31 Oct 2012

Playing for the social and environmental cause (1) : what’s new in the gaming industry ?

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Some months ago, I came across a gaming start-up company recently established in Luxembourg to develop social and environmental games. Alongside its financial center, Luxembourg has become for a few years a place of choice in the ICT and biomedical sector mainly, owing to an attractive legal framework for intellectual property (management of patents and licenses, protection of rights, etc …)

 Social Games - Business Model

Social games ecologically relevant

“We are coming from Kalahari”, said Natie Engelbrecht (one of the founders of this gaming company) as per introduction, meaning that they know the desert’s landscape : everybody who has experienced it gets aware about the fragility of our world. In the desert, every source of live is precious. Nothing is to waste. If you don’t think in a sustainable way, you don’t survive. Such behavior should be replicated everywhere.
Their storyline is clear : what will drive the development of their series of games is the education on environment conservation. In their games, enemies are any kind of pollution : radiation, carbon, litter, oil. It takes the shape of invading balls to delete with a machinegun. Through the purchase of virtual goods, the gamer can enhance his fight capacity and performance (like in every games).
The philosophy of this South-African team is as follows :
– “I am because we are”
– “If you think of a rhino, also think of a tree” (it might be your last chance to save your life !). The lesson is : “If you see a problem in your life, remember to what situation you met in the past”. In other words, never forget that you need some help in life. Be it a tree or something else …
– “Peace is expensive, but it is worth the cost (with the drumbeat of war being fuelled by a clash of cultures, the very essence of life on earth is being neglected as someone else’s problem)”.
No doubt that they are driven by passion, that they are eager to translate into their games.

The very fast pace of the gaming industry

Their reasons to come to Luxembourg are triple :
– the Grand-Duchy has no history of colonialism (what is a very sensitive topic for the black continent)
– the Grand-Duchy has developped performant and very flexible infrastructures (which allows to change things rapidly)
– in Luxembourg, it is easy to talk to each other. “In one day, 6 meetings are possible”, said one of the team members with satisfaction.

More generally speaking, the geographical world economy can be segmented in three parts :
– the Western world owns brands
– natural resources come from Africa
– manufacturing is located in Asia

The Western world has positioned as the pioneer of the gaming industry, starting with the hardcore games that are played on machines like the Playstation. Later on, the big players of the internet economy have opened the way to a second wave : Facebook has been the main channel to access the largest choice of free games so far. 50 % of Facebook users’ time is dedicating to gaming !
The next surging trend is mobile gaming fueled by the leading operating systems, iOS and Android. They are opening a new horizon for growth due to an easier and larger access whatever the situation : when commuting, in a doctor’s waiting room, on the beach, … but it is worth to notice that majority of people play at work (!). Resulting from this, the limited playing time pushes the player to come back every day …
Mobile phone is the new hope for social gaming, a true battlefield for the gaming industry. But the customer average lifetime is getting shorter and shorter : on hardcore games (Playstation …), it is 18 months ; on casual games (that are used to be played from a computer), it is 4 to 8 months ; with mobile games, the player moves to another one after less than 2 months !

Some key-figures about the gaming industry (worldwide)

Market size
– there were 500 million players in the world in 2011 … expected to extend to 1,5 billion in 5 to 6 years. 3,5 billion USD were spent on virtual goods in 2011 (against 1,6 billion in 2009)
– the gaming industry generated a total turnover of 70 billion USD in 2011 (against 60 billion for books and 20 billion for music).
– the social games market (i.e. games played with many participants) is estimated 15 billion in 2014

What business-model ?
– the social games must be able to work with low retention rates. When launching a new game, a first-day retention rate of 30 % is considered as being a huge success
– a game is monetized with a very small minority of gamers : the conversion ratio (number of players buying virtual goods) is around 1 %.
– women spend more than men to play social games (it is a woman driven industry)
– the social games business-model reveals that 80 % of the revenues are coming from the purchase of virtual goods (or currency) and 20 % from advertising

As a conclusion, social gaming is more about getting together with friends than the game itself. Hence, the equation “Reach + Retention + Revenue = Success” is the undisputed rule to follow. The players are battling for distribution power, new revenues streams and talent acquisition for being able to meet this challenge.

“In every real man a child is hidden that wants to play” wrote Nietzsche. 150 years later, his assertion still proves to be highly pregnant.

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