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

11/24/08Follow @wroush

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where you can access the demographic you want more efficiently, and in that context there is a lot of competition,” adds Meyer of WorldWinner.

But some forms of advertising are still pulling in good money. “Here at Lycos we do have some experience surviving economic downturns, and one of the things that we did pretty early on was to create a family of strong brands with diversified revenue,” says Gamesville’s Cummings. “That’s basically how we survived when the bubble burst last time. And we spent the first half of this year diversifying our own revenue sources beyond display ads.” In particular, Gamesville has started offering video ads, for which advertisers have been paying “pretty spectacular” rates, according to Cummings.

Meyer points out that opportunities for cross-media exposure can also attract advertisers. WorldWinner happens to be part of Liberty Media, which also owns the Game Show Network. “We are in a little bit of a unique position, because we can pull media packages together,” says Meyer. “You can buy ad inventory on TV and have that link to customized elements that show up online. That gives us a leg up when we walk into an ad agency or an advertiser.”

5. Gaming Companies Growing in Some Areas, Retrenching in Others

While many tech startups are being forced to lay off staff to conserve cash, several casual game companies are still hiring. Big Fish, which has 340 employees, will likely grow by another 60 positions in 2009, Lewis told TechFlash last week.

WorldWinner, too, is looking for more developers. “We are one of the few players, at least here in Boston, that is hiring,” says Meyer. “A lot of of the candidates that I have talked to recently say ‘Wow, you guys are one of the few companies that is this upbeat and charged up.’”

But that doesn’t mean gaming companies are spending money as loosely as they used to. At the same time as it’s adding staff, for instance, WorldWinner has scaled back efforts to rewrite its Windows-based games for the cross-browser Flash multimedia format, so that they’ll run on Mac computers and browsers other than Internet Explorer. “We pulled in some of the R&D work to refocus resources on those things that have more immediate return on investment,” says Meyer. “On the GSN site we have doubled the portfolio of Flash games, but at WorldWinner we have not moved forward significantly there.”

Lewis, a veteran of Goldman Sachs, says that in a recession, the most important role for the CEOs of gaming outfits—or of any other type of company—is to ensure that their organizations are ready to adapt to changing conditions, and that they are meeting their customers’ needs.

“We’ve always questioned whether the Big Fish Games business is a defensive one or a countercyclical one, and thus far the data demonstrates that it is countercyclical,” Lewis says. “But our focus ever since we founded the company has been on improving our understanding of our developer community and our game customers, and having that understanding reflected in the things we produce. That’s something we can control, irrespective of the economic cycle.”

[Update 11/25/08: CNET's Daniel Terdiman published a piece today entitled "Is the video game industry recession-proof?" It focuses on console and PC games rather than casual games, but comes to similar conclusions.]

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

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