on building a loyal long-term user base that plays its games for years.  Nexon also focuses heavily on quality over quantity, and is heavily into branding its games.

Nexon and Zynga had an IPO at the same time, and they both had very similar revenue for 2011 at about $1.1 billion. The difference was Zynga was much newer, and thus in theory on a faster growth track. However, looking at Nexon’s prospectus of late 2011, there were stark contrasts, most notably in the Nexon’s much smaller portfolio and the longevity of its games. Nexon was focusing on quality over quantity. They presented games such as MapleStory, which launched in 2003, and Dungeon Fighter, which launched in 2004. Both had their best revenue year in 2010, with $1.5 billion in cumulative revenue each. Other games such as Mabinogi and Counter Strike Online were also having their best years several years after launch. Since its IPO, Nexon’s stock has been somewhat volatile, but it is generally traded near or above its IPO price. It’s a very different story from Zynga.

Zynga is now looking into growing its business on mobile platforms.  Of course, pioneering the mobile market in Japan was a big secret behind Gree and Mobage’s success.  The issue is whether the pioneering days are over.

While mobile games may be a growing area, it is worth looking at whether Zynga can crack a market that is already tremendously overcrowded and dominated by small, lean players.  There is also an issue of player fatigue around the entire Zynga game type, and moving to mobile is not likely to change that.  On the other side, Gree and Mobage in Japan show that in-app purchases on mobile platforms can be done. This does not mean Zynga will be the one to do it, considering they do not have a first mover advantage in mobile.

The issue with Zynga products is that, first, they quickly reach the saturation danger point, and second, the company doesn’t support building strong brand loyalty among its core users.  Brand loyalty is the key to long-term success in all aspects of the game industry. As mentioned, strong branding and high quality were critical for Nintendo. The same can be said for most successful companies in the game industry.  Examples abound, with EA’s sports franchises and products such as The Sims, Activision-Blizzard’s Call of Duty and Warcraft IP, and the many Japanese publishers that are still doing well off of franchises from the 1980s.  Branding is crucial, and not just for core games. It is also the secret to success with casual games. PopCap is a perfect example of a company focused on branding with products such as Bejeweled and Plants vs. Zombies.  It’s a major reason EA paid about $750 million for PopCap in 2011.

Branding is a long term commitment that requires careful management of a franchise. The game industry has numerous examples of game fads that quickly burned out, often due to oversaturation. Even strong brands can’t escape saturation and player fatigue.  Activision’s Tony Hawk and Guitar Hero franchises are examples of that.  EA Sports is one of the few examples of where a franchise can be continually pumped out, mainly because of the loyalty to the underlying sport.  Even with the incredibly popular Call of Duty there is an issue of how many games Activision will be able to pump out before there are diminishing returns.  Meanwhile, a company like Blizzard whose inability to pump out quick sequels to WarCraft, StarCraft and Diablo may in fact help maintain the brands demand over time.

The problem with Zynga is they seem to have quickly hit the saturation danger point, when too many essentially similar titles in essentially similar genres generate decreasing returns. A FarmVille begets a CityVille begets a FrontierVille, but the attachment consumers form with each succeeding and very similar game is weaker and shorter in duration.

Once again, there are many historical trends of this occurring in the game industry, even among core gamers.  In the late 1990s, there was a boom in real-time strategy (RTS) games that quickly led to a flood of new products.  What eventually happened was that even the best new entries in the genre had fewer users, as they were all targeting a subset of the established user base.  There was a declining percentage of gamers willing to make the jump from Command & Conquer to Dark Reign to Warzone 2100, or from Age of Empires to Total War to Empire Earth to Rise of Nations.

Zynga also faces the challenge of competing with the thousands of simple free-to-play games on one hand, and the more robust games on the other hand.  The company built its audience on gamers looking for a quick, simple experience. Now, to get more heavy paying users, Zynga is trying to make its games more complex.

An article in Kotaku has some excellent points about how the typical Zynga player liked how simple games like FarmVille were to play.  But as the games got more complex, the masses churned faster.  There will always be a certain percentage of game players turned off by added complexity.  Of course, much of Zynga’s goal may have been weeding out those users in an effort to attract more robust paying users. The issue is many experienced gamers looking for interesting challenges don’t look to “Blank-Ville” games because they are frustratingly slow if you don’t pay. If they are going to pay, they will opt to pay for something more interesting. Meanwhile, the typical “Blank-Ville” gamer who grew with the complexity of each new game might eventually recognize that the games are still basically the same, leading to burnout.

Clearly, Zynga is looking to build both game quality and focus on building stronger brand recognition.  Much of this is following in the example of Rovio’s Angry Birds as an impressive case study for successful branding. In late 2011, Zynga partnered with Best Buy to release plush toys based on FarmVille that came with in-game credits.  In early 2012, Zynga announced a partnership with Hasbro to make, among other things, a CityVille branded version of Monopoly, a FarmVille themed version of the classic board game Hungry Hungry Hippos, a Word with Friends board game (essentially a different branded version of Scrabble), and probably a Pictionary themed game based on Draw Something. These products are due in October for the 2012 holiday season.

Zynga wants to build more of a presence for its brands, but the deals with Best Buy and Hasbro are fairly limited efforts.  The plush toys at Best Buy were more of a minor test, and monthly active users of FarmVille on Facebook have declined from about 31 million in December 2011 to only 18 million in August 2012.  The Hungry Hungry Hippos board game is targeted for a 6 year-olds and under audience, not really the audience for FarmVille.  Monopoly, Scrabble and Pictionary are well-established board games, but they seem to have reached their own saturation point.

In the end, Hasbro may be the one to benefit the most from the association by attracting Zynga users.  It seems doubtful that these products will bring in many new users to Zynga games.  At best, they are probably a minor upsell for serious Zynga users.

Can Zynga be saved? 

That question is out of our hands.  Recent marketing efforts are not positive.  If we look to a positive sign, it is the significant increase in R&D that is worrisome but could be a potential source of salvation.  Zynga is a company that has lived on success in days and months, but R&D pays off in years.  It comes down whether their R&D money is being well spent, and whether their investors have the patience to see it bear fruit.

Source for all data: DFC Intelligence (www.dfcint.com)

—

This is part of a series of articles for [a]list daily outlining the changing face of publishing and marketing games on digital platforms. Previous articles include “Why Publisher 2.0 is M.I.A.” Part 1, looking at the changing face of game publishing, and Part 2, the shift in digital games from marketing a product to marketing a service, along with “The Emergence of Mid-Core,” a piece co-authored with Peter Warman, head of analyst firm Newzoo, “Riot and the Rise of the Player Community,” an interview with Riot Games, and “Finding Publisher 2.0,” an interview with Wizards of the Coast.

Exclusive: Game Of Thrones, Social Game With Adventure And Skullduggery

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By David Radd

Game of Thrones almost overnight turned from a fantasy series generally only appreciated by the relatively nerdy to a pop culture phenomenon with millions more people that have read the books and watched the TV show. It’s expanded out into the gaming sphere as well with an announced free-to-play MMO and recently released RPG. Westeros will also be the basis of a social game called Game of Thrones Ascent. We got a chance to talk with Jon Radoff, CEO of developer Disruptor Beam, to find out what the plan is right now for their new social game with a very hot license.

