The confidential internal memo is now public: Video game industry juggernaut Electronic Arts is laying off as many as 1,000 employees. As an EA alumnus and friend of some of the affected employees, this truly saddens me. Even in the fevered pitch of competition, no one likes to see good teams and good people affected by market change.

But you can’t stop evolution. Console game companies are standing on the same ground as others that were disrupted before them. Borders was shuttered by Amazon, Blockbuster buried by Netflix, and Encyclopedia Britannica withered by Wikipedia. When consumers get something faster and cheaper via the Internet, disruption occurs, and the companies that don’t evolve quickly inevitably decline. The cycle of change is rapid and relentless. This is industry Darwinism at work.

Free-to-play game companies have been riding this wave of disruption. It’s a wave analysts believe will generate more than $20 billion in 2015, or almost one-third of worldwide gaming revenue. There is no question that free-to-play games are here to stay.

When I started working in the free-to-play gaming industry in 2007, many of my video game colleagues wondered if the business model had legs. Why would core gamers ever pay for content via micro transactions? How could a game company possibly afford to give their games away for free? These questions may sound out-of-date today, but they were certainly reasonable back when traditional PC video games accounted for $50 billion, or more than 98 percent of the world’s annual gaming revenue.

Today, games on mobile devices make up about half that revenue alone. No one anticipated this even six years ago. When Steve Jobs unveiled the iPhone in 2007, he proudly showed off what you could do with it: Listen to music. Check voice mail. Search the Web. Find directions. Get a stock quote. But there was one thing Jobs did not tout: Play games. Games literally went unmentioned when Jobs introduced the first iPhone. That sort of omission would be unthinkable today.

While no one, not even Steve Jobs, might have called it right six years ago, gaming has inexorably become central to the mobile phone industry. For proof, take a look at the number of games versus other apps on the top grossing charts, where 83 of the top 100 grossing iOS apps are games.

My boss, Kabam co-founder and CEO Kevin Chou, says games represent the “Triple Crown” for mobile devices, with the unique combination of reach, engagement and monetization. As Kevin wrote in Wired, reach is the percentage of people who own a mobile device that engage in an activity such as playing games, checking email, or shopping, and gaming’s reach is 60 percent of all tablet owners. Engagement is the percent of time spent on the device, and 67 percent of all time spent on tablets is spent playing games. Monetization involves capturing the share of wallet, and gaming wins hands-down. More than 80 percent of all revenue generated last year by mobile applications — a $10 billion software industry — was from games, according to Flurry Analytics.

And it’s only going up. The universe of mobile users grows exponentially while the console universe is flat. For example, according to the investment banking firm Jefferies, the installed base for consoles was 240 million in 2012. Compare that with the installed base of 450 million for iPhones. That doesn’t include Android or tablets.

Mobile alone is reason enough for the console industry to go into rapid decline. But there’s more.

New generations of video game consoles come out only every four to six years. Compare that with the timeline for tablets. New tablets and smartphones come out every year with ever-increasing computing power, functionality, and fidelity. It’s only a matter of time before the majority of former console developers focus on free-to-play, leaving the console ecosystem in further disarray.

Consumers, of course, have the final say. They’re voting with not only their pocketbooks but their bags as well. Free-to-play has taught consumers they don’t need to shell out $60 for a game before they even try it.

Free-to-play has changed how we pay for our entertainment. Mobile devices have changed how we play our games. Together, they’re an unbeatable foe for the venerable console games industry.

As hard as it is to watch industry disruption impact so many good people at EA, there is good that can come from this. EA rose to the top of the gaming industry by hiring and training many of the industry’s most talented contributors. Some of these good folks will soon be in the job market for reasons very much outside their control. Now they have the opportunity to embrace change faster than they would have had at EA. I hope many will consider a future in free-to-play gaming.

Andrew Sheppard is president of Kabam Studios, a leading player in the western world for free-to-play core games.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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SANTA CLARA, Calif. – Nvidia‘s Project Shield remains on schedule for release in the second quarter, the company’s chief executive said.

Jen-Hsun Huang, CEO of the world’s biggest standalone graphics chip maker, said in a speech today to investors that Nvidia is targeting Project Shield — a game controller with a 5-inch screen attached — at the most enthusiastic gamers on the Android platform.

“Shield becomes the ultimate Android gaming device,” he said.

