Who was there: EA augmented its casual portfolio in late 2009 by acquiring social games maker Playfish in a deal valued in excess of $275 million. As part of the Social & Online Games Summit at the 2010 Game Developers Conference today, Playfish cofounder Kristian Segerstrale delivered the track's keynote address, a talk titled "The Relentless March Toward 'Free.'"
What he talked about: Segerstrale began his business-focused session with the claim that the games industry is in the midst of a fundamental change, moving away from physical media and toward fully digital content. The most immediate implication of this shift, he said, is that game makers can no longer approach their product in a fire-and-forget fashion. Instead, the industry is becoming more service-oriented, where game makers continue to support their product postlaunch with patches and updated content.
The transition to a fully digital play experience also has the repercussion of affording game makers more flexibility in how they monetize their content. Namely, instead of the pay upfront model, game makers now have options such as subscription fees or free-to-play, microtransaction-supported revenue streams. As indicated by the title of his session, Segerstrale is particularly interested in the free-to-play business model.
The word "free," he continued, has traditionally been a maligned word within the gaming industry, due to reasons that range from piracy to an assault on the viability of console software. Segerstrale sees "free" differently, of course, and he argued that the concept represents the biggest growth opportunity for the industry over the next five years. Namely, free is useful for the industry due to its unquestionable ability to attract new audiences by lowering the barrier to entry.
Segerstrale then took a look at how gaming has grown in popularity over the past 15 years, pointing out that as new consoles launch, audiences grow. The Playfish executive argued that the reason for these spurts is that each successive console generation progressively brings down the barrier to entry, by lowering costs, including more social elements, making the experience more immediate, or having the games better tie in to people's real lives.
He then drew a parallel to the rapid growth in Internet usage, saying that online-enabled persons grew from 16 million in 1995 to 1.8 billion in 2010. The reason for this, he said, was that the Internet had become infinitely more accessible, going from the archaic BBS systems to hyper-streamlined services such as Google. Likewise, online video has exploded in the past three years, rising to 150 million in the US alone, thanks to YouTube's ease of use.
What YouTube did for the popularity of online video, Facebook has done for online social games, Segerstrale continued. More than 200 million people play games on Facebook, and Segerstrale believes this number will only continue to grow. However, he went on to note that it isn't just the concept of "free" that's driving this growth, as people had been giving away games online for some time.
The true source of the growth, he believes, is that Facebook provides developers and publishers access to people's friends. Therefore, they are able to create gaming experiences where the primary reason to play is to engage in social interaction with friends. This concept, he said, provides a far more compelling reason to play than just the solitary hero's journey through a quest.
More importantly, he said, Facebook offers an online social platform that lets friends tell each other what they are doing with a game, while outside said game. People spread word about a game they are playing to everyone--not just their gamer friends. In turn, those who wouldn't normally play a game are more inclined to try it out, if for no other reason than to have something to talk about with their friends.
Segerstrale also addressed the misnomer that a "free" game implies that no money is being made off of it. He noted that social gaming as an industry is expected to bring in $1 billion in 2010, a figure made all the more impressive considering that everyone is still trying to figure out how best to monetize content. He believes that even if the user base doesn't increase, there's still plenty of room to grow revenue.
Before turning his eyes to the future, Segerstrale noted that many of the concerns related to social gaming didn't come to pass. Namely, blockbuster releases remained stronger than ever (he cited the success of Activision's Call of Duty: Modern Warfare 2, in particular). He also noted that destination sites such as Yahoo Games or Pogo.com remained popular and that there is a good deal of profitability in the business.
Looking ahead, Segerstrale said that the industry will increasingly move away from the business model dictated by price multiplied by units sold. Instead, the more popular option will be what he called the lifetime value approach, where a game earns money through postrelease content.
To truly take advantage of the lifetime value model, he said that game makers can no longer ship shoddy products that are marketed well. (In fact, on any platform, he argued, publishers will no longer be able to deliver poor quality, due to increased communication between gamers. Second, developers must make their wares multiplatform so that they can be consumed on as many devices as possible.
Third, game makers need to understand how to iterate on their products after they are released based on usage data and other metrics. Lastly, he believes there will be a growth in owned franchises in social gaming. Currently, this isn't the case, he said, before noting that consumers simply prefer the security of products they recognize and liked previously.
As for likely industry trends, Segerstrale believes that social networks will be more defined by established brands and franchises. He also believes there will be a good deal of consolidation within the social games sector, as creators are gobbled up by console game publishers or combine with one another. Thirdly, he said the term "social games" will likely become outmoded, because social features are becoming such an integral part of all interactive software experiences. Lastly, he thinks that there will be a boom of innovation and growth, as social gamers begin demanding deeper, more-immersive gameplay experiences.
Quote: "Saying I develop a social game will be like saying I have an electronic television at home."--Kristian Segerstrale on how the industry will view social gaming in the next three to five years.
Takeaway: Segerstrale believes that social gaming is an inevitable evolution for the gaming industry. This development is profoundly positive for the gaming industry because of the ways in which it lowers the barrier to entry for new gamers, who may eventually go on to support the gaming industry. Also, more than just giving games away for free, it's creating an environment conducive to fostering social experiences that will fuel growth.