[a]list: How did you come to acquire the Game of Thrones license?

Jon Radoff: We’ve been working with George R.R. Martin for a while now. Initially it was just the license for the books for sometime and then we worked on it with HBO after the success of the TV series. We have an agreement with both now. Visually, we’re following pretty close to the TV series, like the way the Iron Throne is depicted.

We were originally going to work on this regardless of the TV series, and it’s great that HBO has brought the following of their show to our game.

[a]list: Why do you feel like it’s a good match for social games?

Jon Radoff: A lot of typical fantasy worlds like Lord of the Rings have clear cut good and evil where good guys form a band to fight evil and that’s not very dynamic for social games. In Game of Thrones Ascent, you can evoke all the feelings of the series. Westeros is a fascinating world for players to play in and be able to live out similar dramas and political intrigues that happen in the show.

[a]list: There are other, more traditional video games that have released based on Game of Thrones…

Jon Radoff: Ironically, I don’t think it’s a good environment about classic single player gamers. I have nothing to say about any games that might be set in the same universe. Traditionally, most RPGs are about beating up monsters and getting loot; that doesn’t work well in Westeros, but it’s a good universe for a strategic gameplay. For us, it was about looking at the authenticity of the world and Game of Thrones Ascent really reflects those type of things you see in that world. Part of it is swearing allegiance to certain houses; we’ll talk about the particulars over the coming weeks.

[a]list: What did you get from the hands on experience you got from George R.R. Martin?

Jon Radoff: He’s an interesting guy, he likes games but hasn’t played a lot of games and isn’t on Facebook or Twitter, but he still gets it. He’s a genius – he doesn’t have to use it to understand the experience. He gets the use of the web-based experience and he gets what makes it memorable. He wants the content of the books, with the adventure and treachery, and likes the idea that we’re going to bring those actions to life in the game.

Not in the game (yet).

[a]list: What flavor of the show are you looking to include in the game. Will we see any actor likenesses?

Jon Radoff: We wouldn’t rule out it, but at this point we’re not planning on including it. Tyrion will definitely be in there, but you’re not going to see Peter Dinklage’s image in the game. Visually, it’s inspired by it, but we’re not using digital images from the series; it’s more of borrowing from an artistic look.

[a]list: Will recent happenings in the show influence the game?

Jon Radoff: After Ascent comes out, one of the goals of the game is to put out content in concert with episodes arriving to make it feel like you’re living in the same world as the TV series. That’s one of the more exciting aspects of integrating with the show.

[a]list: Tell me about your plans for beta.

Jon Radoff: We’ll go through multiple phases of closed beta, and they’ll go to a more open phased beta, and we’ll go through a number of months in that – I don’t want to set expectations of when the open beta date is just yet.

Really, it’s about making the game good. I consider us to be fans of George R.R. Martin’s work and the HBO show. I think some social games have been rushed out, especially for licensed stuff, but for us, we want to make something exciting and new. We’re a business, and we’re looking to create something that people are engaging in. The best game businesses are building teams that are truly passionate about what they do, and you see that around the whole tech industry. Whether it’s Apple making iPad or Valve making what they make, you have to have passion.

[a]list: How will Game of Thrones Ascent be monetized? Will it be virtual goods?

Jon Radoff: It will be virtual goods. We’re not doing something extremely novel. It’s the production values and the gameplay itself that’s doing something interesting. We want to make it quite comfortable for everyone, whether they’ve played social games or not.

My big picture on this game and the market, all these games that were created for a social graph, using it as a way to propagate a business has run its course. You have to pay close attention to engagement and not build something people have been playing for years; you have to create something with depth.

[a]list: John, thanks.

_ _

Like Game of Thrones? Want a social game to feed your fandom Join the discussion on Facebook.

Exclusive: GamesBeat’s Dean Takahashi

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By Meelad Sadat

VentureBeat ventured into game industry coverage with little fanfare. It didn’t lure away an army of well-known editors from game sites. It didn’t promise to revolutionize game press. It didn’t unleash a slick branding campaign. It launched as a one man show, hiring veteran games business writer and author, Dean Takahashi. So subdued was the effort that as Takahashi puts it, he wasn’t even sure games were going to be his beat.

“When I joined VentureBeat four years ago I thought I was going to stop covering games because there was no such thing as a venture capitalist investing in games,” says Takahashi.

But he adds that, to his surprise, things drastically changed during his time at the site. Games are now considered serious endeavors with big upside potential for VC and angel investors. Facebook and Zynga have helped. So have the slew of startup successes feeding off of the growth of digital distribution.

During the same period of time, VentureBeat’s foray into games became a success story in itself. Today, the site’s GamesBeat section is a fully-staffed, well-read media outlet covering games from both business and product standpoints, including offering up comprehensive game reviews. Over the past year it’s added game press talent to its roster, with Dan Hsu, Sebastian Haley, and a staff of hardcore gaming freelancers from Hsu’s crowd sourcing site Bitmob. GamesBeat is also now the organizer of an eponymous annual conference gathering game industry heavyweights.

With GamesBeat 2012 {link no longer active} on the horizon in early July, we talked with Takahashi about their growth, and about his views on drastic changes in the industry and even the changing face of E3 in the four years since the site launched.

[a]list: Tell me a little bit about the growth of GamesBeat over the past few years.

Dean Takahashi: Venture Beat has been tripling its traffic every year. We finally got big enough in the past year or so to take on GamesBeat as a real, second site and a new project. That has grown dramatically for us. We expanded by bringing Sebastian Haley as our review editor back in October, and Dan Hsu started earlier this year for us. They brought with them a lot of freelance writers from the crowd source site that we acquired, Bitmob, which Hsu was running. That’s given us a very large writing staff for covering games. At E3, we had nine writers and editors this year. A year ago, this time, we had three writers at E3.

[a]list: GamesBeat has become a bigger and bigger part of a site that’s geared towards the venture capital community. Does that success you’ve had with readership reflect growing interest in the game industry among VCs over the same period of time

Dean Takahashi: Definitely. When I joined VentureBeat four years ago I thought I was going to stop covering games because there was no such thing as a venture capitalist investing in games. Not so long after that social gaming exploded on Facebook and the venture capital started flowing. Now we’ve got a couple of IPOs, and a couple billion dollars on top of that invested into more than a hundred game startups. That sort of came out of nowhere the past four years, surprised everybody, surprised me. Clearly games have turned into one of the great investments in the last few years, alongside things like Facebook and Apple. The growth of apps, the disruption that has resulted for traditional games because of social, mobile and online is really fueling the growth. We’ve tried to cover that disruption or that change a lot more closely than other publications.

[a]list: Let’s talk about your upcoming GamesBeat conference. You’re in your fourth year, and that’s arguably the most transformative four years in the history of games. Looking at your conferences year over year, how would you sum up the major changes and trends over that period of time?

Dean Takahashi: We’ve found a big crowd who’s interested in the cutting edge of games. That’s where we target all of the speakers and the panels. We had Mark Pincus from Zynga on one of our panels at the 2009 conference, and he’s coming back as a multi-billionaire as a fireside speaker at this conference. Last year we focused on mobile games in particular because there was this theory that Zynga was dominating Facebook and so the wide open territory for startups to invest in was mobile. A lot of those happened.

