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The Honolulu Advertiser
Posted on: Sunday, July 9, 2006

Can casual games generate cash?

By ALLISON LINN
Associated Press

Kristie Frankland, left, eyed the competition as fellow RealNetworks Inc. employee Aaron Alberg played a computer game on display at a conference for casual game developers last month in Seattle. Game providers are finding more and more ways to make money off games like solitaire and Sudoku.

ELAINE THOMPSON | Associated Press

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http://www.pogo.com

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SEATTLE — Anyone desperate for a break from crunching numbers, minding the kids or studying for exams knows how easy it can be to find distraction in the simple brain-teasing of computer games like Sudoku, solitaire or mahjong.

And that's exactly what online game services from companies such as RealNetworks Inc. and Electronic Arts Inc. are banking on. As more people get hooked on playing such "casual games" online, game providers are seeking out better ways to make money off the phenomenon.

"You're seeing that there's a big audience for it. The challenge has really been monetizing that audience and getting them to pay for it," said David Cole, president of market research firm DFC Intelligence.

Casual games — generally defined as easy-to-learn, one-player games that you can play for five minutes or five hours — are alluring to companies in part because they tend to attract women and people older than 35. That's quite a different audience than the young men traditionally associated with video- game consoles and other types of computer games.

The business also is attractive because, if the right sales model is found, companies say, it can be highly profitable. That's especially true for those who produce the games in-house, and then can easily — and cheaply — modify them for multiple countries and languages.

"There are a few things that are wonderful about the games business," said Rob Glaser, chief executive of Seattle-based Real-Networks, whose casual games division represented 21 percent of the company's overall revenue in the first quarter of this year.

But one big challenge is that many of the games are available for free. To make money, companies are trying out a number of ideas, including embedding advertising into free games, selling all-you-can-play memberships devoid of ads and using free trials to entice people to purchase downloadable versions.

"There's been a lot of trying everything to see what tracks, to see what works — a lot of experimentation," said Anita Frazier, an industry analyst with NPD Group.

Still, many expect the business of selling casual games online to only get stronger.

DFC Intelligence estimates that revenues from casual games worldwide will grow to $953 million this year, from $713 million last year, after steadily rising from $228 million in 2002.

But Frazier, with NPD Group, notes that online game sales have partly come at the expense of profits companies used to make selling games in retail stores.

Electronic Arts' Pogo unit offers free casual games, a subscription service and downloads. Beatrice Spaine, senior director of Pogo marketing, said the business has been profitable because the company has been able to make money off different users in different ways.

For example, teens may be willing to sit through ads but unwilling to pay for a service, while an older woman may be more willing to pay the $35 per year subscription fee so she doesn't have to wait for intermittent ads.

The advertising industry's increased interest in online opportunities also has helped. A few years ago, Spaine said one big challenge was convincing advertisers that anyone but young men were playing its games. But in part because many of the sites' users are women over age 35, the company has recently been able to sell ads for name brands like Dove soap, she said.

Still, Cole of DFC Intelligence notes that major brands targeting women are still primarily interested in traditional advertising, like in television and glossy magazines, rather than in online games.

"It's still small potatoes when you look at what they can do in terms of mass advertising," he said.

For now, RealNetworks' Glaser said his company primarily gets money from people buying its subscription game service or purchasing downloads for about $20. But many in the industry estimate that only about 2 percent of free trial downloads are converted into purchases, so companies including RealNetworks are mixing advertising more deeply into free versions.