To many in gaming, hardcore social gaming is an oxymoron. To Kabam, it has been the fuel that has led our hyper growth in the last 16 months from 25 people working above a Dim Sum restaurant to over 400 people today in offices on three continents. While most social games are targeted towards soccer moms with shallow, casual gaming features, Kabam’s games are designed for hardcore gamers, who want deeply immersive, synchronous play.
The rapid growth of online gameplay in browsers and on social networks has given rise to a great deal of debate. While it seems there is vigorous agreement that digital content and monetization models are important to the future of gaming, there is a debate on the “how”, especially among the gaming cognoscenti. The contentions:
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Social game playing (e.g. on Facebook) is a bubble that will soon burst.
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Social games will never be played by real gamers, the “hardcore” gamer raised on consoles and PC gaming.
There’s a revolution going on, a tectonic shift, taking place in the game industry akin to the disruption that iTunes brought to the music industry. This disruption is a result of a combination of technology advances, shifts in game player behavior and superior business/economic models.
Here are the key trends we see.
TREND #1 – Boxed games (console, handheld, PC) revenue growth on the decline; online is growing and will surpass offline game revenues in the next 12-18 months.
While the overall games industry is growing at about a 6% CAGR, a deeper look at the numbers reveals that all of that growth is coming from sources other than boxed software games. The online market is growing at 3-times the rate of the overall market, while the boxed games are declining (Exhibit I). In 2008, online revenue (which we define as social networks, web and mobile) was less than half of total boxed game revenues. Sometime in 2012 the online game share of the total worldwide market will surpass boxed console/handheld/PC sales (Exhibit II) …and keep growing.
TREND #2 – Social network models are disrupting the traditional gaming industry with superior pricing, business and economic models.
There is no doubting the great visual quality of console or PC-based games especially compared to social and mobile games. The disruption is occurring in how games are found, played, and paid for by consumers.
The Social Model disrupts the old game models by leveraging community and reducing friction for the user. The traditional model dictates that consumers must pay for a dedicated platform (i.e., console) and software before they engage in one second of gameplay. The company is in control. In sharp contrast, the Social Model puts the consumer in control. This new model:
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creates incentives to play with your friends or to find a community of new friends that have common interests – their love of a particular game
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allows for gameplay on any number of common multi-function devices
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is based on a free-to-play model that allows for consumers to try something before opening up their wallet and even then, they choose what they buy and how much they spend
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enables instant gratification, since there’s no need to take a trip to the store or wait for long downloads – games are available immediately in the browser
Net: Gamers like the community aspects of playing with old and new friends on social networks. Just as importantly social games remove a lot of barriers that a consumer finds with traditional games: no downloads, no visits to retail, no credit card unless the gamer wants to become even more engaged.
TREND #3 – Social games are not monolithic. Core game players are increasingly migrating to alternate platforms, and are playing games on Facebook.
Part of the rap on social games is due to the proliferation of simple, copycat, click ‘em games that that hundreds of millions of consumers play every day on Facebook. These games are famous for the audience they attract -- “middle-aged women”, the soccer moms -- and the level of their gameplay (not very sophisticated or competitive). That was the first wave. Since we launched Kingdoms of Camelot in late 2009 as a strategy/empire building game on Facebook, we’ve been leading the next wave – hardcore social games. These games combine the qualities and features that gamers have enjoyed in traditional MMO strategy and RPGs with the interaction and connectivity benefits of social networks. Our heaviest users play our games four hours a day.
Put another way, these are games that are designed for hardcore gamers to enjoy. They are skill-based, much more competitive, challenging and designed to sustain extended playing sessions (hours of play vs. five-minute click fests).
And, those hardcore gamers are playing these games on Facebook. Kabam recently fielded a social gamer survey in conjunction with Information Solutions Group to understand this trend. Among many findings, we learned that 82% of all people who are playing strategy/RPG style games on Facebook and other social networks also are playing console games. We’ll be sharing an in-depth report of these findings later this summer.
Back to the original debate.
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Is social game playing a bubble that will soon burst? Hardly. Hundreds of millions of consumers play these games and as importantly are speaking with their wallets. Online gaming is a several billion dollar segment of gaming today that’s projected to surpass boxed games in sales next year.
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Will real gamers play games on Facebook? In fact, they already are. Console gamers who also play online games are no longer small minorities. While the visual fidelity of traditional games vis-a-vis online games is substantial, hardcore gamers are finding a new place to play – one unfettered by console, retail, or download cost and time requirements.
Kabam is the pioneer and leader of making games that appeal to hardcore gamers on Facebook and other social networks. That’s a result of making games that combine what gamers look for in MMO style strategy and RPG games with the connectivity/interaction benefits of social networks. As VentureBeat states in a recent article, How Kabam is cracking the code for hardcore games: "…just a stone’s throw away from the headquarters of traditional game company Electronic Arts, Kabam is building a very large business that could disrupt other game makers.”
History has shown that as the gaming industry goes through phases and cycles, players and positions change. While gaming companies have for years been discussing the importance of revenue from digital content we are entering an unprecedented inflection point. With the level of disruption taking place in this cycle, we anticipate that at least one major Western publisher will not adapt to the new ecosystem…and as a result, tumble.
Facebook and “online” games are not a passing fad. Rather, they represent a bigger, more disruptive trend. Companies with the DNA to understand and create great content in this new ecosystem will thrive. In this fast moving and brave new world, Kabam will be one of those companies.
