Building the Electronic Arts of Casual Gaming: PlayFirst CEO John Welch (Part 6)

SM. How big is the market? How do you calculate TAM (Total Available Market)?

JW: The casual games market is expected to hit $1.5 billion next year. More than 200 million people play casual games via the Internet today, with about 60 million downloads each month (Computerworld). Analyst firm DFC Intelligence predicts that casual games will become a $13 billion industry by 2012. This is amazing validation that casual games are truly the future of gaming because just as of 2005, the entire U.S. videogame software market was just $7.1 billion (ESA annual report).

SM: What is your business model?

JW: We have two business models now: The $20 try-before-you-buy download model and ad-supported free play. However, we will expand the way casual games are monetized later this year.

SM: What does it cost you to produce one title? How many titles do you carry? What is the royalty structure?

JW: It costs us about 250k per game that we develop in-house. We have 6 such games developed internally. We also have 18 others that we have paid to develop, but they are developed by contractors and game development houses (studios of sorts). Our deal with them includes exclusive distribution, and we pay them royalty between 5-25%.

Then, we have hundreds of games that we “sell” on our site that are non-exclusive titles. In those cases, we keep 60-75% of the retail price, and pay out 25-40% to the producers. This, of course, is gross. The Net is very different, as we have to foot the entire marketing and operational charges.

Also, we sell our games through Yahoo and other sites, in which case, they keep 60-75% of the proceeds, we get 25-40%.

We have also announced a deal with Hudson Entertainment whereby they will publish our games on gaming consoles like PSP and Nintendo. In general, we make games for the PC, downloadable from the Internet, and license them out to others who port them to other platforms such as Mobile, as well as shrink-wrapped retail channels.

SM: What are your top target segments?

JW: Traditionally the casual games market has been known as the domain of the 35+ female. This segment is still strong, but it is not the only audience attracted to playing casual games – just the one with easy access to credit cards. Game playing is an ancient form of entertainment that is enjoyed by everyone. When we put games on computers they became more and more just for kids, especially boys. Teens make up over half of our traffic on PlayFirst.com, but a small minority of our purchasers. This all adds up to an opportunity to me.

(to be continued)

[Part 1]
[Part 2]
[Part 3]
[Part 4]
[Part 5]

This segment is part 6 in the series : Building the Electronic Arts of Casual Gaming: PlayFirst CEO John Welch
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