Sean Kauppinen• 16+ years experience in the games industry• Sony Online, Ubisoft, 3dfx, bleem!, Frogster, PlayFast• CEO or advisory board member to dozens of start-ups• Launched more than 500 titles to date

• Strategy• Business development• Corporate communications• Product Launches• Funding• Marketing

• Online games expertise (more than 20 MMO titles + virtual worlds and social network games)

• Global view due to frequent international travel and contacts (Europe, Asia, North America – now South America)

• Serves on advisory boards for GDC Europe, SXSW Screenburn and is The Special Advisor to The Academy of Interactive Arts & Sciences

Opportunities in the Games Industry

As of 15 November, 2011

Social Games

• The challenge is getting users• No Zynga virality anymore• Will cost $1-$1.50 Cost Per User• Monetize 2-2.5%• Facebook Ads – (bid low for liquidity and high

for quality) – they deliver at any price!

Browser Games

• Flash is the dominant format• Unity will be the dominant format – mobile

and cross-platform – (Flash for mobile is dead – now Flash is native app for mobile)

• Monetization is getting harder, but less competition than true social

• HTML5 is B.S. (standard hasn’t been finalized, no native rendering capability)

MMOs

• Free-to-play of “Freemium” is now the prevailing business model

• Expensive to build, but you can make money• User base is growing as more people are

exposed to this model

MMOs• The market for online games is growing fast with ABI

Research predicting that The overall online game market will grow to just over $29 billion by 2015 (14.8 percent CAGR).

• IHS Screen Digest released a report outlining the MMO sector in North America and Europe:

• Microtransaction revenue in North America and Europe rose to $1.13 billion in 2010, an increase of 24.2 percent.

• Microtransaction revenue is predicted to reach $1.8 billion in 2015.

• Combined MMOG/MOG revenue in North America and Europe is predicted to reach $3.13 billion in 2015

MMOs• According to Newzoo, there are More than 86.5 Million MMO

Gamers in the USA and Europe (excluding Scandinavia and Eastern Europe)– France – 9 Million– Germany – 13 Million– Spain – 6 Million– UK – 11 Million– USA – 47.5 Million

Platforms

Mobile Devices

• iPhone – Free-to-play (freemium) is now the prevailing model

• Going Free is no longer beneficial as it doesn’t increase sales

• The Android market is severely fractured and full of “profiteers”

• Angry Birds gamed the system, it’s no longer possible

Smartphone Growth• China captured the No. 1 position in 2010• Brazil will have a CAGR of 43% over the next five years• India will have a CAGR of 39% over the next five years• Turkey will have a CAGR of 37% over the next five years• Nigeria will have a CAGR of 34% over the next five years• Latin America will be the fastest growing region at a

compound annual growth rate of 48%• Africa and the Middle East will have a 39% CAGR• Pyramid also forecasts sales of 1.8 billion smartphones over

the next five years

Freemium

• Freemium games on iOS and Android now account for over 65% of all revenue generated among the Top 100 grossing apps in the App Store

• 25 – 34 year olds account for 49% of total dollars spent

• 35 – 54 year olds account for 28% of total dollars spent

• The average consumer spending money in these games is 32 years old

Thanks Flurry!

Smart TVs

• Publishers are currently looking at their own virtual consoles

• Android and the Chrome OS are making headway in this market

• Developing on Unity could be a smart way to get on these systems

• This is the way the industry is approaching emerging markets in Asia, Latin America and China – markets where consoles are scarce and there’s massive piracy

International Markets

• Russia• Brazil• Latin America• USA• Korea• China• Asia Pacific

DFC Estimates Global Videogame Market to Reach $81 billion in 2016

• The market is expected to grow from $66 billion in 2010 to $81 billion in 2016

• In 2013, online delivery of games and online business models will surpass sales of physical retail software

• The traditional worldwide interactive entertainment market reached a high of $58 billion in 2008

• Over the next few years, there is expected to be a steady decline at retail, reaching a low of $43 billion in 2016

• Total worldwide sales of online games are expected to increase from $19.3 billion in 2010 to $37.9 billion by 2016

Russia – Mail.ru• 40+ MMO Games, with 35 million players• 70+ Social Network Games, with 45 million

players• Legend: Legacy of the Dragons, developed in-

house, is a bestselling online game in Russia and Europe.

• AllodsOnline is the most ambitious Russian game development ever, with $15m budget.

• Perfect World is the most popular client-based online game in Russia.

Legend: Legacy of the Dragons• The internally developed “Legend: Legacy of the

Dragons” is an award winning browser-based MMORPG with a fully animated asynchronous dynamic combat system, castle sieges and global PvP with up to 1,000 simultaneous players.

• Free-to-Play business model• More than 8 million players globally, 5 million in

Europe• ARPPU more than 120 €• 6+ month customer lifetime

Brazil• 190 Million Brazilians• 189 Million Mobile phones• 17.5 Million – 3G Network mobile phones• 75 Million Internet users • 60 Million Computers • Brazil makes up 65% of South American Economy • 98,000 Internet Cafes• $165 million virtual goods market in 2010 –

virtual good sales are predicted to double to $320 million in 2014

Latin America• Mexico – $42.5 Million in 2010• Guatemala – $2.3 Million in 2010• Costa Rica – $1.2 Million in 2010• Panama – $1.7 Million in 2010• Dominican Republic – $3.1 Million in 2010• Venezuela – $11.9 Million in 2010• Colombia $44 Million in 2010• Argentina – $19.1 Million in 2010• Ecuador – $4.5 Million in 2010• Peru – $15.4 Million in 2010• Bolivia – $2.3 Million in 2010• Paraguay – $0.8 Million in 2010• Chile – $13.3 Million in 2010• Uruguay – $3.4 Million in 2010

Social Gaming in Japan was $1.43 Billion in 2010

• Social gaming in Japan was $326 million in 2009

• 37 percent of all social game users have spent money on a social game

• 20 percent are still spending money• 30 percent of social game players own a

smartphone

U.S. Digital Distribution Market for Digital Content

• 51% of Xbox 360 and PlayStation 3 console owners in the US downloaded digital content in 2011

• 40% downloaded digital content in 2010• 39% downloaded digital content in 2009• DLC generated more than $875 million in sales in 2011• EEDAR estimated DLC to rise to $1 billion in 2012• 20 million consumers in North America bought DLC in the

past 12 months• 14 million consumers bought DLC in 2010• 9 million consumers bought in 2009• EA also release numbers stating that their ORIGIN digital

distribution platform now has 5 million users.

Digital Distribution

Korea

• Approximately 61% of Korean smartphone users play games on their phone

• In a market dominated by Samsung, LG and other local handset manufacturers, Apple has been able to carve market share with 2 million and counting units of the iPhone being sold in Korea

China

• There are 235 million registered social network game players in China

• There are 150 million active social network game players in China

• 64.8 percent of registered social network game players in China are active players

• The number of registered players grew 33.7 percent over the past year

China• China’s Online Games Industry has a 21.4%

growth-rate in 2011• Niko Partners estimates market size in China as

$5.8 billion for 2011.• The market was $4.8 billion last year.• 2009 was the first year to see games on social

networking sites in China, generating $80 million in revenues by Niko’s estimate.

• By 2010, the amount of revenue generated from these social networking games had reached $500 million.

Asia Pacific

• Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam are fast growing

• By 2014, there will be more than 90 million gamers throughout these six Asian emerging markets

• Southeast Asia Online Game Market is $405.7 million in 2010

• Will grow to $833.7 million by 2014

Thank You

sean@ide-agency.comwww.iesherpa.com