He also noted that Nvidia has invested around $10 million in the project. That’s similar to the $8 million-plus raised via Kickstarter for the Ouya microconsole, but it’s also a lot less than major home console makers spend on a launch. On the other hand, Nvidia spends $880 million a year on the core R&D behind its chips and $300 million more on Tegra itself. All of that money makes it easier to launch Project Shield.

He did not share many other details. He said that Project Shield will “hopefully be on shelves by the end of Q2. It is going into production soon.”

Project Shield lets players enjoy free-to-play Android games on a big screen TV by connecting the Shield device to the TV via a HDMI cable. The aim is to bring the disruptive power of an app store full of free-to-play games to the television in direct competition with $60 games.

With Shield, you can play PC games — like those from the digital distribution service Steam — on the TV or its small portable display. The PC does the hard work of processing the game, using a GeForce graphics processing unit (GPU). It then displays the image on the TV or monitor. Then you can control the game with the Project Shield controller. The PC can also use Wi-Fi to stream the video of the game to the Project Shield screen.

I played the PC version of Borderlands 2 on the Shield today, and it worked great. The graphics are top-notch, and they look good on both the TV screen and the small screen. That capability to play PC games is an edge that Shield has over the likes of Moga, Green Throttle Games, and other devices that can only play Android games. Project Shield is also a good match in this respect for the PC-focused Razor Edge, which Razor will sell for $1,200 or more. You can bet that Nvidia isn’t going to be charging that much for Project Shield. (It has not announced a price).

Nvidia hasn’t announced any Project Shield exclusive games yet — nor has it announced any games at all. On the other hand, it doesn’t have to. It can run your existing collection of PC and Android games.

Project Shield will use Nvidia’s latest Tegra 4 processor, which is going to have PC-like graphics performance. Shield can also tap games that are available on Android in Nvidia’s Tegra Zone game portal. It’s cool to get Android games in the living room. But Huang said that “Android is not just a mobile operating system. It is a computing system.”

Tegra Zone’s user base has grown by 80 percent over the year, said Phil Carmack, head of Nvidia’s Tegra business. Carmack noted that 76 percent of revenue in the Google Play app store is now coming from games.

Here’s a video I shot today with Andrew Coonrad, tech marketing analyst at Nvidia, about Project Shield. Hopefully, Nvidia will have more details available soon.

Project Shield demo from VentureBeat on Vimeo.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Japan’s Square Enix, a major video game company that just published a reboot of Tomb Raider, announced a big restructuring today. GamesBeat has learned that it has sold off four free-to-play games to Sleepy Giant Entertainment, a startup with a considerable amount of funding.

Sleepy Giant raised $100 million from TPG Capital, the private equity firm run by financiers David Bonderman and James Coulter, and Evolution Media Capital. It’s not clear which titles Square Enix has sold, but it evidently has lost its appetite for launching the free-to-play titles on its own. Square Enix is a major publisher of hardcore games such as the Final Fantasy series.

The companies have not announced any deal yet. We’ve queried Sleepy Giant for a comment. A spokesman for Square Enix said, “We don’t comment on any details for external development deals.” But multiple sources familiar with the matter confirmed that Sleepy Giant has picked up four unannounced Square Enix games.

Meanwhile, Square Enix formally revealed on Monday evening (U.S. time) that its digital entertainment business will fall substantially below revenue expectations due to slow sales of major console games in North America and Europe. The company said it is “also experiencing sluggish performance of its arcade machine business.”

Square Enix expects a loss from restructuring in the fiscal year ending March 31. The company said it plans to implement “major reforms and restructuring in its development policy, organizational structure, some business models, and others.” It expects a loss of 10 billion yen, or $105 million, from its restructuring charges. The extraordinary downturn includes a loss on disposal of content of $42 million and on evaluation of content of $42 million, and other losses of $21 million.

Square Enix said that it still is operating some free-to-play titles. The company has dozens of free to play games on the PC web browser lie Gameglobe, Heroes & Generals, and core online initiative and titles that are specific to Japan and Asia. On mobile platforms the company operates games such as Drakerider, Final Fantasy Dimensions, Guardian Cross, Symphonica, and more.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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With more than 100 million downloads to date, Pocket Gems has made it into the top ranks of mobile game companies. The San Francisco-based mobile game publisher is only a few years old, but it has built itself up to more than 150 employees on the backs of free-to-play casual games such as Tap Farm and Paradise Cove (pictured above).

