Many people inside the casual games space assume that the industry is being driven by download offerings from major portals. In truth, however, there are many additional opportunities to make money on casual games, opportunities that have little or nothing to do with portals or downloads. Because MumboJumbo has spent many years working as a publisher and distributor of video games at retail, we thought it would be interesting to sit down with Mark Cottam, the firm’s CEO, and Paul Jensen, its President, to find out more about their perspective on issues related to monetization. Here’s what we learned.
Everyone seems eager to define what “casual” is. How do you see it?
Jensen: I think we all agree that casual games are easy to understand, that you do not need to read a manual to play them. They are engaging, challenging, rewarding, and—most of all—fun. As the audience for casual games continues to grow, we are seeing new games introduced to the market that are expanding the breadth and depth of what casual gaming means. Also, the successful extension of casual games to traditional hard core platforms such as the Xbox or Sony PSP shows that these games are appealing to a wider demographic than before.
Cottam: It’s hard to define casual games as a specific genre because it is such a broad category. The game play mechanics of casual games appeals to almost everyone, and allows them to be ported to every device and platform. We receive letters every week from retail customers whose ages span from children to grandmothers in their 80s. It’s mainstream entertainment for everyone.
Jensen: I like to use this analogy: Casual games are like sitcoms. They provide 20 or 30 minutes of entertainment—a short but rewarding experience that costs you little in time, money, or effort. (As long as you are willing to watch TV commercials.) Those who watch sitcoms and those who play casual games have similar entertainment expectations—which is why I am very enthusiastic about advertising revenue for our market in 2007.
MumboJumbo has a strong internal production development team as well as an active distribution business development team. Will MumboJumbo continue to branch out across the value chain? Or do you foresee companies being forced into defined roles in the value chain because of increased competition in the space?
Cottam: Ultimately, as the market grows and our customer base expands, consumers will decide what the roles are. For now, however, portals have lots of power—but I see that diminishing. Over the next six-to-18 months, I think you’ll see strong publishers extending their reach across the entire value chain—at retail, in mobile, everywhere—just as they have in the traditional games market. As a consequence, publishers will emerge as the primary movers in the market.
Will we continue to branch out in this fashion? Absolutely. We believe in the value of the IP, and that the winners will be those who can best exploit IP to their advantage. We are focusing on putting Luxor everywhere, on putting 7 Wonders everywhere.
Jensen: The casual games market is still a nascent industry, with its roots evolving out of the online download space. The online space has many advantages, chief of which is its low distribution costs. As the market has moved from online to retail, the distribution costs have risen exponentially. It’s takes a very different organization with specialized skill sets, resources, and experience to bring games to market at retail, This creates a barrier to entry for the traditional online publisher, but provides a distinct advantage to companies like MumboJumbo that are a leader in both online and retail publishing.
We often hear that shelf space is shrinking for core PC games in the retail market, but that—theoretically—digital distribution solves that problem for casual games. Do you think the casual market can effectively handle an ever increasing number of games, or will we have to limit production? Is shrinking shelf space an issue for casual games?
Cottam: The irony is that when people think about digital content, they envision unlimited shelf space; but in reality, retail is better suited for displaying a lot of content. In the digital space, you see a lot of action for the top 10 games, but after that you see a big reduction in sales activity. From a merchandising standpoint, you’re limited to a couple web pages on a portal, but at CompUSA or Best Buy you have a massive section of games where consumers can easily identify their favorite games for purchase. In most major chains we are now seeing a well defined section for casual games due to two primary reasons. First, the casual games market is growing quickly with broad consumer awareness at retail. Secondly, the hard core PC gamers are moving more to console, which is freeing up additional shelf space for our titles.
Jensen: As I said before, this industry is still in its early stages. The try-before-you-buy model was introduced in the online casual games space because it allowed consumers to buy only the games they enjoyed. With this came the idea to launch as many games as possible, and let the consumers select from huge libraries of titles. I find it ironic that even in the try-before-you-buy model—in which consumers are able to choose among hundreds and hundreds of titles—the top 20 games still account for over 75% of the total casual game revenue,
Meanwhile, there is a glut of content entering the casual space, and this glut is causing a dilution of overall revenue for the category. We still have a long way to go as an industry to effectively merchandise and promote the best titles to maximize the revenue for the distribution portal and the content owner. Category Management is a science at retail, and hopefully we can take some of what we have learned at retail and apply it to the online space.
Due to their nature, many casual games can be ported to a number of different platforms. Given your experience, which platforms do you think are best suited to casual games?
Cottam: MumboJumbo has been a leader in extending casual games to different platforms, At first we brought leading online casual games to the retail PC and Macintosh market. Recently we’ve extended that success to the handheld market with our recent PSP launch of both Luxor and Platypus, with more to follow in the near future. There is no doubt that the DS is a prime devise for casual games; and when you look at Nintendo’s messaging and ad campaigns, you can see that they are putting a very strong emphasis on casual and bringing mom into the gaming world.
