John Barbour has been the president of Real Games — Real Networks’ gaming division that was set to spin off before the IPO market froze over — for just 14 weeks.
And he says that he’s never seen so much worry and anxiety in an industry that’s growing by 20 percent a year. Keynoting the Casual Connect conference in Hamburg, the outspoken Scotsman said that online games can provide millions of players around the world with a sense of achievement, happiness, escape and even self-improvement tactics. So, why all the angst?
“This is a market going through maturity,” said Barbour. According to the Casual Games Association’s 2007 numbers, more than 200 million people play worldwide — a massive audience with an incredibly wide range of tastes and interests that gaming companies must adapt to appeal to.
He outlined some common concerns: Many in the space are nervous about the impact of the financial tsunami and unemployment on the industry. New games cost more to develop, and the profits tend to be lower. There’s a glut of average games, and free games are chipping away at everyone’s marketshare.
Barbour validated these concerns, but said that nerves are not likely to be calmed anytime soon, regardless of record growth figures. “If we’re this gloomy [now], what would we be like if the business were declining 10 or 20 percent?” he asked his audience, though he doesn’t predict such a steep drop.
Instead of dreading the future, game developers should sink their energy into making sure they take part in the growth right now, he said. Ability to do this well comes down to content — the companies with the best content for the broadest audience should steer out of the downturn just fine. “Everyone else will struggle,” Barbour predicted.
Despite this positive outlook, he warned against what he called the “short-term drug of exclusivities.” Many developers choose to make their games available only through one major portal in exchange for higher royalty rates and marketing support. In the long-term, this tactic is bad for business he says, because great games need to be exposed to as large an audience as possible from the start in order to consistently attract new players.
In the meantime, worried gaming companies are looking to cut costs to weather whatever financial decline might yet be in store. Real Games, for instance, plans to control spending by creating more cross-platform titles for PC, mobile, Xbox Live and the Nintendo Wii. On the revenue side, companies are looking to take more advantage of new monetization strategies. Virtual goods sales in particular have drawn a lot of attention.
Adopting more subtle ways to make money from games is more necessary than ever with the proliferation of free casual games. As Barbour points out, people losing their jobs will still want to play but can’t pay. And there is still a lot of room for that business to grow. After all, only 10 percent of women who use the Internet play casual games.
“The market has the opportunity to be ten times the size it is today,” Barbour stressed. “Why don’t we do something to build the bigger market?”
Following the speech, I asked him if growth is likely to continue. He said he is certain it will, considering the level sales of low-cost computers and smartphones, and greater broadband deployment.
Barbour would not disclose when Real Games will officially spin off from Real Networks. For more on all of these issues, please check out our GamesBeat 09 conference coming March 24.