Electronic Game Market Declines

NPD has the figures in for 2009, and reports an 8% drop in sales for electronic games in the year. On the plus side, though, December showed a gain (and was in fact the best month ever in electronic game sales). It should be noted that NPD's figures include all hardware as well as software, and of course the reduction in console prices had some effect on sales (though not nearly as much as the manufacturers had hoped). The big news was really the collapse of the "music games" genre, which some analysts believe was responsible for about 75% of the sales decline. Perhaps the marketplace was oversaturated with music games; I tend to believe that was the case, and as a contributing factor the price of the instrument controllers (especially when dollars got scarcer for consumers).

I also think the essential shallowness of the music games meant that there would be a burnout sooner or later. Yes, the songs are different, but basically the actions are pretty simple. Now Project Natal comes along, and you can use the sophisticated sensors involved in that to actually have the software judge someone's performance with their body language as well as their facility in hitting the notes, it might revive the genre.

This is also a good object lesson in the limitations of marketing. The Beatles release had a lot of money spent on marketing, including a widespread TV ad blitz, yet turned in disappointing numbers (especially given the massively difficult job of getting all the proper licenses). At seventh and last, it was yet another music game, and with music that is increasingly less relevant to the core audience for the genres (due in large part, I think, to the Beatles' refusal to allow their music to be sold as downloads, thus locking themselves out from a new generation of fans). You can do a really fine job of putting lipstick on a pig, and giving it a wonderful wardrobe and hair styling, but it's still a pig. Marketing is ultimately, and in the long run, limited by the inherent quality of the product and its appeal to the customers may be limited by factors beyond the control of marketing. Caveat vendor.

DLC Not Widespread Yet

According to a survey conducted by a media consulting firm, only 15% of those surveyed said they were awre of or had purchased downloadable content (DLC). This is both good and bad news. Bad, of course, for companies planning to make DLC a centerpiece of their profitability and future designs. Good, in the sense that DLC is already doing well, and this shows just how much upside potential exists.

My analysis is that DLC does quite well among people who know that it exists, but that the publishers have yet to work at letting customers know about it. For the most part, the publishers haven't seen DLC as being that important, so it hasn't really featured in their marketing. Really, isn't it time the big publishers got behind this? The margins on DLC are terrific since there's no physical cost of goods. You're just looking at the cost of making the content, which in most cases needn't be more than a couple of man-months. We have yet to see a AAA-funded title with a development cycle and marketing campaign built around an ongoing stream of DLC, carefully planned and timed, with the customers ready and eager for each new item. Remember, it's not just a new item, it's new characters, classes, scenarios, levels, and all sorts of things big and small. Promotional opportunities abound... shouldn't you get an energy drink to sponsor that mana potion? Collectability is a design feature that has huge potential in DLC... no one has touched it yet. (OK, that's a both a design issue and a marketing issue... I can't help it sometimes, being both a designer and a marketer.)

This is just the dawn of DLC... in a few years, launching a game without it will seem archaic at best.

Competitive Analysis Made Easier

One of the more important tasks for marketers is to keep track of the competition. Not just in general terms, but in detail. Why? There are several reasons.

• Sometimes it really is a zero-sum game (that is, if the other guy wins, you lose), and you need to know the competitor's tactics in order to counter them.
• Whether or not it's zero-sum, you can always borrow good ideas.
• You see how to add product features to respond to your competitors.
• You learn if you're under direct attack.
  

This being the age of the internets, there's a web site to help you track all of this: Competitious. It's especially useful if you have several competitors you're trying to track, and lots of features you need to keep tabs on.

It's important to note that while many game companies don't see themselves as having a direct competitor to their games, you're always competing for the time and money of your target audience. Not only with other game companies, but with other calls on their time... movies, books, TV, the internet, sometimes even real life. So when someone has some leisure time and some dollars to spend, you want to make sure that your product is the best choice for them. Which means being fully aware of the market, the competitors, their products, and their marketing efforts. Even if you're not going head-to-head with a competitor, you need to find the openings in the market that you can profitably fill.

2009 Layoffs

Last year was very hard on the game industry, at least on the electronic side... 11,500 people lost their jobs (starting in late 2008), according to this study. Here's the most interesting quote for me:

“Aside from the cost of retooling, others were so focused on their retooling efforts they weren't able to see the changes in the market and the impact things like digital distribution, casual, and social gaming was starting to have on the market.”

Ya think? It's so tempting to keep doing business as usual; changing your whole business model is painful, wrenching and expensive. The alternative, though, can be even worse when the market is changing so rapidly. I expect major publishers to continue to change by acquisition, as the grab developers in the mobile and social areas. I'd think that some big company might be looking at a move into digital distribution via acquisition, as a hedge against further growth in that segment.

It's made even more difficult with games that have multi-year development cycles... expect more changes, folks. Marketers have to stay nimble in this sort of environment.

