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Presentation that was done in Mexico City on September 23, 2011 at DevHour. A Macro view on the Video Game business (recent past, current, and a little future). A few key pieces specific for/to the ...

Presentation that was done in Mexico City on September 23, 2011 at DevHour. A Macro view on the Video Game business (recent past, current, and a little future). A few key pieces specific for/to the Latin American market. I firmly believe that this market can rival Canada for development in five years if they get the proper support from their respective governments.

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The Bu$iness of Games LATAM Sept_2011_ss Presentation Transcript

  • 1. The Bu$iness of GamesSeptember 23, 2011 – Mexico CityJustin BerenbaumTheseus Games, Inc.
  • 2. Agenda A Perfect Storm ◦ The Effects Retail by the Numbers ◦ The Retail Model(s) ◦ Where We Were ◦ Where We Are ◦ Where We’re Going The Social Market Mobile Trends Conclusion ◦ Take-A-Ways ◦ Fortune-Telling Questions Theseus Games, Inc. 2
  • 3. A PERFECT STORM Theseus Games, Inc. 3
  • 4. A Perfect Storm – 2009 to 2011• U.S. economy in recession spilling over into the world economy• Beginning of a steady and long decline in retail software sales• Dramatic rise and adoption of iPhone and then Android (mobile apps)• Meteoric rise of Facebook Theseus Games, Inc. 4
  • 5. The Effects • Apple convinced people content (apps) should be “free” • Facebook / Zynga – Virtual goods through micro- transactions • Free to play MMO’s and Virtual Worlds Theseus Games, Inc. 5
  • 6. The Effects • Dramatic rise in the adoption of digital distribution • The big word “CLOUD” • Going from Product model to “Service” model Theseus Games, Inc. 6
  • 7. RETAIL BY THE NUMBERS Theseus Games, Inc. 7
  • 8. Traditional Retail ModelWholesale $48.00 Retail Price =(Gross Revenue to Publisher) $60.00Cost of Goods (Includes 1st Party -$8.00Royalty)Variable Sales & Marketing -$9.00(Commissions, MDF’s, etc.) Gross Profit Per Unit $31.00Licensor Royalties - (if any) - 20% of GrossDeveloper Royalties Profit Model seems OK, assuming you can move most of your units at full MSRP Theseus Games, Inc. 8
  • 9. Used Game Retail ModelUsed Price $55.00Maximum Trade-In Value -$30.00Revenue to Publisher -$0.00 Gross Profit Per Unit to GameStop $25.00 Good for Consumers – Maybe Good for Publishers – Doubtful Good for Developers – Yeah right! Theseus Games, Inc. 9
  • 10. The Rise and Fall of Retail U.S. Videogame Industry Revenue (in Billions) Retail Only, Subscriptions and Digital Distribution Excluded $21.4 $19.7 $18.0 $18.6 $12.5 $10.3 $10.0 $9.9 $10.5 $9.4 $6.3 $6.9 $6.6 $5.1 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Theseus Games, Inc. 10Source: NPD?
