Will Social Games Erode the Hardcore Console Game Market?

A new study being released today is challenging the notion that all gamers on Facebook are housewives in their mid-40s.

Instead it finds that social games have begun to eat away at time and money spent on traditional games in the console market.

The report was commissioned by Kabam, the Redwood City, Calif.-based start-up that has ballooned to more than 400 employees after raising millions of dollars in venture capital.

Founded in 2006, Kabam has released some of the first hardcore titles for Facebook, including Kingdoms of Camelot and Glory of Rome. More recently, it released Edgeworld and has plans for a game based on the movie “The Godfather.” Essentially, it is in the company’s DNA to go after the traditional game companies, like Electronic Arts or Activision as opposed to going after casual games made by Zynga.

Maybe it is old news at this point that the console environment should be concerned about social gaming. After all, Zynga has managed to get 268 million monthly active users on the platform.

But the company has found some interesting data that supports its theory that all gamers — even the ones who enjoy the bloodiest or most complicated of story plots — will become so-called social gamers.

(But don’t worry, the data also backs up that for now the “casual” social game market is still dominated by females aged 30 and over.)

Even more to the point, it believes hardcore social gamers, who are defined as those who play action or role-playing games on Facebook, will end up the more lucrative portion of the market, even if they are outnumbered by the general population, because of their propensity to play more games and more often.

Some of its findings: 

·         41 percent of all Internet users in the U.S., or roughly 98 million poeple, are playing social games.

·         Hardcore social gamers, of which 82 percent play console games, tend to play a larger number of social games for a longer period of time than casual social gamers.

·         About 24 percent of hardcore social gamers report that they’ve decreased the amount of time they are playing on other platforms.

·         About 22 percent have decreased the amount of money they’ve spent.

·         78 percent of hardcore social gamers are playing two or more social games and 47 percent are playing three or more.

·         30 percent of hardcore gamers play social games for more than an hour per day.

The report was conducted by Information Solutions Group and was based on the results of an online survey completed by 1,412 people in April and May. To qualify, participants had to live in the U.S. and have played games on a computer, game console, mobile phone, handheld game player, tablet or social network in the past year.

Kabam Acquires Top LucasArts Game Makers to Help Build Hardcore Social Games

Kabam, known for developing hardcore social games such as The Godfather and Kingdoms of Camelot, has acquired a company with deep roots in the console game space. Fearless Studios was co-founded two years ago by notable game makers Haden Blackman and Cedrick Collomb. Blackman was the creator and senior executive producer of Star Wars: The Force Unleashed, and Collomb was formerly director of engineering at LucasArts. The two will immediately join Kabam, along with all members of the team from Marin, Calif.

Acquisitions in social gaming are common, especially as emerging companies try to gain scale. But it is not often that a social game company purchases a console game developer. In the case of Kabam, it matches with what that company is trying to achieve. It is the goal of the Redwood City, Calif., company to challenge the notion that all gamers on Facebook are housewives in their mid-40s. Instead, it wants to bring some of the high-end games found on consoles to social networks in order to attract more engaged players, who are willing to play — and pay — more. In a release, Kabam CEO Kevin Chou said the team at Fearless has the right game-design skills and technology set to help social games become higher fidelity. “Having the background and emerging technologies and proficiency in making the transition from 2D to 3D on consoles mesh perfectly with Kabam’s strategy,” Chou said.

In 2012-2013 we will see more top social games companies making mergers and acquisitions in the more sophisticate MMO games space.  

Zynga needs new revenue stream

Zynga's shares are way up this week based on speculation that Zynga could expand into online gambling after the U.S. opened the door to possible legalization. (Zynga) shares have been up 15% in the last week, in part, we believe, from speculation ZNGA may have an opportunity in online gambling if it is legalized in the US. This is a long-shot and highly speculative.

Based on Appdata, Daily Active Users (DAU) for Zynga’s games on Facebook in 4Q were down 6% to 51M from 54M in 3Q. This means ZNGA will need to convert an increasingly larger percentage of users into payers in order to grow. For context, Zynga has 200 million users. Only around 2.4 percent of those users are actually paying customers. So in order to earn more Zynga needs more users or a new revenue stream.

Online gambling can be one or acquire a MMO hard core games publisher which have a higher percentage of paying users convertion of between 6.8% to 7.8% and a higher ARPU.