Now we have this theme for this year’s conference that it’s the cross-over era, where the different barriers that have held up over the years between the different segments of the game industry are all coming down. The web itself has obliterated them, and there’s a lot of movement back and forth between console, social and online now. This year’s conference has a lot of speakers from big game companies, the traditional ones, as well as the disruptive startups. We always try to focus the conversation on what’s on the cutting edge and what’s disruptive.

[a]list: One of the areas that could be somewhat disruptive is this growing idea that there’s a market for core games on mobile or tablets, and that there’s going to be this category called mid-core with games that look like console games to an extent but are designed specifically for mobile platforms. Do you think this is a significant opportunity and is it right for developers to target it?

Dean Takahashi: I think there are definitely some great examples of success on that front. Funzio had pretty good success with a string of games. They went three for three above a million users on iOS. Kabam has had great success with Kingdoms of Camelot: Battle for the North. There are other hardcore games out there like Infinity Blade from Epic and ChAIR Entertainment. Those games are proving that hardcore gamers are on the platform and they want to play games. As you said, mid-core is sort of like a ratcheted down experience because it is a different type of platform where you play for a shorter amount of time. So those kinds of games are making sense for sure. I think we’re just at the beginning of this.

[a]list: If you were to define the kind of core gamers that are playing these games on mobile, who is it, is it gamers filling up their time away from consoles or is there an actual migration happening?

Dean Takahashi: I think it’s everybody because these games and other free-to-play games can reach a much wider net and a wider audience because that barrier isn’t there where you have to pay sixty bucks for this game. That creates a very large funnel for the game companies that are grabbing just anybody they can, and then it narrows down based on who’s willing to pay for something like virtual goods in a game through micro-transactions. That becomes more the core group of fans gathered around different titles. It’s an interesting blend because those hardcore players wouldn’t be there if the game wasn’t populated, if there weren’t many players in it. The large majority of players aren’t monetized there but they provide a valuable function by making the game feel very popular and populated.

[a]list: What are your views on the sudden growth of Kickstarter and crowd-funded projects in the game industry, is it a threat to traditional investing?

Dean Takahashi: It’s a much needed breath of fresh air for funding games in the middle layer of gaming. The blockbuster games get all of the funding they need from major publishers. The small indie games don’t take much money, and so a group of just a few people can work on them and get something to market. But this middle layer of publishers and developers who didn’t have gigantic hits but have games that deserve sequels or properties in need of a reboot, those are the ones cashing in pretty big on Kickstarter. The big thing about Kickstarter is that it comes from the fans, and the fans can validate the idea of doing a game. Like the revival of Wasteland that Brian Fargo is doing. He got a lot of money, nearly a million bucks out of that. He also sort of validated that a lot of fans still care about the franchise. I think there’s still a need for venture funding for companies that are more ambitious, that want to raise more money, like five million bucks and upward. It’s pretty hard to imagine that crowd-funding sources are going to produce that much money. This middle layer of people who are well known already as developers, who have some property that they can revive, are the ones that I think are going to benefit most from Kickstarter.

[a]list: Has there been any rumbling among the VC community about how they feel about crowd-sourcing?

Dean Takahashi: I think they sort of realize that they have to bring their own value to the equation, that they can’t get as greedy as they might be in the absence of Kickstarter. It kind of keeps everybody honest. The VCs can’t take a controlling stake in a company for a very small amount of money. There’s a checks and balances system here. If the deal you’re getting from a VC or angels is an ownership one, you have an alternative now to go shopping for money on Kickstarter without giving up any equity.

[a]list: Let’s get your thoughts on E3. There’s this question of the viability of E3, now that there seems to be fewer major announcements made at the show. There’s also the question of where it should be located, whether it should stay in Los Angeles. What are you views

Dean Takahashi: First, I think it should stay in LA. It’s the center of entertainment in the country. It makes sense to have all of the entertainment industry represented at the show. If they move it out, maybe they move it out for a couple of years then come back to LA at some point, just because of the construction issues really. [Editor’s note: LA is mulling a new football stadium.] They could try to put it in other big cities like Las Vegas, but there are a lot of pluses and minuses there, with too many distractions in Las Vegas.

The Last of Us

As far as the show itself, I disagree with people who think it’s over. I think it’s still a very valuable venue and it’s going to be so for a long time, especially for a lot of the major tent pole announcements of the game industry. This was an in-between year so it’s sort of unfair to criticize it and say there was nothing that exciting at E3. Nintendo’s console announcement could have been better. By next year we’ll have some new console announcements coming from Microsoft and from Sony that will sort of put some life back into E3. I think there were really some good surprises in the games that were shown by different players. Sony scored very well with brand new intellectual property with games like Beyond: Two Souls, The Last of Us and The Unfinished Swan. Ubisoft also had a very good showing with some very solid sequel games like Assassin’s Creed 3 and Far Cry 3. They also had a brand new title in Watch Dogs that wowed the audience at their press conference. If you add all of that up, it wasn’t that disappointing. I think Microsoft and Nintendo could have shown their games better. They looked weaker by comparison.

[a]list: With Nintendo, where do you think they came up short in the way they showed the Wii U?

Dean Takahashi: They have a major issue with the capability of the Wii U console where it has a single processor but it has to drive multiple displays. A single graphics chip inside the console has to drive the big screen, the main game screen, but it also has to provide the imagery for the tablet controller, the game pad. And yet the system itself isn’t that powerful. Nintendo only showed games with one game pad controller and the TV. Most games out there, if you’re in a social setting, you want two controllers. Nintendo didn’t show any games that do that. They admitted in a Q&A that the games are going to run slower if you have two game pads and playing on a main display. That’s a fairly big issue for them. They made a good case that you can play with one controller and multiple Wii controllers, what they call asymmetric gaming where one person is looking at the small tablet screen and trying to deploy zombies while the people playing with the controllers were all on the main screen. You come up with very creative, different kinds of games where it’s one against four, or one person going online. They tried to justify and turn into an advantage this major weakness of the Wii U, but I think a lot of people saw this as a weakness. The games themselves were creative. They tried to do something like Wii Sports with NintendoLand, which has mini-games in it that explore the capabilities of the tablet and the touch screen. But there wasn’t an obvious blockbuster within those games. They may have had a good one in ZombieU, but in the demos it didn’t necessarily play that well. Nintendo came up as a pretty big disappointment at E3.

[a]list: I know you’re a gamer. What are you playing and what are you most looking forward to?

Dean Takahashi: I just finished playing Max Payne 3. I think I’ve slayed more than 1,500 people one at a time. It’s interesting for that game, which is a very cinematic game with some outstanding cut scenes and a character driven story. Yet at E3 some of the most interesting games to me like Tomb Raider, The Last of Us and Beyond: Two Souls, they had confrontations in them with a lot fewer people. A lot fewer people to shoot but each conflict was a life and death struggle with someone who was just about as capable as you were. Instead of shooting a hundred people, it seemed you might kill one or two, and also in a more brutal way. These games that are coming up that I mentioned are much more emotionally rooted, almost like movies in the impact they can make and the power of these scenes. They can sort of make Max Payne 3 seem like kid’s stuff by comparison. The only worry that I have is they might seem too scripted to the gamer, where you’re not controlling the game as hands-on as you would like, and that it’s more like watching a movie unfold in front of you. The game industry has gone down that road and made that mistake before. It’s a hard problem to solve in how much can you increase the drama of a game before it’s no longer a game and turns into a movie.