The “mobile first” company has done so well that it believes it has staying power and the ability to produce multiple hits, said Ben Liu, chief executive, in an exclusive interview with GamesBeat. Back in early 2011, Pocket Gems had only 10 people. The numbers suggest that Pocket Gems is building a real, sustainable business on mobile platforms even though it isn’t the maker of gigantic blockbusters such as Angry Birds.

“These are meaningful milestones for us,” he said. “December was the best month that we ever had in terms of revenue growth. We have done it all profitably, and we have really strong business metrics such as strong user engagement.”

A number of its older games such as Pet Hotel are still doing well on the app store, and so are the newly released titles, said Liu, who was recently promoted from chief operating officer to chief executive officer. Tap Zoo, which launched in the fall of 2010, has been running for 2.5 years and it is still generating revenues. Overall, Pocket Gems has more than 20 live games, and, on average, most the games grow their daily active users for the first year or so. Because the company can cross-promote titles within its own network, it doesn’t have to do as much paid advertising. The good thing, Liu said, is that mobile advertising rates have flattened out after rising a lot last year.

What’s the secret to launching multiple hits? The games all feature a lot of interactivity and animation for mobile titles. In that sense, Pocket Gems tries to push the visual experience for mobile players, Liu said.

According to App Annie, Pocket Gems was the No. 10 publisher of games on iOS (which runs on Apple iPad, iPod touch, iPad mini, and iPhone). And of the 150 employees, 33 are from 10 different countries, working with H-1B visas. The company is starting to develop capabilities for localizing mobile titles in different territories, but so far everybody is based in the U.S. The vast majority of its business is on iOS, but Pocket Gems is expanding into Android.

As a mobile first developer, Pocket Gems is focused on creating unique games that make use of the features of tablets and smartphones.

“We want to create new forms of entertainment,” Liu said. “As far as unique content goes, we don’t have specific announcements there but you will see interesting things from us in the next couple of months.”

Pocket Gems is also looking at expanding in international markets.

“International expansion is an important focus for us. We are starting to explore different paths and think about what makes sense for us,” Liu said.

When asked about Kakao and Line: he said, “Like everyone else, we’ve seen Kakao in South Korea and Line in Japan take their respective markets by storm.” (Update: That doesn’t mean that Pocket Gems is in talks with those entities).

As it does so, the company will remain focused on hiring the best talent, he said. It is also leveraging its own distribution strength. The company has published third-party titles such as Amazing Ants, which was developed by Twyngo and hit No. 1 on the iPad. Over time, Liu believes Android and Amazon will be good growth platforms for Pocket Gems in the future.

Pocket Gems was founded in 2009 by former Stanford University student Daniel Terry and fellow co-founder Harlan Crystal. Pocket Gems became a big player in free-to-play mobile gaming with Tap Zoo and Tap Pet Hotel, the No. 1 and No. 4 top-grossing iPhone apps of 2011. Terry was the initial CEO and he gave the title to Liu so he could focus on game creation.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Chris Carvalho is chief operating officer of San Francisco-based online game publisher Kabam.

I just spent a week at TED, the renowned conference focusing on technology, entertainment and design, where some of world’s most enlightened people question the unquestionable, empower “factivists,” and help make the seemingly impossible possible.

For more than 20 years TED has presented its members a whirlwind of ideas that have changed consumer behavior and even shaped global cultures. This year TED’s themes included Disrupt, Dream, and Create. I sat with and learned from such people as Elon Musk (SpaceX), Vint Cerf, Bono, and others who presented such thought-provoking topics as bringing wooly mammoths back to life, enabling consumer space travel, and communicating via reading people’s minds, all of which are apparent possibilities in the next 15 to 20 years. (If you think the Internet has privacy issues today, imagine when someone commercializes the capability to read another’s thoughts.)

I work for a video game company — arguably the poster child of industry disruption today – and I found so much of TED’s content to be dead-on relevant to our industry.

Traditional gaming, with its prepackaged discs and $60 upfront commitments to play a single game, is going the way of other packaged media like CDs, DVDs, and home-delivered newspapers. Not today. Not tomorrow. But the tide already has turned with a proven business model that has changed gamers’ playing behavior. It’s called “freemium.” Most consumers call it … awesome. Just like with LinkedIn or Dropbox, consumers try the service (games, in our case) and can continue for free as long as they want. If they want an enhanced experience, they pay for premium content. Free-to-play gaming equals disruption of the established $30 billion packaged games industry.

