Casual Games May Be Recession-Proof; Companies Report Record Revenues, and Some Surprising Trends

11/24/08Follow @wroush

“Countercyclical” is a word you’re probably going to hear a lot in the coming months—from entrepreneurs professing that their businesses are not only recession-proof, but will actually fare better during lean times. It’s a word that the leaders of the casual games industry, which has a strong presence in both Seattle and Boston, have been using a lot lately. But in their case, so far, it seems to be true. Seattle-based Big Fish Games and Newton, MA-based WorldWinner both tell Xconomy that in October, while stocks were swooning and unemployment was swelling, they earned record revenues.

Casual games is the gaming industry’s term for break-time online games or small downloadable games like “Bejeweled” or “Diner Dash,” as opposed to console-based video games or all-absorbing multiplayer games like World of Warcraft. I’ve written about the Boston casual gaming cluster here, and Greg has covered Seattle-area gaming companies extensively.

Not all of the regions’ gaming companies are likely to be immune to the downturn. From talking with executives at gaming outfits in Seattle and Boston, it’s clear that there’s pessimism in the industry about Web advertising as a source of revenue, and about the prospects for survival for companies that get the bulk of their revenue from display ads. “For ad-based casual gaming companies, pretty much everyone agrees that it’s going to be tough for a while,” says Christopher Cummings, senior product manager for Gamesville, a gaming site owned by Waltham, MA-based Lycos. “Some startups probably won’t survive, and for others it might be lean times.”

But casual gaming companies with more ways to make money, such as charging customers for downloads or tournament play or licensing their games to other companies, may fare better—especially as computer owners turn to casual games as a less expensive diversion than going to a movie or eating out.

“One possibility in a downturn would be that people would have an aversion to games, because it’s discretionary spending,” says Jeremy Lewis, CEO of Big Fish Games, which gets most of its revenues from purchases of the downloadable games designed by its community of 650 freelance contributors. “But a second possibility is that people see it as an attractive alternative to other more expensive forms of entertainment. And a third would be that people who are out of work have more time to play games. We are certainly seeing the second effect, and maybe also the third.” Lewis says Big Fish’s October revenue was up a whopping 23 percent over September levels.

Gaming executives are also encouraged by surveys indicating that Americans plan to retrench during the recession by spending more time at home and less on activities like travel and theater-going. “Consumers are looking for entertainment options that they can enjoy at home with their families,” says Christian Meyer, chief marketing officer at WorldWinner. And that means “home entertainment is well positioned to withstand the downturn.”

Here’s a closer look at five major trends the gaming executives I spoke with are observing or predicting as the industry confronts changing economic conditions.

1. Game Players Spending More Time Online

Meyer says WorldWinner, where players pay a small fee to compete against other players in a variety of skill-based games, had more visitors in October than in any other month in its nine-year history, and is on track to set another record in November. But even at sites such as Gamesville, where traffic hasn’t increased as much, the people who do come are staying longer.

“The user base for Gamesville has been mainly flat, with a little bit of growth over the course of this year,” says Cummings. “But the amount of time that people are spending on the site has increased dramatically.” Not so long ago, the typical Gamesville user played for about … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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