[a]list: Thanks, Dean.

Exclusive: Publisher 2.0 — Riot And The Rise Of The Player Community

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By Steve Fowler

Following in the series looking at digital games and the rise of Publisher 2.0, where we last showcased the growing opportunity for mid-core games, we turn to the one of the category’s biggest games.  League of Legends is arguably the most successful free-to-play mid-core title in the digital game market. The game’s publisher Riot Games is a rising star that’s helping define what it means to be a Publisher 2.0.

League of Legends began as a small community focused PvP game inspired by the popular “Defense of the Ancients” mod based on Warcraft III.  The game has players choosing sides to defend and attack cooperatively against other real players.  The matches are furiously fast. They’re also extremely well balanced, a critical element for a free-to-play PvP game. Players get in, get their fix, and then reset or stop playing.  It’s exactly the type of play style that suits mid-core gamers.

Riot’s success with making the game a hit also has a lot to do with how it branded the IP with core gamers in mind and focused on nurturing a loyal player community. League of Legends has an impressive 32 million players registered, but what’s astounding is how more than a third still play monthly, and more than 4 million do so daily. That’s dedication that comes with attracting core players, and it speaks to both the quality of the game and Riot’s player community, which drive the experience.

For anyone who wasn’t tracking the rise of digital and free-to-play a few years ago, Riot’s success may have been off the radar. That changed in 2011, when China game conglomerate Tencent invested a majority stake in the company to the tune of $400 million. It didn’t go to Riot’s head. There was no sudden surge in marketing spend, no chase for the quick buck nor expensive and unsustainable customer acquisition campaigns. Instead, the company continued its “community first” approach.

No small part of the credit for that philosophy, not to mention the overall success of League of Legends, goes to Chris Enock. Enock joined Riot’s marketing team just as League of Legends was exiting beta testing in 2009, and he now serves as senior marketing director.

“We haven’t yet had the time to focus on traditional acquisition marketing, of going big at retail, or doing massive media buys on TV,” says Enock. “Instead we focus on helping our players engage with the game and the brand. That has been our primary strategy for both [player] acquisition and retention.”

Enock granted [a]list daily this exclusive interview to delve into what he believes defines effective marketing strategy for digital games and how Riot understands the changing face of game publishing.

Steve Fowler: Tell us, what do you oversee at Riot?

Chris Enock: I oversee a number of the publishing operations at Riot Games including Business Intelligence, Marketing, Community, eCommerce and Corporate Communications.

Steve Fowler: League of Legends is an entertainment service and not a traditional game product, given that it’s persistent, constantly evolving, and reliant on an ongoing stream of customers. How does that simple fact change the way you market it?

Chris Enock: I think it changes things drastically, but in a way that plays to our strengths.

First, I love marketing video games, not only because I get to play League of Legends and other titles in the name of “work,” but also because it’s a high involvement product. Gamers who play the types of games I most enjoy working on are highly involved in the games they play. They play a ton – most League of Legends players invest hours in the game each week – and that means they’re highly knowledgeable about the games they play. They research strategies, debate the meta-game, and even create astounding fan art. That gamers dedicate so much thought to the games they’re playing makes marketing games more interesting than marketing products like butter or socks that consumers might only take a few moments to consider.

That level of engagement and passion enables us to have a different type of relationship with players. Instead of just broadcasting a marketing message or talking at them, we talk with them, typically on our forums or on social channels like Facebook. We might start a conversation, but it very quickly becomes a real live conversation between players — a different beast entirely. Traditional marketing, like a TV commercial, allows marketers to broadcast messages and doesn’t generally offer a response mechanism. Exaggerated claims aren’t necessarily challenged. In contrast, marketers who engage in conversation with players must be authentic or players will respond negatively, challenging the marketer’s message and drowning it out with their own corrections or questions. For League of Legends, that means we only do marketing around messaging we feel will both resonate with and ring true to our players.

Steve Fowler: Let’s look at the three types of media, paid media such as ads, owned media such as videos and game assets, and earned media such as PR, social and community. Give us insight into how Riot Games uses these effectively and how you integrate your message into each.

Chris Enock: Our team of marketers takes Riot’s mission to heart: We try to be the most player focused company in the world. This means we focus on building our brands from a player perspective. Building our brand then becomes an exercise in deeply understanding what players want, aligning with development around providing it to them, then connecting the dots for players so that when they taste the improved experience they understand it wasn’t accidental. The net impact is that our players end up doing most of our marketing for us — what you’d call earned media in your framework. Most League of Legends players join because they hear about the game from a friend. Friends feel comfortable telling friends about the game because they see Riot’s regular improvements to the game experience. The medium for communicating our message – as in paid media or owned media – is in some ways an afterthought. We just want to have a meaningful dialogue with our players about the game.

Steve Fowler: In your marketing messaging, you almost see no mention that League of Legends is in fact free-to-play. Is playing up that business model no longer a focal point for your company’s strategy?

Chris Enock: That’s very insightful. Nobody plays League of Legends just because it’s free. There are plenty of games like that that don’t really grab and hold players’ attention. They play it because it’s a compelling game with a great roster of characters. Being free just makes it easier for players to get into and stay in the game. So instead of the economic model, when we discuss the game, we focus on what draws players to the game. We try to grab the attention of players by showing the iconic and epic characters. As players engage, we try to convey the action-oriented nature of the game. As gamers explore deeper on the website or elsewhere, we discuss the strategic depth of the game.

Steve Fowler: eSports seem to be a huge focus for you. Tell us how this works into your overall marketing strategy.

Chris Enock: It’s a big part of our being player-focused. We designed the game to be a viable eSport from the beginning, but when saw how important competitive play was to League of Legends players, we doubled down. There were well more than a million players tuning in to our first World Championships in 2010, and [we] have seen more than two million tune into the regular matches in our Challenger’s Circuit this year. We look at eSports, in marketing parlance, as a way to deepen our engagement with our players. That millions of gamers watch other people playing the game for hours speaks volumes about the role League of Legends plays in their lives. This is another area where our interests and those of our fans intersect. Having a lot of exciting competitive play in [the game] lends itself to great conversations, and therefore great marketing around it. It’s the equivalent of Monday morning water cooler conversations about the performance of your favorite sports team over the weekend. eSports fans have huge levels of engagement.

Steve Fowler: Can you give us some examples of what tactics are working best for player acquisition and retention?

Chris Enock: To add to the earlier answers, for retention, we don’t focus on “retention” per se. We instead focus on making sure that players have a good experience in the game. A popular tactic of retention marketing is the winback campaign, usually an email to lapsed customers. We don’t think that sort of thing is effective unless players find that the gameplay is well balanced, that matchmaking works well, that a culture of team collaboration exists, and so on. We have had to build our organization from the ground up to run the game as a live service, with content, balance and new feature updates very frequently. It has required a different structure and a lot of different choices from what more mature or older-school businesses do, but I believe that much of the industry will eventually have to make a lot of the changes and tradeoffs we’re making at Riot Games.

