Multiple platforms are 'holy grail' of gaming
The National Post
January 21, 2008
Making it big in the video game industry isn't exactly a cakewalk. Only a fraction of the thousands of games released each year, are rewarded with the majority of the profits. When investors look for a video game they consider to be worth their money and energy, they are not looking for the next Halo or Guitar Hero. The games are now considered to be secondary to the overall user experience.
"I'm looking now for games that are more of a feature of the product," said Randy Thompson, a Calgary-based general partner of Argon Venture Partners. "The holy grail of the tech product, not just video games themselves anymore, is to get it seen by as many customers as possible."
With video game consoles such as Microsoft Corp.'s Xbox 360 and Sony Corp.'s PlayStation keeping video game addicts glued to their televisions, and the emergence of the casual gamer with the release of Nintendo's Wii system, 2007 was a record-breaking year for the industry with more than $17.9-billion in sales, according to research firm NPD Group.
With dollar signs in their eyes, independent game developers converged last week on a downtown Toronto hotel for the Game On Finance conference, aiming to learn more about alternative ways of packaging video game experiences and how to level the playing field against the Electronic Arts of the world.
"Investors are now migrating to games that can be offered on as many platforms as possible," said Mr. Thompson, who rejects about 97% of developers that approach him for capital funding. "There's so much less physical shelf space where you can sell your games now that you need to incorporate services like social networks and Web services into your entire product lineup."
A major trend investors are beginning to open their eyes to is taking burgeoning online social networks that are geared to a specific demographic and adding a physical, retail component to it, says Kim Pallister, a director of content strategy with Intel Corp.
"Kids get hooked on something like Club Penguin or Webkinz, but since they're anywhere from three to 10, they don't have a credit card," Mr. Pallister said.
"But when their parents go into a store and can buy a Webkinz or Build-A-Bear for $10, $12, that's when they get some return on their investment."
The strategy seems to be paying off. Last year, Club Penguin's Vancouver-based development team sold the Web site to Disney for US$350-million, while Ganz Interactive's Webkinz now gets about US$45-million in retail sales from its popular plush dolls.
"You can't go to bed with Club Pengiun, but you can with Webkinz," Mr. Pallister said. "And you're going to see that happen a lot more with traditional companies that are looking to broader their customer base with more innovative ideas."
Another example showcased at the Game On conference was Groove Media's skill-based golf and driving simulation video games. Although gamers can pay an initial transaction fee to compete head-to-head for cash prizes, the real money, says chief executive Jon Walsh, is in the lucrative in-game advertising business model.
Companies including BMW have lined up to advertise in Groove's golf simulation, which Mr. Walsh says gives the game a more realistic feel, as if you're actually playing in a PGA Tour tournament.
"And with more than three-million ad impressions in the first eight weeks of game play at 25¢ per impression, that adds up significantly," he said.