My company’s — and many others — goals don’t stop with enabling disruption. We are bringing all the genres of traditional gaming to a free-to-play mobile environment. Fans of strategy, role-playing games, racing, action, adventure, and more are experiencing an incredible entertainment revolution. I soaked up every bit of TED and imagined the possibilities for our industry. Some examples:

Think inside the box: Phil Hanson is an artist who had suffered nerve damage and had to completely rethink his art because his toolset (his hands) no longer had their former capacity. His doctor said he could not “fix” him and he should instead embrace his limitations. And he did, fueling incredible creativity – including designing art using Starbucks cups. By limiting his options, Hanson avoided the distraction of thinking through the endless tools he could use and his art became more singularly unique.

Application to games: Would game teams be better off if we limited such choices as tech stacks, business partners, or platforms and had them focus instead on making the most of known processes, partners and technology to create the most amazing and innovative games? Are we distracted by too much choice and too many options?

Five-senses design: Jinsop Lee introduced a design concept that measures value against a 10-point scale of sight, sound, touch, smell, and taste. The ultimate example is a product or an activity that scores highly across all five senses. For example, riding a motorcycle scores high on almost all but smell or taste. You can improve a product materially by applying this measure, even if you can only improve one of the five senses.

Application to games: Video games are visual and they have incredible sound. Could we make both better? Could we add “touch” to the game by enabling the smartphone or mobile device to vibrate when you hit a certain goal?

Overcoming the impossible: Jack Andraka was a 14-year-old boy whose uncle died of pancreatic cancer. Andraka’s uncle never stood a chance because there was no effective early detection test available to him. Detected late, pancreatic cancer takes 95 percent of its victims.   Using Google and Wikipedia, Andraka did his own research and contacted 200 professors in the field, seeking help in remembrance of his uncle. He was rejected 199 times. One professor finally said, “Let’s talk.” Together they built a lab and eventually created a very effective screen for pancreatic cancer (and eventually many other diseases) that costs almost nothing. It will save millions of lives.

Application to games: Every day we face roadblocks in what we do. Teams say some things are too hard. Or have to be delivered too fast. But we live in incredibly disruptive times. So I say to our industry, to the gamemakers: Keep dreaming, keep creating.

Think possible.

Image credit: Mammoth image via Shutterstock

Chris Carvalho is chief operating officer of Kabam, which he joined in 2009. Working with CEO Kevin Chou, he has helped grow Kabam to more than $180 million in revenue in 2012. Earlier, Carvalho spent a decade heading Lucasfilm’s business development efforts and driving the company’s digital media strategy and partnerships. Prior to Lucasfilm, Carvalho consulted with a range of companies, from startups to the Fortune 500 as a management consultant with Deloitte & Touche. He is a graduate of the University of California, Los Angeles’ Anderson School of Management and completed undergrad studies at University of California, Berkeley.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Crytek is bring its Warface first-person shooter online game to the U.S. soon. This is all about taking triple-A-quality shooting games and reinventing them as low-barrier, free-to-play titles that you can play with minimal hassle on a wide variety of hardware. It’s the kind of game that you can play at work while you’re goofing off, or, rather, on a lunch break.

The game has already been live in Russia for almost a year, and it has more than 7.5 million users who play it for free. In the U.S., Trion Worlds will publish the game for Germany-based Crytek while Tencent will take the game to consumers in China. Nexon will deploy it elsewhere in Asia. In the U.S., Crytek is staging a couple of closed betas, and then it will launch an open beta in the not-so-distant future, said Cevat Yerli, the chief executive of Crytek.

Warface, a modern combat game set in the near future, is a big bet for Crytek. Yerli has said that his company will make the transition from disk-based triple-A retail games like Crysis 3 to always-connected, free-to-play online games in the next five years. The quality isn’t as good as the single-player version of Crysis 3, which is Crytek’s flagship disk-based PC game.

But Warface is based on the CryEngine, which naturally provides great graphics and flexible development. Developing with speed is critical in free-to-pay gaming.

Yerli repeated his assertion that free-to-play will rule again in an interview with GamesBeat yesterday.