In terms of acquisition our players do a lot of the marketing for us. They tend to carry the message to other potential players and bring them into League of Legends. We enable that by having a conversation with our players, by discussing and getting behind aspects of the game that they will support and believe in. In that sense, we are tailoring our marketing messaging not to new consumers, or targets, but instead to our current base of fans.

We haven’t yet had the time to focus on traditional acquisition marketing, of going big at retail, or doing massive media buys on TV. Instead we focus on helping our players engage with the game and the brand. That has been our primary strategy for both acquisition and retention.

Steve Fowler: What’s your opinion on the importance of building a brand around a game, and how did you approach it with League of Legends?

Chris Enock: I think building a brand is essential, but we don’t go about it the conventional way. In traditional branding, money is spent on paid media to help a symbol start to take on a set of attributes that mean something for consumers. The Nike Swoosh, thanks to the endorsement of Michael Jordan and Tiger Woods and a whole string of celebrity endorsers and Super Bowl commercials, certainly is an amazing brand. But for League of Legends, we’re taking a more grassroots approach, instead allowing the experience of playing to define the brand for players. When someone has an amazing moment in game, there’s a deeply rooted sort of goodwill generated, and we think it’s more valuable.

Our job as marketers is to simply to highlight the highlights, to help the community become aware of the rich stream of value that’s being generated by Riot [such as] features, service upgrades, new champions, new skins, and by the community itself – team play, community-generated art, community-generated strategy guides, and so on.

Steve Fowler: What advice can you give to marketers of smaller digital games with limited resources and budgets?

Chris Enock: The great thing about this new style of marketing is that it doesn’t really cost anything compared to traditional marketing around paid media. Many of our conversations happen on our forums, Facebook, and other social channels. The reach and frequency of this marketing first scales with the strength of the play experience and value offered, and second with the number of players in the game. It’s also a virtuous cycle. Companies that better engage their players around the positive aspects of their game enjoy more positive word of mouth and more referrals.

As for jumpstarting the process and getting the word out about a game at launch, there are a number of marketing channels available today, like AdWords and Facebook, where the limiting factor is more often time and creativity vs. budget. Having a two-way conversation with players flips the tables. Now, the quality of the messaging is as important as the ability to broadcast it.

Steve Fowler: With a service-based game, the marketing really begins at the launch of the product. Can you give us an idea on how you manage the consumer message over time to keep it fresh and relevant?

Chris Enock: Being fresh and relevant means having meaningful discussions with players. League of Legends is built and run around being able to facilitate that. We update the game on a rapid cadence, adding new features, new content and balance changes about every two weeks. That cadence creates a constant dialogue with players who are excited and engaged not just to play but to talk about it as well. Add in eSports, contests, events and many other activities that Riot helps facilitate, and there’s always something new happening.

The strategic challenge then becomes more about shaping the brand by prioritizing which areas you want players to talk about, rather than as is typical coming up with a clever marketing message to get people excited about something they normally wouldn’t pay attention to. My personal challenge is around recruiting great marketing talent who can think about how to leverage this shift in marketing and understand the messaging nuances enough to sustain a conversation with our most hardcore players. When players are engaged, and new game enhancements roll off the line with regularity, keeping the conversation fresh and relevant is straightforward.

 

This interview is part of a series of articles for [a]list daily outlining the changing face of publishing and marketing games on digital platforms. The series began with “Why Publisher 2.0 is M.I.A.” Subsequent pieces have covered the shift in digital games from marketing a product to marketing a service, a publisher that gets the category in an interview with Wizards of the Coast, and a piece co-authored with Peter Warman, head of analyst firm Newzoo, looking at the growing opportunity in mid-core games.

—

Steve Fowler is a thirteen year veteran of the interactive entertainment industry. He is responsible for the brand identity and launch of the Halo franchise at Microsoft Corporation, Inc., and has held marketing and business development roles at Interplay, Sega Sammy Holdings, Inc., Square Enix, Inc., and Take-Two Interactive Software, Inc. He is the chief architect of the one of its kind annual industry conference the [a]list summit, and has been incubating new digital game publisher [a] list games internally at Ayzenberg Group for the past year. For more information on [a]list games, visit www.alistgames.com.

 

 

[a]List Game Marketing Summit: Pachter’s Bold Keynote

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[Update]

Pachter has responded to his critics on NeoGAF {link no longer available} with a forum post titled “A little context” about his Wii U comments during the keynote:

“I believe (and please feel free to disagree) that a large portion of the Wii audience comprised casual gamers–those who bought one or two games a year the first two years, then put the Wii aside–and that those casual gamers moved on to another platform,” wrote Pachter. “The ‘other’ platform may have been Facebook games, smart phone games, tablet games, or one of the other consoles, but once they moved on, they are not likely to come back.”

“At the same time, I believe (again, please feel free to disagree) that the growth of smart phones and tablets has attracted many potential dedicated handheld game customers, and these people also are unlikely to come back to either 3DS or PS Vita,” he continued. “Summing this up, I think the addressable market for the Wii U is around half of the market for the Wii, and I think Microsoft and Sony will compete for a portion of that market if the Wii U is priced too high. I think that the dedicated handheld market is permanently impacted by smart phones and tablets, and think that Nintendo’s addressable market is probably also half of its former market.”

“Nintendo is in disarray because they waited too long to launch the Wii U,” Pachter detailed. “I know that this sounds like (and is) sour grapes because they didn’t launch the Wii HD in 2009 or 2010 as I ‘predicted’. They should have, and because they didn’t, the decline in Wii and DS hardware and software sales drove them into generating LOSSES. For those of you who aren’t financial analysts, losses mean that the company is worth less than it was before. Nintendo stock has dropped by over 80 percent in the last few years, and the market has appreciated over the same period. I’m paid to advise investors, and none have made a profit owning Nintendo stock. I don’t think that many will make a profit over the next few years, because I don’t think Nintendo’s strategy will return them to profitability.”

“If the context above infuriates you, go back to school and pay attention, then read it again,” he concluded.

[Original Story]

Michael Pachter, Managing Director of Equity Research at Wedbush Securities, gave the keynote address at the [a]list game marketing summit in San Francisco on Thursday, and he had a number of provocative observations for the assembled crowd of game marketers.

Pachter lead off with his prediction for the industry standby of packaged console products.“I think console packaged products are going to be around for a long, long, long time,” said Pachter “When they do go away, they’re going to be replaced by console download products. People are going to have that $60 – soon to be $70 – game play experience as long as there’s somebody who has a vested interest in making sure that happens.”

Pachter took exception with an observation by David Cole that was cited by Steve Fowler of the Ayzenberg Group, who introduced Pachter and the summit. “I think David Cole said something that’s wrong. He said there could be a social bubble, because all the games are copycat, there’s no originality… you could absolutely say that about first-person shooters. You could. They’re all the same game. Except they’re not. I would say that about Hidden Chronicles and Gardens of Time. I love Zynga games, and I get why they’re doing them,” Pachter said. He followed with double-edged compliment: “Zynga actually does a great job with their games. Even when they rip somebody off, they do a better job than the person they ripped off.” That’s one quote that Zynga probably won’t be using in their marketing materials.

