Above: The most active acquirers of mobile apps
Image Credit: Digi-Capital
Mahoney: In M&A, do you mean, or in the industry in general?
GamesBeat: There are these combinations that are likely to happen. Stats show that Asian game companies were the biggest buyers of game companies for the last two years.
Mahoney: The thing that people forget about M&A in our business is that, more than anything else, it’s a cultural exercise. It’s not a finance exercise. There’s a big area of finance, but what you need to think about first and foremost is compatibility of cultures. That doesn’t necessarily mean Asia versus U.S. culture, east versus west culture. It’s what your cultural beliefs are about games. You can have a game company in Palo Alto and a game company in Los Angeles that are practically next door in terms of geography, but they have vastly different cultures. That happens just within the San Francisco Bay Area.
The real question in the games industry is, what do the people who are responsible for the company believe about their industry? What do they want to do? What we get on the lookout for is people who have a lot of passion about making great games. I sound like a broken record here, but sadly it’s not said enough in our industry.
Making great games, delivering those great games in a reasonable time frame — you get a lot of people who want to make great games, but they aren’t able to finish it and deliver it – and caring deeply about building something you’re going to be proud of. There’s not a lot of them, but those companies are all over the world.
What gets tricky in big M&As, you end up dealing with big prices, but then you also deal with folks that are—A lot of those big companies have cultures that are effectively left over from a long time ago. It depends on how they pursue the industry, how they think about it, how they think about the future of their company.
GamesBeat: The whole idea of free-to-play and how well it plays here at E3 is interesting. For one game, the publisher said it’s going to be affordable, but nobody could commit themselves to saying it’s a free-to-play game. Then Sony said, “We have 25 free-to-play games, and you’ll see them all in one minute!” It doesn’t seem like free-to-play and the console game business are mixing much.
Mahoney: It’s interesting. You don’t get those kinds of conversations in the east, where there’s a lot more gamers. They’re not confused about what free-to-play is at all. They’ve been doing it for more than a decade – China, Korea, southeast Asia, our big markets. We were talking before about those five bad years. One of the things that happened in those years is, quite literally, some of the companies on the Facebook side said, “I’ve been to Korea once. I know what free-to-play is. It’s that thing where you trick people into paying for stuff, but you call it free.”
Again, they came at it from a perspective of, “How do I make a whole ton of money in a short period of time?” Not, “How do I deliver a great game experience?” As a result, they found out that consumers aren’t stupid. I wish they didn’t need to be taught that lesson, but they did. Consumers were unhappy to find out that they’d been effectively bait-and-switched.
That’s not free-to-play as we look at it. We’ve made mistakes like that in the past, but that’s not the way we look at it now. We’re going to give you a really great experience, and it’s free. If you want to improve that experience in some way, make it even better, then you can optionally buy stuff. That’s why we’re completely happy having 90 percent of our active user base not spend any money in our games at all. Those that do end up spending, on average—I think it was about $30 a month last quarter, per paying user. The point is, the other 90 percent are really important to us. We like having them there. We want more of those people.
Above: Peter Molyneux of 22cans
Image Credit: Dean Takahashi
GamesBeat: Peter Molyneux, the maker of Godus, Fable, and Populous, was making this point. He was very critical of free-to-play, but what he was saying was that he’d like to do free-to-play in the way that people think about their hobbies. When they buy something in pursuit of their hobby, they love to spend that money. They’ll spend as much as they want on whatever hobby excites them, and if you can bring that to free-to-play gaming, it won’t be a bad word anymore. It sounds like you’d agree with that.
Mahoney: I think Peter’s got it nailed. As a matter of fact, if you go to the top 10 in Korea, which is where we were founded, and look at the games that have been in the top 10 for the last year or two or three, like our games, he’s basically describing those games. I’ve played several of our games without spending anything for years on end, like Maple Story. I really enjoy those games. Part of the game, for some people, is not buying anything and still doing really well at it. That’s part of the challenge for them.
Free-to-play, by the way, is much easier to do in a multi-user environment. Synchronous multiplayer games are much harder to make than single-player games. But executing on a free-to-play model makes a lot more sense in a multiplayer environment.
In game after game that calls itself free-to-play in the west, the difficulty curve goes way up – almost exponential – and it becomes almost impossible to play the game after a certain point without buying items. I don’t consider that our model. We made those mistakes before. Every free-to-play company that’s experimenting and trying new things will continue to make mistakes like that, but it’s a tiny minority of what a good free-to-play company will do. Tuning and learning how to do that while still paying all your developers is where the art comes in.
We just finished our Nexon developer’s conference in Korea. We have a lot of discussions about that within Korea. But if you come to Korea and look at what’s very popular there, it’s something very similar to what Peter’s talking about.
Founded in Korea in 1994, Nexon is the worldwide leader in free-to-play games. Nexon pioneered the free-to-play business model with the concept of microtransactions, revolutionizing the online video games industry by offering users co... read more »
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