Origin, Activate, and now Infinity from Disney (NYSE: DIS) are trying to jump into the lucrative social gaming space. These are platforms to distribute games, interact through social media, track rankings, etc. It is like GameCenter mixed with the App Store on the iPhone, except limited to a specific publisher. Disney Infinity is what Activision did with Skylanders. That model is very interesting and warrant attention for incorporating the old with the new. I am not a fan of mobile or social gaming, but Origin and Activate are likely to be the future of social and mobile gaming.
Pricier Games From Great Publishers
Indie games are fantastic, and Valve’s Steam Platform does a great job of giving these smaller publisher’s access. The same holds true for the mobile app stores. I am all for access, but Steam implements some level of quality control. Mobile app stores do not.
Electronic Arts (Nasdaq: EA) has its online platform. It includes a complete mobile platform that you can witness through Springfield: Tapped Out, which is just designed to manage users across different games. Getting into the games via gameplay and social interaction might lead to conversions for in-game purchases. You can see this in Springfield: Tapped Out. It is hard to quantify the need for more in-game donuts, but it is there and only through strict dieting have I been able to control the habit.
Skylanders = Darkspore
There is also a section for independent developers to submit the game for sale through Origin. Incidentally, Metro: Last Light is published on Origin after it was sold from THQ to another video game label, which is not a subsidiary of EA. There is also a standalone software that can connect a user to Origin. Activision-Blizzard (Nasdaq: ATVI) is launching its own platform with two Skylanders titles, but no additional details are yet available. For now ATVI just has an online store, not really a platform with integration across games and users.
Just like the future of gaming revenues was driven by DLC material for massive titles, these platforms both mobile and traditional are the key to the strategies for these companies into the future. Being on Origin exposes you to other games that users you are connected to are working. I scoffed at the idea, until I found a new game that way and dropped some money onto it. They got me and I do not even enjoy social gaming, for that I will never forgive them.
The mobile gaming space is moving out of the wild west period where everyone can grab a homestead and eke out a living. Now it is the time for land consolidation with bigger more productive properties. Taking a look at forecasts from mid-last year, traditional gaming was $70B. That excludes mobile gaming. The combined numbers are $78.5B in 2012. Mobile gaming on top of traditional gaming will be limited. Mobile gaming is likely to eat into traditional game a little, but not entirely or fatally. The whole pie will grow organically, but with a broader reach because even non-gamers buy the occasional smartphone game.
Traditional gaming will still be the lions share, but mobile game has higher margins. A complementary approach is probably what companies like Activision and EA will go for. They want to capture as much of the excess revenues above traditional gaming from casual consumers, while driving sales in the far larger traditional gaming business. They do this by having unique mobile games, as well as having games that are companions to traditional titles. For example, Mass Effect 3 had a mobile game to complement the traditional game.
Traditional gaming is not going away, but it will be accompanying mobile gaming. Tapped Out is light on gameplay, but appeals to fans of the massively popular Simpsons, netted EA $23M in 3 months. Updates keep rolling in with the recent Valentine’s update adding a bunch of new content. Origin has been around for a while, but EA is only just starting to really leverage it. Mobile and handheld revenue was $100M for the same 3 months, so that one game accounted for a fourth of revenues.
Activision is coming out with a new platform with the massively successful Skylanders series. It will benefit substantially over time from a conscientious approach to mobile gaming. Mobile gaming is successful over long periods of time. With updates Tapped Out could be generating revenue for 3-5 years.
Skylanders and Disney Infinity is Digital and Physical
Taking a page out of ATVI’s Skylander’s playbook Disney is planning on a video game that involves buying real plastic figurines to obtain in game characters. I am not sure on the specifics since I will not be playing the game. However, I know this has been done before in various forms. There were some handheld games that involves power up cards that had a bar code on it that I seem to remember from childhood, but none were very good or lasted long. Apparently, Skylanders is a good game.
This strategy is an interesting one because it has the chance of capturing some revenue from video games as well as retail toys. As a child, I preferred the SNES over plastic figurines, so I am surprised at the success. A two-pronged approach could really bring in the money, but Disney is a diverse entertainment company so you would need to look at all the other aspects of the business to come to a real decision.
Skylanders as a franchise has crossed $500M in retail sales, which is pretty fantastic considering that retail has seen a marked decline when it comes to video games. Apparently the secret to success is to target the children. Skylander’s success is a guide to the success Disney could see. That kind of revenue is nothing to sneeze at even if it takes a while to get there.
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