Executive producer Joshua Howard said at an event yesterday that concurrency rates in Russia continue to climb, with more than 145,000 users on a single server. The game is designed to run on laptops that are 2 or 3 years old as well as the latest high-end gaming PCs.

Yerli said that he began thinking about the foundation for games like Warface years ago when he visited South Korea. He watched people playing games in Internet cafes around the clock for hours at a time with their friends. He wanted to create a game that encourages such social behavior around the world.

We had a look at Warface at a preview event. Unfortunately, the venue suffered from considerable lag with its Internet connection, and the build crashed on us as well. So we didn’t have a fair test of exactly how well Warface will play. But we played it enough to get some general impressions.

The Warface tutorial

The game is supposed to be a lot more accessible than your typical first-person shooter. So it comes with a tutorial that gently introduces you to the gameplay.

The tutorial shows you how to handle a gun and move. It shows you the basics of playing as a rifleman, or all-around soldier, who can supply ammo to other players; a medic, who can heal others; a sniper, who can take out enemies from afar; and an engineer, who can equip bombs and other heavy ordnance. The classes are designed to be well-balanced. The sniper needs protection and can’t fight well at close range. The medic  is lightly armed. The soldier is vulnerable to snipers. You can go through the tutorial playing each of the roles or just move into a live game.

The game is social in a couple of ways. If your buddy gets knocked down, you can pick him up with a “raise” function. You can help your friends get to higher elevations through the “climb” function, where you pull a buddy up a wall and vice versa. You can slide and shoot as you maneuver through the world.

You do a one-time download of the game, and then you never have to wait a long time again. That means you won’t be hit with continuous downloads that stall the game and turn off the casual player. The game runs like a browser game, but the look is lot more sophisticated. You can play in “versus” mode or “cooperative” play.

“The game itself is familiar enough so that a beginner can jump in and play, but it has enough of its own style and authenticity to stand on its own,” Howard said.

You can play it in long sessions or during short breaks. I’d agree that it’s easy to get into and figure out what you need to do in the game.

The Gface social platform

You can easily register on Crytek’s Gface online gaming network user interface. Gface is a social platform that can connect people in a game like Warface or in other games that Crytek will deploy on the network. Players can sign up without entering a credit card. The game is independent of the monetization model. Gface makes it easy to install a game, and you don’t have to spend a dime to play it. One of the virtual currencies available in the game can only be earned through exploits on the battlefield.

The Gface online gaming network created by Crytek is aimed at making it easier for players to step into a multiplayer world. It has a library of free-to-play games, not a store, that simplifies the process of downloading and updating a game. If you come back to a game, the title boots as if you’re playing it in a browser.

As you return to Gface, you log in. Then you can join your friends in a social chat and then immediately jump into a game with all of them. You can buy a new kind of weapon and give it as a gift to a friend.

“That brings social to a game,” Yerli said. “It’s a new social platform built for high-quality online games. It’s about connecting with friends and meeting your friends. The gaming of the future means you are never alone.”

You can purchase virtual currency in Gface, but that will get you shiny weapons, not victory. You can’t buy your way to winning. But Howard had a good point. Once you get your friends on Gface, it’s easier to get them to try new things. It’s free, so people are more likely to experiment and give it a shot. After all, the price is right.

Warface gameplay

One of the very useful functions in the game is your ability to change the custom options on your gun in the middle of a firefight. You can switch scopes to a long-range sniping scope or attach a grenade launcher to take out enemies who are bunched together.

You can just hit “c” on the keyboard and customize your barrel, undercarriage, or scope. I played a bunch of rounds where the object was to take a bomb to a location and set it off. The opposing team tried to stop us.

Other players had no problems firing accurately. They took me out with a shot or two during first encounters on a regular basis. I wasn’t used to shooting with a mouse and keyboard. Eventually, I warmed up and started dishing back. I couldn’t figure out if the game movements were actually a little slow or if the lag in our venue was the problem. So I’ll reserve judgment on that. But the pace of the game definitely seemed a notch below the fastest shooters.

We played on a fairly conventional combat map, with multiple-story buildings, lots of walls, and all sorts of corners. At first, I had trouble drawing a bead on other players. The guns have a lot of kick, so they’re not so accurate when you’re spraying bullets. Over time, you can work your way up to better, more accurate guns.