  • 11. Platform Breakdown Total U.S. Games Spend (in Billions): 2010 $24.7 (-2% vs 2009) Social networks: $1.5 Casual game portals: $3.7 (+66% vs ‘09) (+34% vs ‘09) PC/Mac (download): $2.5 6% 15% (+60% vs ‘09) 10% MMOs: $2.7 PC/Mac (boxed): $2.1 (+27% vs ‘09) 11% 9% (-19% vs ‘09)Mobile Devices: $1.6 6%(+46% vs ‘09) 43% Consoles: $10.6 (-29% vs ‘09) Theseus Games, Inc. 11Source: Newzoo, 2010
  • 12. Traditional Platform Trends Worldwide Hardware Console 2008 2009 2010 2011–YTD* 4,365,219 4,738,151 5,910,598 5,471,806 12,154,986 8.912,394 8,320,295 5,536,184 5,363,229 5,288,667 7,220,353 6,513,403 14,765,991 15,065,468 10,596,169 5,644,388 7.802,298 5,698,096 5,149,101 4,098,014 Total 44,451,723 39,702,776 37,196,516 27,263,795 Theseus Games, Inc. 12Source: VGChartz – *Through September 18, 2011
  • 13. The Not So Pretty Picture Worldwide Hardware Market Share 2008 2011 10% 15% 18% 20% 27% 21% 20% 33% 12% 24% Theseus Games, Inc. 13Source: VGChartz
  • 14. Retail Down but Not Out Worldwide Game Revenue (in Billions) $81.0 $76.9 $18.5 $66.5 $20.0 $17.5 $24.6 $27.0 Hardware Games Sales $29.7 Retail Games Spend $37.9 Digital Games Revenue $29.9 $19.3 2010 2013 2016 Theseus Games, Inc.Source: DFC Intelligence & Gamasutra 14
  • 15. THE SOCIAL MARKET Theseus Games, Inc. 15
  • 16. The Social Epidemic The Rise of Facebook – December 2009 Theseus Games, Inc. 16Source: http://www.pamorama.net/2011/01/30/65-terrific-social-media-infographics/
  • 17. Global Domination Theseus Games, Inc. 17Source: http://www.pamorama.net/2011/01/30/65-terrific-social-media-infographics/
  • 18. Unstoppable Force Audience Growth on Facebook Position Country July 2011 12-Month Position Country July 2011 12-Month (millions of users) Growth (millions of users) Growth ALL 712.4 33.5% 14 Colombia 14.6 30.1% 1 United States 151.4 16.8% 15 Spain 14.4 26.4% 2 Indonesia 38.9 33.3% 16 Malaysia 11.2 34.8% 3 United Kingdom 29.9 11.2% 17 Australia 10.6 60.3% 4 Turkey 29.5 64.2% 18 Thailand 10.4 13.5% 5 India 29.5 23.4% 19 Taiwan 9.9 32.1% 6 Mexico 26.8 51.5% 20 Venezuela 9.1 26.4% 7 Philippines 25.3 42.3% 21 Chile 8.5 18.6% 8 France 22.7 16.6% 22 Egypt 7.9 54.4% 9 Italy 21.2 77.6% 23 Poland 6.4 56.4% 10 Brazil 19.8 16.0% 24 Peru 6.3 59.2% 11 Germany 19.5 48.9% 25 Pakistan 4.8 59.6% 12 Canada 16.6 6.6% 13 Argentina 15.6 33.2% Theseus Games, Inc. 18Source: http://gold.insidernetwork.com/facebook
  • 19. The Social Games Market Facebook Social Game Metrics 60M (19%) Addicted Players 600M Active Social Game Players Facebook Users 318M (53%) 258M Extrapolates to: 712MM users, 377MM Social Game Players, 72MM addicted. Theseus Games, Inc. 19Source: Lightspeed Research – September 13, 2010
  • 20. Behind the Numbers Social Game User Characteristics Have up to 10 friends 55% playing the same social games as them 12% Play on a mobile device Have invited their friends to 59% join themSource: Lightspeed Research – September 13, 2010 Theseus Games, Inc. 20
  • 21. A Marketer’s Dream Social Game Metrics for Marketers 75% 63% Have a Facebook account Social games are “more 26% likely” to buy products from a brand/company that has sponsored or advertised in a social game Social gamers have responded to some kind of 39% marketing activity to get game rewardsSource: Lightspeed Research – September 13, 2010 Theseus Games, Inc. 21
  • 22. The Local Opportunity Theseus Games, Inc. 22
  • 23. MOBILE Theseus Games, Inc. 23
  • 24. The Mobile Landscape Smartphone Market Snapshot – Recent Acquirers Microsoft Palm / Web OS Windows 2% Symbian OS Mobile / WP7 1% 7% RIM BlackBerry OS 15% Android OS 50% Apple iOS 25%Source: The Nielsen Company, March 2011, Nielsen Mobile Insights, National Theseus Games, Inc. 24