I guess you could say that at MumboJumbo, we are bullish about the PSP and the DS. We also think that the Wii is perfect for the casual gamer, which is why we will be extending the MumboJumbo IP into the Wii as well. As for XBox Live Arcade, I said at the 2006 Amsterdam CGA Conference that it was the “Real Deal.” I am pleased to say that I was right.
Have you done any tests with the price elasticity in the market?
Jensen: Early price elasticity models have shown that the $19.95 price point is the ideal target for online casual games. If you lowered the price to $10, you would need to double the unit sales to break even from a revenue standpoint. The broader issue here is conversion rates, not retail price. The audience of casual gamers that purchase these games still hovers around 1% to 2%. These users are a small but devoted group of gamers who are willing to pay for a title they enjoy. One could argue that prices should be going up as the games themselves offer more and more entertainment value.
Cottam: We regret that we didn't test out a $29.99 price point when we launched Luxor 2 recently. That price would have been consistent with the prices currently charged on handheld devices. Both Sony and Nintendo supported $29.99 and thought it was a good idea to test the market—so if we could rewind we would try the higher price point in the download market. If any product can push the price point higher it would be a game with a strong established consumer brand like Luxor 2.
What kind of an impact does a consumer-focused marketing campaign have on casual games sales?
Jensen: Cost effective consumer ad campaigns for casual games have been focused on the online space. There are efforts to try mainstream consumer advertising to test its effectiveness to reach consumers. In our partnership with Nickelodeon, they ran TV spots on their network to promote Charlotte’s Web: Word Rescue, the game we developed with Nickelodeon. It will be interesting to see the results.
Cottam: Considering the size of the market, however, a large-scale marketing campaign might have an impact but maybe isn’t justified if you are only selling $20 downloads. Once strong brands like MCF, Diner Dash, Luxor, SuperCollapse, and Jewel Quest are available on all platforms, however, you might be able to justify a mass market campaign.
Jensen: The great benefit of the online business, after all, is that it is relatively cheap to get your game to millions of people. In traditional media, you would have to pay millions for the same exposure and awareness.
Any comments on the issue of generic versus name-brand games? Do you think the market should implement a system similar to the one used in the pharmaceuticals industry, where names brands are protected and clones are monitored and regulated?
Cottam: This is a discussion that seems to come up a lot. The question is: Should the clones be released at all? Consider the first-person shooter: Should people be given only one choice or many? Do people have the right to choose among a variety of clones, or only those that are derivative?
In my mind, giving people only one choice creates a terrible user experience. Derivative works can create new features, add twists to game play, and push the graphical experience for the consumer. They can reenergize the category. It would be a shame to have only one mah-jongg or only one match-three game available. That being said, we do need more ingenuity and breakthrough products to ensure the ongoing success of the casual games market.
Jensen: It isn’t clones that are bad for the market; it’s poorly designed games. In the end, it’s the quality of the game that truly matters.
Cottam: Do I think that the clones of Luxor took business away? I’m not sure. Blatant rip-offs are wrong and do not move the game industry forward; but a variety of choices brings more people to casual games. Even if a game is second or third to market, that doesn't make it "generic" necessarily. Ultimately, it is all about what the users choose.
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As CEO of MumboJumbo, Mark Cottam brings over 20 years of industry experience to the company. Mark is responsible for the global operations of the business with a focus on retail sales. Under Mark’s direction, MumboJumbo has become a leading developer of games for online distribution and the preferred publisher of premium casual games for the retail channel. Prior to joining MumboJumbo, Mark served as Chief Operating Officer and Vice President of Sales and Marketing at Moto1.net, where he led the company's successful development and deployment of its motorsports portal and online racing series. Additionally, Mark has held management positions at MacPlay, Dragon Systems, PowerHouse Entertainment, ParSoft Interactive, CyberMedia and XTree Company.
Paul Jensen serves as President of MumboJumbo. He has extensive experience in the casual games industry, having previously served as President of Skilljam, where he brought the company from the early stages to majority acquisition by Liberty Media of its parent company. Prior to SkillJam, Jensen was Vice President of Online Games at Sony Pictures, and held various online games-related positions including Business Manager of Online Games for Microsoft. He has also worked in sales, marketing, brand management and business development for leading consumer goods and e-commerce companies, managing businesses in the US, Europe, and Asia. Jensen holds an MBA from Xavier University and a B.A. in Business from Baylor University.
Interview by PopCap Games’ Ethan Clark, who focuses on PopCap’s alternative platforms including Xbox 360 Live Arcade . Before joining PopCap, Ethan was the project manager for Oberon Media’s externally published titles for Xbox Live Arcade and other platforms. Ethan can be reached at ewclark@gmail.com.
