The casual game industry's dilemma can be summed up by two stats: 200 million players worldwide, yet only US$1.5 billion in revenue anticipated next year.
At an anemic $7.50 per player, it's a fraction of what the mainstream video game industry -- worth $7.4 billion in the U.S. alone last year -- wrings out of its much smaller, mostly young and male audience.
Still, casual gaming's potential -- the sheer number of players, as well as the interest from audiences traditionally apathetic to video games, such as middle-aged women and seniors -- is luring big companies, from Electronic Arts Inc. to MTV Networks to Microsoft Corp. to Google Inc., to the party, hoping to create the next puzzle hit a la Bejeweled or a nonviolent, female-friendly blockbuster such as Cake Mania (downloaded more than 50 million times in the last year and a half) -- or profit from it.
At last week's Casual Connect Seattle, the industry's leading North American conference, executives were divided on how they planned to profitably tap into the casual game audience without driving them away.
Some, such as Daniel Bernstein, CEO of Cake Mania creator, Sandlot Games Corp., said that the predominant "try-and-buy" model -- letting users download and play games for a limited time before demanding payment of $20 or so -- can remain the fundamental driver, though tweaking it is vital.
"Our industry has an average conversion rate of 1-2 percent. That is abysmal," he said.
Try-and-buy will be popular for casual games on smart phones, where the screen size limits other options such as advertising. But executives said smart phones have a way to go before they become a popular medium for casual gaming. The problem is the intransigence of telecom operators, as well as phone vendors such as Apple Inc., who either make their development platform hard to write for or (in the case of the iPhone) closed off to all but licensed developers.
The iPhone is an "exciting device. But it's a closed platform that is forcing people to hack it," said James Gwertzman, director of business development at PopCap Games Inc.
Whaddya mean, pay for it?!
Others point out that the try-and-buy model is disproportionately unpopular with certain players.
For instance, at RealNetworks Inc.'s popular RealArcade site, the ratio of male to female players is about 50:50, though the percentage of paying players is skewed 3:1 in favor of 40+-year-old women, according to Charles Merrin, vice president of North American games at RealNetworks.
The archetypal player today, at least in the U.S., is an affluent middle-aged woman. According to a survey of MSN Games players, two-thirds are women with an average age of 43 and an average household income of $68,000 per year.
That's led to blatant but successful targeting such as MTV's Shockwave.com's Carrie the Caregiver game, in which players become a "virtual nanny." Carrie has been a top 10 seller at Shockwave.com for the last nine months.
"We're thinking beyond the alpha mom, though we love her, too," said Robert Nashak, general manager of Yahoo Games.
Others see promise in game portals luring both men and women through all-you-can-play subscriptions. That allows portals to monetize both games that are played purely online through a Web browser as well as the "premium" games that are downloaded and played offline.
For instance, the Club Pogo portal run by Electronic Arts Inc. has 1.5 million paying subscribers, nearly half that play every day, according to Andrew Peterson, vice president.
"Once you have an engaged customer, that's the Holy Grail," he said.
A variation on the typical monthly subscription is the micropayment, aimed at cost-conscious customers. PlayOnArcade, which has about 100 games available on its site, is one example of a company using micropayments.
Users are typically charged about a penny a minute to play the games. For any particular game, users cannot rack up more than the list price of the game. Indeed, once they reach that amount, they usually own it.
Ad it up?
Much of the talk at Casual Connect, however, centered around the potential of ads and sponsorships.
Ads and sponsorships already help MTV Networks' game sites earn about two-thirds of its revenue, according to Dave Williams, senior vice president.
In Williams' view, games on MTV's AddictingGames site such as Head Blast, which was released last year after French soccer player Zinedine Zidane headbutted an Italian player during the World Cup final, share more in common with ad-supported media than their packaged brethren sold in stores.
Casual games are "viral, they're embeddable, and making them shareable drives growth," he said.
But so far, advertising has mostly benefited game portal operators. Embedding ads into the games themselves remains tricky for the many small developers that dominate the casual game industry.
The result, complained one unidentified developer during a Google talk on in-game advertising, is that while game portals likely collected tens of thousands of dollars from advertising from his game, he saw only a fraction of that.
To help them, companies such as Google are looking to both simplify the process of embedding ads into games, but also woo sponsors to place their products into the game play itself.
Williams said MTV has already had success with its own games.
"When you can have salads from Sonic inside our game Diner Dash, it enhances the experience and the audience eats it up," he said.
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