Pachter went on to compare the evolution of the gaming industry to the evolution of the casino gaming industry. Pachter noted that to be a successful player, games like poker require a deep knowledge of the game and a lot of play time to develop the necessary skills. (He also said that he paid his through law school as a poker player, earning $250,000 per year for three years of law school.) Poker is played in long sessions; you don’t just sit down and play for a few minutes, Pachter noted. Casinos all have a poker area now, but they also have table games like craps and roulette, which are kind of complicated but not as highly skilled as poker. You spend time playing them, but you don’t have to spend as much time as when you play poker. The biggest area in casinos is devoted to slot machines, which anyone can sit down and play for a minute or two or for hours.

How is all of this like the gaming industry Pachter explains: “Texas Hold’em is like playing an MMO. Exactly like one. Nobody does it for five minutes, and when you play it you are immersed in it. The same kind of people do both, obsessive-compulsive people.” In Pachter’s analogy, the table games are console games. “You cannot just start playing Call of Duty. You tend not to play it for a few minutes,” said Pachter. In both cases you have to learn something about the games and develop some skills, and you tend to play them for at least an hour or two.

Then you have slots, which Pachter says “are just like casual, social , and mobile games. Everyone can figure them out, and they’re really mindless.” When Las Vegas was just table games, that was like the game industry with just console games. “Console games were really like Vegas thirty years ago. The 90s was when the MMO started to appear, and that’s when the poker rooms started to appear in casinos,” said Pachter. Now we see that casinos have devoted a huge amount of space to slots, and they generate a lot of profit for the casinos because they are so easy to play for anyone, and you can play them for a minute or for hours. The casinos still have the table games, and they still have the poker rooms, and they’ll continue to draw a good audience even though the slots may get the majority of the floor space.

Pachter now sees social games as a good business that will continue to grow, especially when the social game companies are able to refine their business model. “Free-to-play is free, and that’s a mistake,” said Pachter. “Free to play should not be free. In Western cultures, we get nothing for free. It’s ad-supported if you don’t pay for it.” He pointed out that we have no problem watching an ad in order to listen to music on the radio, or to watch television, or see movies on TV. The scoial game market needs to take that to heart, according to Pachter. “If publishers and developers can figure out a way to monetize the 98 percent of the people who don’t pay, this is a great industry to work in.”

Pachter had quite a lot to say about the console market, too. “Smartphones have absolutely destroyed the casual market for consoles. They also killed the casual Wii game,” Pachter noted. “The market for hardcore games is bigger today than it’s been. Nintendo inflated the numbers with a bunch of great casual experiences, which have been replaced by social games, and smartphone games, and tablet games. I can tell you that the women that were playing the Wii Fit are now playing FarmVille, CityVille, CastleVille. Wii was a bubble. The Wii bubble has burst.”

We took advantage of the question period to ask about the next generation of consoles. New consoles are in the wings, the Wii U’s been announced, but pricing hasn’t been announced. There are rumors that Microsoft’s next console might be as much as $600. Could the next generation of consoles really be successful at that kind of price point

Pachter didn’t hesitate to share his thoughts on the next generation of consoles. “Since Microsoft hasn’t settled on specs, I think that’s probably premature,” said Pachter, referring to the idea of a $600 price point for the Xbox 720. He moved on to his thoughts on the Wii U. “I think Nintendo’s in disarray. I think the idea that we don’t know the price point yet, but we do know what the console is, is just sad. I think they’ve completely blown that. It’s gonna launch at $249; because it has to. They’re dead if they launch at $259, I think they’re toast then. I think they’re toast anyway.” Why “I think the Xbox 360 with Kinect will be priced below that by the time they launch.”

Pachter went on to talk about the next console generation in general. “I’m a little worried about the next generation because I actually think we’ve gotten to the point where people don’t care any more. Look at television displays; we’re at 1080p (2K) already and they’re already talking about 4K and then 8K. Nobody’s buying a 4K TV or an 8K TV in the next ten years. They’re $15,000! All the consoles now are running in 1080p, so what are we gonna get 60 frames per second standard, and 120 frames per second occasionally Who cares Have you played NBA 2K? It looks like a frickin’ movie. The facial animation isn’t great, but the game looks like a movie. It doesn’t get any better than that. I’m actually worried about them in general.”

Pachter finally circled around to the pricing question. “So the answer to your question is, yeah, price I think is everything, because I don’t think features matter that much. I think what you’re going to see in this next generations of consoles is this: 4 GB hard drive, except for Nintendo which will be no hard drive, and maybe some type of built-in cell access or something, some way to connect with the television without wires, it’ll be like little features… but as far as gameplay, you’re talking about faster framerates, but I’m not even sure what manufacturers want. We’re in a really interesting time. I think the manufacturers better figure it out and better let consumers know, because we don’t want to make them to wait for something that’s not coming. If Microsoft launches at $600 it’s over.”

Nintendo’s pricing of the Wii U will be a very important part of the puzzle; not just the price, but when they choose to announce it, and then how Sony and Microsoft respond. The holiday market in 2012 will be very, very interesting to watch.

Finding Publisher 2.0

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The search is on for a new approach to binding product development and market making in the game industry as more and more products are served digitally. It’s the search for publisher 2.0. This series has covered the issues facing developers and publishers in the shift to digital. It started with how developers gunning for success in the category might overlook essentials, some in their haste to  shun the old publishing model. The last piece drilled down on the fundamental differences between marketing packaged versus service-based games.

Both articles have also argued how important it is to establish a cohesive branding strategy. It’s critical for an entertainment product, where people have become accustomed to highly creative marketing campaigns that are compelling and aim to entertain.

In the search for publisher 2.0, let’s look at one company that gets it.

“A brand is nothing more than a promise between you and your community,” says Bryan Chu from Wizards of the Coast. “The validity of that promise is expressed in every interaction, every product release, and every experience you create together.”

One way to look at a brand is that it’s the wrapper for a product. It’s a potential customer’s first impression. Whether they run into an ad pasted on the side of a building or find a game in a Tweet from a friend, the first impression better be good. So should the second, and the third and so on. According to Chu, Wizards of the Coast goes to the level of seeing their flagship franchise, Magic The Gathering, as a lifestyle brand.

“Regardless of the level of player or whether their play experience is in stores, around the kitchen table, or digitally, we continuously and actively engage with our players,” says Chu, adding how key to the effort is “unity of voice and messaging across all channels.”

That stance came into play when the company was ready to take their IP, viewed as the most successful trading card game in history, into digital games. It was with the release of Duels of the Planewalkers. The game hit PC and console digital game stores just under a year ago and has been selling briskly, becoming one of the most successful Xbox Live Arcade titles of all time.

We go in-depth with Chu, who serves as Wizards of the Coast’s senior business manager, on how strength of brand as well as tactics unique to digital games factored into how they marketed Duels of the Planewalkers.

Steve Fowler: What’s your opinion on the importance of building a brand around a game product, and how did you approach it with Duels of the Planewalkers?

