Economics of Living Outside the Box
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Economics of Living Outside the Box

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In only a few short years, the games industry has made a dramatic change from selling boxed products to digitally downloadable and browser-based games. This shift affects everything from game design ...

In only a few short years, the games industry has made a dramatic change from selling boxed products to digitally downloadable and browser-based games. This shift affects everything from game design to publishing, distribution and revenue generation. In this lecture, I will discuss key market forces in the industry’s new ecosystem, how game companies can make the most out of them, and what to expect next. Central to this presentation is the use of current market data and primary research. The audience will gain a better understanding of the overall games market and its drivers. No previous knowledge on the subject is required.

Delivered at Casual Connect Europe, February 2012.

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Economics of Living Outside the Box Economics of Living Outside the Box Presentation Transcript

  • The Economics of Living Outside the Box Joost van Dreunen Prepared for Casual Connect, Hamburg February 8, 2012 Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 1
  • Intro Joost Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 2
  • SuperDataMarket intelligence on paying online gamers‣ 200+ titles‣ Social, MMO‣ Brazil, Canada, Colombia, Chile, France, Germany, Italy, Mexico, Poland, Portugal, Russia, Spain, UK, USA‣ Benchmarking: key performance indicators‣ Market analysis, forecasts, revenue estimates Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 3
  • Future of the games industryDouble rainbow all the way “Companies that continue to rely on the old model as the model changes before our eyes, unless they change their ways and invest in the future those companies eventually will die off. No two ways about it.” -- EA COO, Peter Moore “the global market for virtual goods would exceed $100 billion by the end of this decade.” -- Digital Chocolate CEO, Trip Hawkins Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 4
  • Free-to-Play Resonates with new generation of gamers and changing preferences$30 Unboxed Boxed$20 $7.1 $15.9$10$0 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 E 12 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 Shown: Boxed sales (retail and arcade revenues) versus unboxed sales (digital downloads, subscription, and virtual good sales) for the U.S. market. Numbers shown are estimates for 2012 in billions of dollars. Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 5
  • Free-to-PlayMarket characteristics + Accessible market + Room for growth + Future not (yet) set in stone - Crowded - Consolidation - Lack of market transparency Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 6
  • F2P is obvious but not easyWhat works for DLC doesn’t necessarily work for F2P $9.2MM + 2.5MM = 0 Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 7
  • So,tell me What are the economics of living outside the box? Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 8
  • Careful management of available wealth and resources Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 9
  • All relationships in life are transactionalNo, really. ‣ Investors ‣ TraditionalPublishers ‣ Advertisers ‣ Partners Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 10
  • Conversion rates show steady declineOverall percentage of paying gamers drops from 5.5% to 0.5%10% Monthly conversion rate for City Building social game in Germany 8% 6% 4% 2% Title A 0% y y ch ril ay ne ly st r r r r be e be be ar r Ju Ap ua gu ob M ar Ju nu em m m br Au M ct ve ce Ja Fe pt O No De Se Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 11
  • Top spending audience double ARPPUAggregate trend belies 73% growth in key segment€120 Top 10% Spenders €90 Monthly ARPPU for City Building social game in Germany (title A) €60 Middle 40% €30 Bottom 50% Total €0 y y ch ril ay ne ly st r r r r be e be be ar r Ju Ap ua gu ob M ar Ju nu em m m br Au M ct ve ce Ja Fe pt O No De Se Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 12
  • Title’s ARPPU outperforms marketThroughout 2011 ARPPU consistently €1 above market average ARPPU €15 One-on-one comparison of a single title (City Building) with its industry benchmark €10 Title B Industry Average €5 €0 y y ch ril ay ne ly st r r r r be e be be ar r Ju Ap ua gu ob M ar Ju nu em m m br Au M ct ve ce Ja Fe pt O No De Se Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 13