  • 25. Mobile Market Shift Revenue Generated U.S. App Store Top 100 Grossing Games 39% 65% % Revenue from Freemium Games % Revenue from Premium Games 61% 35% January 2011 June 2011Sources: iTunes App Store, Flurry Analytics, Flurry Analysis Theseus Games, Inc. 25
  • 26. A Deeper Dive Mobile Freemium Games Relative Time Spent Playing Relative Money Spent 49% 32% 29% 28% 22% 16% 14% 5% 3% 2% 13-17 18-24 25-34 35-54 55+ Age Group (in years)Sources: iTunes App Store, Flurry Analytics, Flurry Analysis Theseus Games, Inc. 26
  • 27. TRENDS Theseus Games, Inc. 27
  • 28. The 800 Pound Gorilla ACQUISITIONApplies to games on any platform. How do you attract customers? Theseus Games, Inc. 28
  • 29. Brand is Everything The Ecosystem PC Smartphone BrandConsole Tablet Theseus Games, Inc. 29
  • 30. Gaming Key Trends A Rapidly Maturing Market Means Customer Acquisition Costs (CAC) - Rising Game Development Costs (Including Mobile & Social)– Rising “Viral Effect” (K or K-Factor) – Falling The 80-20 rule has become 95-5 or more Importance of Brand Casual Core Theseus Games, Inc. 30
  • 31. CONCLUSION Theseus Games, Inc. 31
  • 32. Take-A-Ways Do small things really well / Don’t reinvent the wheel Find Partners Be relevant for your target market Build a relationship with your customers Theseus Games, Inc. 32
  • 33. Take-A-WaysNot sure who to attribute this to, but it is very accurate Theseus Games, Inc. 33
  • 34. My Crystal Ball Retail finding a way to be relevant Android Market Place Economy evolving Small innovations will drive big money Call of Duty Outsells Battlefield - Brand Wins Theseus Games, Inc. 34
  • 35. QUESTIONS? Theseus Games, Inc. 35
  • 36. THANK YOU! – MUCHAS GRACIAS! Justin Berenbaum President Theseus Games, Inc. theseusgames@gmail.com Twitter: scslugAll research, trademarks and trade names are ™ and © their respective owners. Theseus Games, Inc. 36
  • 37. APPENDIX Theseus Games, Inc. 37
  • 38. Playing the Game Social Game Revenue Funnel Non-Viral User Sources FB Ads, Offer Walls, Display Viral User Sources Banners, Cross Promotion, Wall Posts, Streams, Fan Pages, Others Invites, Email, OthersRefine Marketing / Create New K Opportunities ACQUISITION RETENTION Revenue Sources MONETIZATION Virtual Goods, Offers, Advertising, Merchandise, etc. LTV > CAC $ / User Theseus Games, Inc. 38
  • 39. Social Definitions Customer Acquisition Cost (CAC): Total dollars spent acquiring each new customer from all sources. Engagement / Customer Retention: How long someone plays your game and how often they come back. Monthly Average Users (MAU’s): The total number of unique users your game has on a month by month basis. Daily Average Users (DAU’s): The total number of unique users your game has on a day by day basis (these users are the most likely to spend money on your game). Theseus Games, Inc. 39
  • 40. Social Definitions Monetization ◦ ARPU – Average Revenue per User: Total revenue divided by your total user base. ◦ ARPPU – Average Revenue Per Paying user: Total revenue divided by the total number of users who paid for anything in your game. “Viral Effect” (K or K-Factor): How much is your game spread by users. A higher K factor can help reduce your customer acquisition costs. Life Time Value (LTV): Total value of a user over the lifetime of that user. How much money did your customer spend playing your game before they stopped. Theseus Games, Inc. 40
  • 41. Retail Display of Game CardsRetail adoption has already occurred. They are seeking ways to derive revenue from the virtual space. Theseus Games, Inc. 41