Bryan Chu: It’s about the overall brand experience. I think you need to build a brand holistically and deliberately. You can’t just throw product out there hoping that people will find it anymore. You can’t just think of your players as consumers or worse yet, wallets. You need to think of them as partners in the experience that you’re creating together. It’s not about sales or moving units in the short term. It’s about creating great experiences and touch points and by doing so creating lasting, long term value. We don’t think of Duels of the Planewalkers as a one-off Magic experience, but rather as an on-ramp to the greater Magic brand.

Steve Fowler: Give us an idea of how you manage the consumer message over time to keep it fresh and relevant and continue to attract and retain players after launch?

Bryan Chu: It’s about integration and providing a consistent and great experience in both the campaign and the products. That means constant innovation for both, and understanding your consumer. Who they are, what they want, where they are, how and when they play and on what journeys they want to go on with you. That means as marketers we need to listen and not just pitch. Every time a consumer buys a game, a piece of DLC, or plays in an event they are telling us something. Our job is to hear what they’re saying and to work with the rest of the team to provide that next great experience.

Marketing in this day and age isn’t just about acquisition of new players. This isn’t the game industry 10 years ago when it was all about gearing up the hype machine and getting a huge launch only to move onto the next big launch once product was on store shelves. It’s now, more than ever, about managing the lifecycle of franchises. We’re a part of our players’ lives and we have a responsibility to work just as hard to build engaging experiences as we did to get them to try us out in the first place.

Steve Fowler: How did you approach different channels to get your message across, whether through paid ads or earned media such as social or community?

Bryan Chu: We’re fortunate as a company to have such a robust and engaged fan community, so much so that our earned media efforts often take on a life of their own. This carries over to fantastic traffic to our owned media, which of course creates improved efficiency for paid media. Our players are great. It all starts with them and continuously providing them with great experiences.

 

Steve Fowler: Can you give us some examples of what tactics work well with selling digital games on consoles?

Bryan Chu: If there is one thing that I’ve learned over the years is that there’s no such thing as a small launch. There is a tendency to think of digitally distributed titles as small plays, or side projects and not deserving of focus and attention due to smaller budgets and lower price points. However, this “small play” might be a player’s first and potentially only contact with their brand. In fact, given the delivery and the generally lower prices, it’s even more likely that a player will come into contact with a digital product. We put as much effort behind Duels of the Planewalkers as we would anything else.

Steve Fowler: With eSports being a huge focus for Magic The Gathering, tell us how this works into each product’s marketing strategy.

Bryan Chu: Wizards has the most robust organized play program of any company I’ve ever been a part of. The team here provides amazing experiences year round for all levels of play, from local level Friday Night Magic events to the Pro Tour. Not only are events happening for all levels of players, but they are also happening all the time in a myriad of locations. Players can walk down the street to their local store, hop online and play digitally, or just login to the website to view the robust coverage of the Pro Tour events. What this means from a marketing perspective is that it’s extremely easy to be highly engaged in Magic.

Steve Fowler: What advice can you give to marketers of smaller digital games with limited resources and budgets?

Bryan Chu: The first bit of advice is not to over focus on your limited resources and budget. No one, in the history of the world, has ever gone to market with as much budget as they would have liked. Understand your core consumer and who your target is. Serve that community. Digital marketing is disciplined marketing. It’s more similar to traditional CPG [consumer packaged goods] marketing than the old launch based game campaigns. That means the devil is in the details and getting all those things right.

To me, digital games are making games marketing grow up. We’re suddenly a real discipline and not just a bunch of guys thinking of throwing feather boas onto the Statue of Liberty. That also means that it suddenly is less about the budget and more about your skill as a marketer. Doing your homework, spending those hours in front of your spreadsheets and building your strategies is more important than ever. That is what will let you optimize your budget and make your campaign as efficient as possible. And if your budget is limited, that efficiency is what is going to make or break you.

The other piece of advice is something that does still hold true from traditional video games. Work on your relationships with your product teams. With digital games, especially F2P and rapidly evolving micro-transactional games, the relationship between marketing and development is more critical than ever. You need to be partners from inception through launch and beyond. Good marketing helps good products succeed, and good products make good campaigns great.

Steve Fowler: Bryan, thanks.

—

Steve Fowler is a thirteen year veteran of the interactive entertainment industry. He is responsible for the brand identity and launch of the Halo franchise at Microsoft Corporation, Inc., and has held marketing and business development roles at Interplay, Sega Sammy Holdings, Inc., Square Enix, Inc., and Take-Two Interactive Software, Inc. He is the chief architect of the one of its kind annual industry conference the [a]list summit, and has been incubating new digital game publisher [a] list games internally at Ayzenberg Group for the past year. For more information on [a]list games, visit www.alistgames.com.

Exclusive: Transforming A Brand Into A Game

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When you ask someone who grew up on the action cartoons of the ’80s which was their favorite, there’s a pretty good chance they’ll say Transformers. Iconic as a toy brand, now a mega success as a movie, there are still a number of people who feel the greatest connection to the original cartoon series, (known as Generation One, and abbreviated to G1). High Moon Studios saw an opportunity with the franchise outside of just adapting the movies into video games and have run with it. We talked with High Moon Studios President Peter Della Penna and Marketing Manager Greg Agius about the brand and their latest game Transformers: Fall of Cybertron.

[a]list: How did you get a chance to do a game based on an original take on Transformers in the first place?

Peter Della Penna: It was pretty obvious to us and Activision, that our studio capabilities and sensibilities were a great fit for the Transformers license. Also, it was perfect timing for us to develop a Transformers game that was not based on the film property and did not interfere with the movie franchise release schedule.  The natural place for us to go was back to our childhood roots in G1 and start telling the story of Transformers before they came to earth.

Peter Della Penna

[a]list: What are ways that you look to bring in fans of the classic cartoon series Do you try and tap veteran voice actors?

Greg Agius: Authenticity is our biggest strength at High Moon Studios. You walk around the studio and you see G1 fans everywhere. I’d say that bleeds through to the game in every way. The look and the feel all are heavily inspired by G1. But everything is updated so that it feels right and up to date with the look of a modern game. Landing original G1 voices like Peter Cullen to voice Optimus Prime and Gregg Berger to do Grimlock is another key. Transformers: Fall of Cybertron reboots your childhood and makes it cool again!

[a]list: What games do you try to emulate as far as being successful with a classic brand?  Do you try and learn something from the recent Batman and Spider-Man games?

Peter Della Penna: Game wise I would say both Batman and Spider-Man are great references. Especially the Batman Arkham series where everything you do in those games drives the player back to the core of what makes Batman so cool.  For us, it’s about transformation and the variety of awesome characters in the Transformers lore.

[a]list: Talk to me about the reveal trailer for the game and what you thought the important messages you were trying to convey were (prescience of certain characters, style of the graphics, etc.)

Greg Agius: We wanted Transformers fans and gamers to take a fresh look at our game. For me, we needed to communicate that Fall of Cybertron is an adult oriented game that stands totally apart from anything related to the films. So the team set out to break every rule we could think of for a Transformers trailer: we had zero voiceover, we destroyed main characters, we made the story come to you, and we picked a song that is totally groundbreaking for this franchise. When fans started posting, “attention… this is how you do Transformers!” I knew we had done things right. The style and look is all very in line with what gamers are currently playing.