Social Gaming Gets Huger

According to this analyst the social, mobile and online gaming segments could total 40% of revenues for 2010. With traditional console games expected to decline, this represents a continuation of the tectonic shifts in the industry. Whither marketing in this brave new world of social gaming? Elements of marketing become incorporated into the game design... encouraging people to dragoon their friends into joining the game and giving them free gifts, or help with their game. Of course, it's the virtual goods that are really bringing in the revenue. Some predictions figure a $1 billion market in a year or two for virtual goods.

Much as publishers and developers have to rethink their product development model for these new platforms and distribution methods, marketers are having to rethink how they market games. Old school: spend a lot of time designing the package, create an ad campaign to run in all the major gaming magazines. New school: Spend time developing a web site, orchestrating a buzz campaign on social media, get game designers to throw in features that help connect users together and interest them in DLC and updates... magazines? Oh, yeah, that dead tree stuff last century.

Oh, it's going to be an interesting year ahead...

The High End of IPhone Gaming

Tapulous, creators of Tap Tap Revenge, have told Reuters that their iPhone games bring in around $1 million per month (see the article here). That's some serious revenue... too bad this is not a typical example of an iPhone developer. But it does show what is possible to achieve with the right title, the right timing (being an early iPhone game was a big help) and some good marketing.

Of course, the immediate question any game publisher has is "Damn, how can I do that with my game?" You might expect that as a marketer I'd say great marketing is the answer. Sorry, but I'm also a game designer, and I have to say that I think you need a great game more than great marketing. Yes, you'd like to have both. But make sure you start with a great game. The iPhone market in particular is so challenging (partly because of the sheer number of games) that you have to do something that stands out in some way. The better your game is, the better your chance for success. That is a necessary but not sufficient condition for great sales... sometimes you'll get lucky and a great game will succeed without much push from marketing. But don't just stand around and pray for a lottery ticket... put some effort into marketing and your chance for a "lucky" break will improve.

AppQuest

OK, I've looked around for a while, and I've yet to find a really good solution to the App finding problem. The problem is that the App Store's sorting functions are rudimentary, and basically if you're not one of the top 100 Apps in a category you may not be seen at all. Apple see themselves as being a store shelf; it's up to each developer to bring people to their App. This is all well and good when you have a tremendous brand or a tremendous advertising budget, but what do the other 99% of the developers do? Yes, there are some Apps to help find other Apps... some websites that review Apps every day... and regular lists of good Apps on some popular blogs.

What suggestions do you all have? Post to the comments, and I'll compile a list along with the things I've found.

Dis-N-Gage

Looks like Nokia has finally recognized reality and pulled the plug on the N-Gage service (posting explaining it on their N-Gage blog here; see news report with analysis here). Of course, they're positioning it as merely a move to put their games into the Ovi Store (Nokia's answer to the App Store), though admitting that any community features for N-Gage games are going away, as are the hardware platforms. One commenter says "It's a sad day for N-Gage fans." Yeah, all three of them.

It was pretty clear to anyone with a cerebral cortex that N-Gage was a flop shortly after launch. Nokia gamely kept trying (note: always assumes puns are intentional on this blog), but they were never able to make the N-Gage anything more than an obscure gaming footnote about on par with Virtual Boy. Playing games on a postage stamp size screen never seemed to attract buyers for some reason. But Nokia continued to pour in money and marketing effort well after the corpse had been buried. The huge booth they had at this year's Game Developer's Conference was an amazing example of marketing dollars wasted. Nokia stocked the booth with a bevy of models in skintight white spandex and spike heels. Naturally there was a huge crowd of guys blocking the aisles around Nokia's booth... all staring at the Autodesk projection screens next door showing new features for 3D Studio Max.

If you can't attract game developers with hot babes in spandex, ain't nothing gonna help you.

Businessweek Covers Games

Well, sort of... their cover story this last week was about apps, or as they spelled it, App$ (read the whole thing here). Though as usual, Businessweek manages to be a little unlcear on the concept; they use the term "apps" to refer to things like Facebook games and Yahoo widgets. But the interesting part is how they cover games as an important part of this phenomenon. Zynga's gone from 0 to $100 million in a couple of years, and it's profitable at that... selling stuff inside their games (like buying land inside Farmville).

It really highlights that the problem facing most of the game developers (and other app developers) is a marketing problem. Apple's App Store really sucks at helping you find what your interested in. Just for an example, check out the roleplaying section... it's crammed full of games that aren't RPGs at all (like innumerable clones of Facebook social games). Which makes finding what gamers classically think of as RPGs difficult. Some developers have taken to gaming the system (releasing new versions rapidly mostly to get listed in the new section, for instance) but the problem is bad and getting worse. Some solutions are evolving (like ngmoco's ingame ad network), but until the market matures marketing is a far more difficult problem for most developers than actually building their title. Usually because the have expertise in building titles, but none in marketing, for starters.