The experience wasn’t nearly as good as playing Call of Duty: Black Ops II in multiplayer combat on the Xbox 360. On the other hand, it’s a free-to-play game. It might be just good enough for a lot of fans out there.

So far, Warface has a long way to go before it can claim to be the equivalent “console quality,” particularly at a time when the consoles are going through a refresh cycle. But Yerli is undaunted. He said that the company will continuously update Warface and, five years from now, it will be a very different game that may be able to fulfill the company’s dream.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Matt Hulett, the president of GameHouse, is going all in. His company has shifted its development firepower into the social casino game business. Today, it is launching GameHouse Casino on Facebook and debuting GameHouse Slots on the iPhone.

The Seattle division of RealNetworks has deployed half of its 200 employees to create a suite of social casino games. Hulett (pictured right) said in an interview with GamesBeat that he hopes to differentiate his free-to-play games with a high-class style reminiscent of the elegant Bellagio Hotel in Las Vegas. More releases are on the way.

“This is not an off-strip lobby,” Hulett said. “Our big bet is to build a high-class casino experience where you feel like you are at the big hotel. We feel we can bring a lot of innovation to these games.”

GameHouse is one of many mobile and social game companies seeking salvation in social casino games, where players can bet virtual chips in games like video poker but can’t cash out. The category drew huge players and investments last year, and it remains hot, as we witnessed the Casual Connect Europe conference in Hamburg, Germany.

Social casino games have raised considerable funding. And slot machine maker IGT bought Double Down Interactive for $500 million in early 2012. Double Down had just 70 employees at the time. Aristocrat bought Product Madness in November for an estimated $40 million. And earlier this month, Scientific Games bought WMS for $1.4 billion. Morgan Stanley Research estimates that annual revenues for social casino games will hit $2.5 billion by 2015.

Hulett is late to that party, but he believes the market is just getting started. The team has been building the games over the past 13 months.

“We think there is a lot of room in the market,” he said. “We wanted to nail the core game experience and create the right core behaviors. We want to make a good first impression.”

And GameHouse has more than a dozen games inside its Casino app on Facebook. The titles include slots, video poker, roulette, blackjack, and others. They’re tied together with graphics, animations, and social gameplay. The video poker game has six different machines and can play up to 25 hands at a time. You can make side bets, double-or-nothing jackpots, and high-low plays. In the slots game, there are already 17 machines, and GameHouse will add more.

“The joy of winning money with your friends around a table is there,” Hulett said.

The monetization of casino games is already 50 percent higher than other casual games. And retention rates on mobile are twice as good as they are on Facebook. Players are loyal, but only 2 percent or so pay for virtual chips.

On the right-hand side, a player can see all of the actions that friends are taking. The dynamic lobby (pictured at top) is a kind of home base that changes as players come back and discover new games or slot machines played recently by friends. The Party Play feature shows what friends are playing, and you can jump into a game with them. You can also send virtual gifts to friends and help them increase their winnings.

“The social element is what is more fun to players, and it explains why these games are becoming popular again,” Hulett said.

Players can compete to win more than friends do during a fixed time frame based on an allotment of free chips. If they want to play for a longer duration, they have to pay real money for more chips to extend their session. That’s how GameHouse monetizes the free-to-play game, Hulett said.

So far, GameHouse has no plans to go into real-money gambling, a market where rivals such as online gambling companies and Zynga are staking claims. Hulett doesn’t want to hitch his fate to the actions of lawmakers and regulators.

The move into social casino games is a pivot for GameHouse, which has launched more than 3,000 casual games over the past decade. That audience is shifting from the web to social games on Facebook and on mobile devices. GameHouse is following them, but it is doing so at a deliberate pace. The company is using a team in Victoria, British Colombia, which is becoming a hub for studios. GameHouse has more than 10 Facebook games and twice that number on iOS and Android. It also has 14 million unique monthly users on the web still.

The company tested its ideas with the launch of GameHouse Slots on Facebook, where it garnered more than a million fans. The title, which launched quietly, is one of the top casino and card games in the U.S. on iTunes.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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When you think of the best first-person shooter game developers in the world, Brazil doesn’t come to mind.