Greg Agius

[a]list: How do you balance aesthetic considerations for these games?  The Transformers are evocative of G1, but they’re not cel-shaded. Was it conscious to make it like the early cartoon but have it be a little grittier?

Peter Della Penna: Visuals are very important to gamers.  If it doesn’t look good many won’t even try the gameplay.  So, yes, our style is evocative of G1 but not a reproduction of it.  By design we intended to have a gritty, nostalgic sensibility.

[a]list: What went into bringing in the Dinobots for Fall of Cybertron?

Greg Agius: Getting the Dinobots in Transformers: Fall of Cybertron was a labor of love that has paid off handsomely. This game is new canon for Hasbro, and we are working with them to write lore that will stand for future storylines for this multi-billion dollar brand. Our team passionately fought to keep the Dinobots in the lore so that we can have them in our game. And why not You can’t find characters more unique than this! Of course we had to work with them to find a plausible creation story that Transformers fans would accept. We found some inspiration from the old U.K. comics and it provided some excellent ground that players will explore in our story. Playing as Grimlock is fantastic, you just feel super powerful!

_ _

Like Transformers? Looking forward to High Moon’s latest? Join the discussion on Facebook.

Why Publisher 2.0 Is M.I.A. – Part 2

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There is a single radical shift facing marketers and developers in the emerging digital game landscape. In the first article we covered opportunities in digital games and evidence that a lack of a new approach to publishing them is hindering growth. One shortcoming could be that not everyone recognizes this radical shift. It’s that many games in the digital distribution era are more akin to services than products, and that marketing a service has a set of different fundamentals.

The shift is very similar to when television emerged, adding to Hollywood’s annual slate of products a persistent service for filmed entertainment.

From the onset, it was apparent to TV networks that they would have to approach content development and marketing very differently than film. Their product was free to consume, with profit reliant on sponsors and advertisers. This gave a uniquely important role to audience analytics, which provided the means for broadcasters to prove the value of content. There was too much at stake for any room for error, and advertisers of powerful companies holding the money end of the stick. It didn’t take long for the industry to develop a single standard for analytics using Nielson ratings.

The ratings were projected estimates, yet they gave broadcasters a dramatic new tool to quantify viewership and thus set pricing for advertisers. Suddenly there was a need for mathematicians in the entertainment industry to do more than budget and count money. Statistics were influencing what got made, what got canceled, and how shows were packaged and promoted.

As shows came and went at a brisk pace, the networks needed some sense of consistency to their business. They needed a strategy for building audiences continuously while maintaining those they had the best they could. Nielsen was a good source of consumer research. Outside of development, it also helped networks measure how their service rated and made adjustments.

To build a following, however, these media companies had to approach marketing the same way Coca-Cola, McDonald’s and Ivory Soap were building loyal customer bases. Their marketing strategy revolved around branding. Performers, producers, programs, even the network as a whole were given personas. Tuning in was akin to joining their community. Tune out and you were bound to miss something. It’s why even today TV networks quite explicitly project a feeling of belonging, presenting shows and their stars as your extended social group.

That’s what it took for TV to attract a persistent stream of customers. To a game company or product in the digital marketplace that needs a persistent player base, some of the same fundamentals apply to you. It’s part of being a game publisher 2.0.

Forget Nielsen and its estimation. We have at our disposal enormous amounts of granular data on player behavior. We can track people all the way through the funnel, from awareness to purchase. More remarkably, for some games that means from impression to click to registration through download, log in and first in-game purchase. This allows us to make informed decisions on what content to make, how to price it, how to sell it, even how to promote it more efficiently.

As a career game marketer, once I began working on digital games, I was amazed how access to all of this data immediately changed the way I made decisions. In the console days of “fire and forget” marketing, we made educated guesses on messaging and placement and hoped it worked when we fired the product onto shelves for a few weeks.

With digital games, marketing spend and execution became a gradual exercise. I could roll out a campaign then test alternative multivariate creative or shift spend from one outlet to another, and use that agility to constantly maximize key performance indicators (KPI). I was always mindful of how much it was costing me to get someone into the game, otherwise known as cost per acquisition (CPA).

To have data like this to support every decision is a powerful drug. For me, it drove the desire to reduce CPA to as low as possible. That became my primary KPI. Seeing direct response to my marketing and employing different tactics to react to it brought out my inner Billy Mays. Acquiring users became a scientific exercise.

Looking back to the first few years of this kind of execution, I can now say it’s too narrow a view on marketing. Tactics driven by analytics alone, whether DR efforts or media referral plans, do not provide value to potential customers in the way the product is being marketed.

Start with branding. So many digital games are presented as commodities with such little personal attachment. It’s why people easily decide to move on to the next one with very little emotional attachment. If a player downloads your game because of an offer for a $25 free starter pack, and the game is free in the first place, what have you done to encourage them to stay? Unless the game is delivering an exceptionally engaging experience, the next game that offers them a free starter pack is all it takes for them to jump ship.

We need to give our potential customers a sense of ownership, the feeling that they are appreciated, that they are wanted. Making an emotional connection requires thinking of them as people, not consumers. Simply changing the way you talk about them is a good first step. Words such as “acquisition” and “discoverability” have a side effect in that they dehumanize what we do. At the end of the day we are selling entertainment, not Sham Wows.

We also need to entertain them in our marketing so that they believe us when we say our product or service is entertaining. And if we want them to stick around, then we need to empower them, engage them, listen and respond.

It goes farther for games as service-based products. For these games, there is no single launch towards which you build as big an audience as possible. All of the above begins in the lead-up to launch but then continues afterwards. The strategy needs to be consistent communications through a variety of channels, usually with the goal of growing the game’s player base gradually. Launch is not the window out for these games, it’s the door in.

The strategy also needs to surround the consumer via all appropriate channels. The importance of adding layers to the marketing message has never been more critical. Key is proper utilization of the three tiers of media: paid media, a.k.a. ads, owned media, which can be your game and its assets, such as a trailer, and earned media, whether PR or social. In the world of service marketing, the ability to combine communications through these multiple channels into one integrated campaign takes discipline, guts and planning.

Layered over all of this is building appeal with longevity in mind, again much more important for service marketing. Brand affinity is critical for this. Continuing from our television analogy, digital games can look to current great entertainment service brands such as HBO or Hulu for cues. These companies are constantly looking at metrics and trying to acquire, monetize and retain users. At the same time they build their brands as quality entertainment providers, and foster loyalty and a sense of community around their products.

Enough theories and anecdotes. Starting with the next article, we’ll look at companies who get it. We’ll delve into case studies for mobile, PC and social games from people who are blazing the trail into this new digital landscape. These are game makers who effectively executed campaigns with well thought out “performance-based” marketing that also factored in branding and customer loyalty.

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Steve Fowler is a thirteen year veteran of the interactive entertainment industry. He is responsible for the brand identity and launch of the Halo franchise at Microsoft Corporation, Inc., and has held marketing and business development roles at Interplay, Sega Sammy Holdings, Inc., Square Enix, Inc., and Take-Two Interactive Software, Inc. He is the chief architect of the one of its kind annual industry conference the [a]list summit, and has been incubating new digital game publisher [a] list games internally at Ayzenberg Group for the past year. For more information on [a]list games, visit www.alistgames.com.