  • On track to meet industry engagementGap in number of average purchases slowly closing Average Number of Purchases per User 8 One-on-one comparison of a single title (City Building) with its 6 industry benchmark Industry Average 4 Title B 2 0 y y ch ril ay ne ly st r r r r be e be be ar r Ju Ap ua gu ob M ar Ju nu em m m br Au M ct ve ce Ja Fe pt O No De Se Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 14
  • Transaction value drops 53% since JulyOverall market increases from €0.88 to €1.59 in same period Average Basket Size, € €5 One-on-one comparison of a single title (City Building) with its €4 industry benchmark €3 €2 Title B Industry Average €1 €0 y y ch ril ay ne ly st r r r r be e be be ar r Ju Ap ua gu ob M ar Ju nu em m m br Au M ct ve ce Ja Fe pt O No De Se Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 15
  • German ARPPU increases €10 in 2011Both City and S+C genres show healthy growth in average spending €40 Strategy + Combat €30 City Building €20 Monthly ARPPU by €10 Social Game Genre in Germany €0 y y ch ril ay ne ly st r r r r be e be be ar r Ju Ap ua gu ob M ar Ju nu em m m br Au M ct ve ce Ja Fe pt O No De Se Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 16
  • City building genre doubles purchase sizeS+C games show U-shape trend for average basket size €15 high: €13.50 City Building €12 Strategy + Combat €9 €6 low: €6.47 Average Basket Size per Purchase (€) by Social Game Genre in €3 Germany €0 y y ch ril ay ne ly st r r r r be e be be ar r Ju Ap ua gu ob M ar Ju nu em m m br Au M ct ve ce Ja Fe pt O No De Se Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 17
  • Engagement with S+C jumps mid-yearAvg. purchases for city building games decline from 3 to 2 in 2011 3 Strategy + Combat 2 City Building Average Number of 1 Monthly Purchases by Social Game Genre in Germany 0 y y ch ril ay ne ly st r r r r be e be be ar r Ju Ap ua gu ob M ar Ju nu em m m br Au M ct ve ce Ja Fe pt O No De Se Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 18
  • Brazilian engagement grows 179 percentGermany shows waning appetite for city building games, losing 57%40 Average Number of Monthly Purchases for City Building Games30 Brazil2010 Germany 0 y y ch ril ay ne ly st r r r r be e be be ar r Ju Ap ua gu ob M ar Ju nu em m m br Au M ct ve ce Ja Fe pt O No De Se Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 19
  • Brazilian spending halves in 2011 German spending jump mid-year by 153% and stabilizes€3.00 Average Basket Size per Purchase for City Building Social Games (€)€2.25 Germany€1.50€0.75 Brazil €0 y y ch ril ay ne ly st r r r r be e be be ar r Ju Ap ua gu ob M ar Ju nu em m m br Au M ct ve ce Ja Fe pt O No De Se Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 20
  • Indirect payments average €3.35Partnering with one offer provider or another can mean a big difference Average Basket Size for Social €12 Games facilitated by Offer Providers (Germany, €) Deal €8 United €4 Industry Sponsor Average Pay €0 Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 21
  • Mobile payments average €6.83Service providers show €1.87 difference for same type of transactions Average Basket Size for Social Games facilitated by Mobile Payment Companies (Germany, €) Industry Average Boku MoPay €0 €2 €4 €6 €8 Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 22
  • Case StudyWhat are your strengths and weaknesses? Example Scenario Category Metric Current Benchmark Conversion 1.0% 1.33% ARPDAU $0.01 $0.046 ARPPU $1.48 $3.72 Session Length 15 minutes 12 minutes Sessions Per Player 1.5 2 Retention 1-Day 21% 30% 7-Day 6% 30% Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 23
  • Case StudyWhat are your strengths and weaknesses? Earnings metrics for strongest audience segments 18 to 24 25 to 34 35 to 44 Male + Female Female Female Metric ARPPU $2.62 $4.93 $4.90 % of Users Spending over $25 in 1 month 1.0% 2.4% 5.2% % of Users Making multiple purchases in 6 months 54.6% 55.3% 43.6% % of Users Making multiple purchases in 1 month 5.8% 12.0% 5.2% Industry benchmarks are adjusted for game genre and geography. Industry benchmarks based on sample of 772,958 transactions. Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 24
  • ConclusionLiving outside the box means‣ Livingin an accessible market‣ New set of demands‣ A constant evaluation of your and everyone else’s performance Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 25
  • Thanks!Contact info joost@superdataresearch.com Casual Connect, Hamburg, February 2012 | Copyright © 2012 SuperData. All rights reserved. | www.superdataresearch.com 26