But Aquiris Game Studio wants to put the country on the map in the FPS universe, and Rumble Entertainment plans to make it happen. The company is announcing today that it will publish a shooter dubbed Ballistic that Aquiris has been developing for years. It will be free-to-play and digitally distributed for web browsers and Facebook. Ballistic is part of an ambitious effort to elevate the quality of digital-only releases so that they match traditionally boxed console and PC games.

Greg Richardson, chief executive of Redwood City, Calif.-based Rumble, said in an interview with GamesBeat that Ballistic will be the first title to be published under Rumble’s third-party publishing platform. Rumble will provide technology, tools, and know-how to web and mobile developers who want to reach digital audiences.

“We looked at more than 150 games as we did our evaluations,” Richardson said. “We want to work with the best indie developers who share our passion for great games. This sector of the market for premium games is very much in a boom.”

Ballistic is slated for release in the spring. As you can tell from the pictures, it has beautiful 3D graphics with sophisticated shadow and lighting effects. The game uses the Unity 3D engine from Unity Technologies. David Helgason, chief executive of Unity, provided the first contact between Aquiris and Rumble.

Richardson said that players will likely use a mouse and keyboard or a traditional controller. In contrast to other mobile titles, it is not a touchscreen game at the moment.

“Aquiris was looking for a publisher who shared our vision of delivering premium gaming experiences in the browser,” said Mauricio Longoni, chief executive of Aquiris in Porto Alegre, the fifth-largest city in Brazil. “Rumble understands the changing nature of publishing in the digital space, and as developers of top-tier web and mobile games themselves, they are uniquely positioned to extend their platform to and share knowledge with developers like Aquiris. Partnering with Rumble allows us to deliver a new benchmark for browser-based shooters.”

Rumble plans to provide the publishing services that will allow the game to scale up as its audience grows. It will offer social networking features, telemetry, analytics, customer support, and quality assurance testing.

Ballistic will not require gamers to download a large client before playing. It will give players a choice from an array of modern weapons and skills and put them to the test with frenetic action. Rumble and Aquiris have been working together for about eight months. Aquiris is planning to launch a closed beta test shortly.

Rumble is a new publisher focused on games for web browsers and Facebook. Its other announced titles include the upcoming tablet game Nightmare Guardians and another 3D adventure title dubbed KingsRoad. Nightmare Guardians is targeted for release in the first half of the year, and KingsRoad is nearing its open beta test.

Rumble has 50 employees and has raised almost $20 million to date from Google Ventures and Khosla Ventures. Aquiris has been working on multiplatform games for five years, with a focus on Unity 3D engine games.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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It’s already clear that free-to-play games are having a profound impact on the industry landscape. Their initial success is in large part driven by the frictionless reach being free enables. By removing the need to pay up front, a game can reach an audience that’s as much as 10 to 25 times larger. Anyone who owns a smart mobile device or a PC with an Internet connection is now a prospective player.

But to catapult the growth for free-to-play games to truly massive audiences, a subtle – and perhaps counter-intuitive – design philosophy is required: Your game’s free players are actually more valuable than its biggest spenders. It is free players who hold the key to creating sticky communities, driving virality through word of mouth, and maximizing the opportunity for long-term engagement and monetization of your game service. If you want to avoid the headwinds that companies such as Zynga have run into in recent months and instead ride the tail winds that are driving Riot Games into a multi-billion dollar enterprise, you must learn to love your free players.

To date, most free-to-play game developers have eschewed free players and instead focused (at times myopically) on a handful of big spenders, known in the industry as whales. Whale-driven games are designed to create monetization friction early in a player’s life cycle. This culling process effectively eliminates 98 percent-plus of the new players in a game so that it can instead focus on diving deeply into the wallets of those remaining 2 percent of players who pay. Among that 2 percent, only a tiny fraction has the desire and ability to spend large sums of the money. So the breakdown in some games can become scarily skewed, with as much as 50 percent of the profits coming from 2 percent of the paying players – or just 0.0004 percent of the total audience.

As the free-to-play game market has evolved and the number of competitive whale-driven games has increased on both Facebook and smart mobile devices, an uncomfortable fact has settled on the industry. Despite the ability to reach billions of potential players, the number of whales with a desire to spend thousands of dollars is relatively tiny. Moreover, whales are not going to be able to spend huge amounts of money across multiple games at any given time. As a result, companies are seeing new whale-driven games perform worse than their predecessors, while also cannibalizing their own whales in existing games.

