[In this editorial, Gamezebo founder Joel Brodie examines the effects of a vicious price war on PC downloadable casual games, suggesting that the segment is in "dire shape", and may only get worse without major changes.
Over the past couple of months, it has become painfully clear to me and many of the users at our [digital game review, rating, and community] website, Gamezebo
that the quality and quantity of the PC downloadable casual games that we see
is dropping. There are less download games being released each week, and of those that are released, many are just not good.
The state of download games is in dire shape. And, unless changes do not happen soon, things will only get worse.
Before I talk about what's going wrong, let me tell you what is going right in download games.
The answer is, you, the game player.
There are more people playing download casual games than ever before, which is quite a feat during a worldwide recession.
The growth in demand for download games is driven by lower prices, improved broadband speeds, and the fact that the primary audience that loves to play download casual games, Baby Boomers, is the largest demographic in the US right now.
So what's the problem? While demand is growing (albeit slowly), the supply side is out of whack, moving the market out of equilibrium. Here's the problem:
- The price of download games has dropped in the past year from an average of $20 to $7 per game. That's a 65% drop in price, meaning developers need to sell 2.5 more per game to make as much as before. The demand for casual download games is growing, but at a much slower rate to offset the drop in price (my guess is 10 - 15% yearly growth).
- There are less channels for games developers to sell their casual games, both offline and online. Retailers, like Walmart or Target, noticed the price drop online and either dropped their prices or stopped selling casual games altogether. There has been consolidation online. For example, PlayFirst has partnered with Big Fish Games to sell games and Reflexive is closing their Arcade product. Whereas there used to be hundreds of web sites retail for developers to sell their games, now there are only a few.
- While the price per game has dropped, the amount developers earned per game has either stayed the same or in some cases, decreased as margins get squeezed.
It does not take an economics degree to understand the numbers simply do not add up. If developers are making 2/3 less per game and the amount of games sold is not offsetting that drop, the only way for game developers to earn their return on investment is to spend less time and money producing each game.
Whereas a game developer would have been willing to invest $300,000 and 6 months to develop a game in the past, now they can only afford to spend $100,00 and 3 months just to break even. The result is more derivative content (especially among hidden object games), less game play, and poorly tested games with bad English grammar (I had to throw that last one in there).
Moreover, many highly talented game developers are leaving the download space altogether to focus on iPhone and Facebook games. With iPhone, the cost of development is much lower and Apple only takes 30% of the sale. With Facebook, a decent trafficked game can make up to $50,000 - $100,000 per month. Game developers are not moving to the "hot" iPhone and Facebook businesses to make a quick buck; they are leaving Downloads to stay in business.
And that's a shame, really, because download games are more popular now than ever before. Gamezebo started as an editorial web site devoted to casual download games and even though we have expanded to cover casual games across all platforms, download games remain our top passion. No one wants the download games market to survive and thrive as much as we do.
In a way, the recent drop in quality has given us here at Gamezebo an even greater purpose in our coverage of download games. We understand that game players do not have money to throw away on bad games, and we strive to give our non-biased reviews on games and provide the online tools for our users to share your opinions on whether a game is worth buying or not.
However, we'd prefer to review more good games and give out 5 stars than to rate games with 2 stars or less for being buggy, derivative, too short, or just sucking. And lately, the 2 stars or less have been flying in our Downloads channel.
Fortunately, not all is dire in the world of download games. Companies are starting to re-introduce the concept of higher tiered pricing with Collections and Premium edition games. There are game developers that continue to develop high quality download games (especially those with strong franchises).
New distribution channels and premium services are popping up to offer developers new ways to make money. And, with less competition, this is the perfect opportunity for game developers to jump back into the Downloads business, assuming they can make the math work.
Still, the fundamentals behind the download games market are flawed and we can no longer stay silent. The first step in solving a problem is to admit that a problem exists and for some reason, the entire casual game downloads industry is too scared to speak the truth.
The games need to get better or game players will stop playing. Game developers need to make enough money in order to invest the time and money to create better games as we've enjoyed in the past. And yes, game players need to be willing to pay more than $7 to play higher quality games.
I'm not saying it's possible to get the average price back to $20 per game. There are too many cheap and free games online, on Facebook and the iPhone (that's a reason why we are covering them more). But, $7 does not work. A desk for $1,000 made by craftsmen is higher in quality than a $200 desk you buy at Walmart made of particle wood. It's the same with download games.
If the status quo does not change, we're going to enter a vicious cycle, where lower quality games lead to less game sales, which leads to less developers creating download games, which lead to even less sales, and so on.
And once the big fans of download games get fed up, bored, and stop playing --- well, then that is when it truly is game over.
[Joel Brodie is the President and Founder of Gamezebo, a leading editorial and community web site for casual games across multiple platforms. Gamezebo features reviews, previews, and walkthroughs for games on the PC, Mac, iPhone, and Facebook. Previously, Joel was head of business development at Yahoo! Games.]