SAN FRANCISCO--While Nintendo's Wii continues to outpace expectations and certain games are making fortunes for their publishers, a strong argument can be made that the hottest segment of the video games industry is one that is still in its infancy: social games.
These titles, which are popping up by the bushelful on platforms like Facebook and MySpace, as well as on Apple's iPhone, are garnering user numbers that would previously have been thought impossible. And in a deep recession, when even the strongest console manufacturers and biggest game publishers are being forced to shut down projects and lay off workers, people have no choice but to sit up and take notice.
At the Game Developers Conference on Thursday, Kristian Segerstrale, the CEO and co-founder of PlayFish, one of the most successful publishers of social games, upped the ante, stating his case for how the mainstream video games industry can learn from his side of the business.
In his talk, "Five lessons from social games that matter to the rest of the games industry," Segerstrale argued that while the nature of the social games business differs significantly from that followed for many years by the more traditional, retail-oriented publishers, times are changing, customers' behaviors and expectations are shifting rapidly, and the winning model may well be the new one.
PlayFish's roster of games, including the mega-hit Who Has the Biggest Brain is illustrative of the popularity games can achieve on services like Facebook. Segerstrale said PlayFish has had 60 million players, averages about 25 million monthly users and 5 million daily players, and currently has 5 of the 10 most popular applications on Facebook. And by itself, Who Has the Biggest Brain has been played a total of 500 million times by 15 million people, he said.
With numbers like that, it's clear why Segerstrale feels he has some lessons to teach the rest of the games industry. And while the traditional retail games model has been relatively unchanged for decades and remains strong today, he said he sees signs that the Electronic Arts, Activisions, and Take-Twos of the world, not to mention the countless other game developers and publishers out there, may need to rethink their methodology.
One harbinger of that need for change is evident even within the traditional games business itself, he pointed out. He said that Nintendo established the Wii as a sleeper hit by exploiting a wide range of people's desire to be social with friends and family. And he explained that Nintendo itself is well aware of this, as evinced by ads for the Wii that show groups of friends playing gleefully. Yet the real estate in the ads devoted to showing the games themselves is minimal; it's the image of the social activity that sells the Wii.
"This is about you and your real-world relationships," Segerstrale said, "which is ultimately much more important than anything that happens between you and your screen...That's why you're playing. You're playing together, not because you're trying to beat the boss in level 10."
500 million and counting
In the last few years, Segerstrale said, the size of social networks' user bases have grown to about half a billion, not counting China. All told, with China in the mix, he said, there are probably a billion people worldwide using services like Facebook, MySpace, and the like.
And because of how easy those services have made it for developers to create and distribute social games, titles that are built around social activity between friends, co-workers, family members, and so forth, there seems to be almost no limit on how many games can become successful, and even how many can make money.
But the business model is clearly quite different. Where the retail model relies on consumers being willing to pay up to $60 up front, often for the opportunity to sit down in front of a big TV by themselves, social games are almost always free to play. The monetization comes when a social game publisher figures out how to attract a sizable audience and convince many of those people to engage in relatively cheap microtransactions for any number of things: level-ups, game gear, music, or whatever is on offer. Advertising is also a possible revenue producer.
The distribution model is also vastly different. Where retail games depend largely on gamers picking titles off of shelves, social games reach users in three main ways: invites to play from friends; seeing in friends' profiles what they're playing; or seeing game titles come up in activity streams.
With all of that in mind, Segerstrale said he had arrived at five specific lessons that he thinks can be gleaned by the larger games industry.
First, he said, the "era of the big game franchises may be over." In other words, where people are used to going to retailers and picking from game titles they recognize and feel safe with--EA's Madden, for example, or Take-Two's Grand Theft Auto--digital distribution could deprive publishers of the retail shelf advantage they've long enjoyed. In a purely digital domain, games spread virally, not because of the marketing might of a company able to pay for dominant shelf space and advertising.
In the social realm, then, franchises may not be able to survive, simply because players may be less interested in the latest iteration of an age-old game, and much more interested in what their best friends are suggesting they play.
"Who is playing matters a lot more than what they're playing," Segerstrale said. "The source of trust comes not from the title, but from a friend who's already recommending or playing" a game.
As proof of this, Segerstrale showed a chart of the top 25 Facebook games. And while the list was dominated by games from PlayFish and its competitor, Zynga, there were no franchise titles. No sequels. No expansions. It is, of course, possible to conclude that the franchise in a domain like Facebook is the publisher itself, since games from PlayFish or Zynga or other large publishers will have credibility, but Segerstrale disputed that notion, insisting that only games that can inspire viral growth will succeed.
The second lesson, he explained, is that games will all become services instead of products.
The idea is that because games on social sites are being served live, publishers can fix them on the fly, instituting changes, adopting feedback, and learning about how people play. Retail games can be updated from time to time, but doing so is more complicated than simply modifying what players access on Facebook or MySpace.
And like other kinds of services, revenue comes later, when users feel they want to spend money on something that accentuates their experience, rather than at the point of initial acquisition.
Lesson No. 3, Segrestrale said, is that marketing may well become a numbers game, an exercise in analyzing users' behavior and learning what they like, don't like, want, and don't want.
The traditional marketing methods of big launches and heavy advertising don't mean much in a world of digital distribution and viral recommendations, he said. "My advice," he said, is to "become a numbers ninja...Become a better business by analyzing (numbers). That's what marketing becomes in this type of environment."
The fourth lesson, he said, is that game design itself changes in a world of social gaming. Instead of creating games geared at getting people to sit in front of a large TV firing away at bad guys, social game designers need to think more along the lines of schoolyard ball games and board games, things that are as much about giving groups of friends something fun to do together than about the complex details of game mechanics.
"It's not about the story we want to tell," he said. "It's about the story the player wants to tell...They use (these) games to do something, to communicate with their friends."
So, he said, it will be increasingly important for game designers to create that playground or that object that players want to use to play with their friends.
And lastly, Segerstrale urged all game designers to "listen to your players, because your players will teach you to make better games."
His point is that because social games allow players to give almost instant feedback, both in terms of how they play, as well as in forums, or through player surveys, designers can see very quickly what works and what doesn't, and therefore, how to improve on players' experiences.
"They'll tell you what they think," he said. "The passionate guys will always tell you what they like and what they hate. You can say 'thank you very much' and put it (quickly) into the game."