Contrary to popular belief

The truth is that players who choose not to pay anything are far more valuable to any game company looking to create sustained value for its shareholders. Here’s why:

The best free-to-play games are socially driven. The entertainment value of playing the game is either intrinsic to playing with other players or at the very least materially enhanced. By designing your game to compel free players to stick around for a long period of time, you create social stickiness that will result in a higher retention of your paying users. This is common sense. Who wants to save for months to buy that shiny new BMW if there are no friends or neighbors to admire it?

Moreover, free players are by far your best means of low-cost, high-quality player acquisition. Free players who enjoy the game are viral in the old-fashioned sense: They actually tell their friends to try the game because they enjoyed it. Instead of paying for 50 percent of your new users and then watching them churn out in a week, design your game to ensure free users enjoy it and watch your cost of player acquisition drop dramatically.

And it’s a funny thing about those free users:  the longer they play any free-to-play game, the more likely they are to convert to paying players. The cohort of free players who continue to be actively playing a new game for a month are nearly three times as likely to convert as new users you paid to acquire. The financial advantages of focusing on free players are further enhanced when your game caters to a more diverse demographic and geographic player base. There are simply more players in the world who will happily spend $5, $10, or maybe even $25 on a game they love than there are those who are capable of spending thousands of dollars.

Games that get it right

It’s no surprise then that two most profitable free-to-play games currently in the market have eschewed whale-based monetization. League of Legends from Riot Games and World of Tanks form WarGaming.net decided to focus their game design and monetization efforts with a long-term view of value creation, which prioritized the free players.

Unlike their Moby Dick-obsessed competitors, LoL and WoT are designed to convert a far higher percentage of their players – in some cases ten times as many players as a whale-driven game. Instead of designing the game to optimize for a handful of big spenders, they’ve created economies that allow players to incrementally spend in lockstep with the time they spend in the game, which has resulted in higher retention, effective word-of-mouth virality, and a higher median lifetime value of players.

Both League of Legends and World of Tanks made a conscious decision not to force players into “purchase or else” decisions early in the game. Their pricing and merchandising systems are optimized for consistent small- and medium-sized transactions instead of a handful of big-ticket items. They thoughtfully open the vast majority of the game’s experiences to a free user while making sure value is delivered when a player makes the decision to pay. Thus, a virtuous cycle is born.

Happy free players lower overall acquisition costs, while paying players feel a stronger relative bump for their decision to spend. And all players are compelled to keep playing with one another, as there are plenty of teammates and opponents to fuel the multiplayer and social dynamics of the experience. That leads to higher retention; with higher retention comes higher conversion to paying, higher spending, and ultimately higher profits.

There are challenges in designing games to achieve those goals.  Basing your monetization systems off the game mechanics that generate real fun is the starting place.  Inspiring players to make themselves unique or benevolent in the eyes of fellow players are great incentives — while frustrating them by designing the game to be enjoyable only when you pay is not.  Don’t force failure for free players and make sure the forks you create with opportunities to pay come with a balanced frequency, and not as hard walls.

The opportunity for the free-to-play game space to grow is limitless. With browsers, smart phones, tablets, and Facebook, the digital reach of games is quickly going to reach a number closely approximating the entire population of this planet. The realization of this opportunity is going to be driven by great products that create real value, products that are designed and managed to entertain 100 percent of their players – not just the 0.0004 percent known as whales.

Greg Richardson is the founder and CEO of Rumble Entertainment, a premium free-to-play game company dedicated to create irresistible and beautiful cross-platform multiplayer game experiences for connected gamers.  A 20-year video game industry veteran, Greg was vice president and general manager of EA Partners, senior vice president at Eidos in charge of product development, and an investor with Elevation Partners, where he led the investment in Bioware and Pandemic, and served as chief executive of Bioware/Pandemic through its sale to Electronic Arts.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Santa Clara, Calif.-based Aeria Games is a publisher of free-to-play online games for hardcore players. Gamepot is a Tokyo-based publisher of PC and mobile games. Together, the combined companies will have more than 50 PC and mobile titles. They will have operations in five countries, games in 11 languages, and more than 50 million registered users. And the entity will have more than 600 employees.

The companies didn’t release details of the transaction except to note that the shareholders of Aeria Games will own a majority stake in the combined company. The deal accelerates the launch of Aeria’s technology and Ignite game distribution platform in Asia. It also gives Aeria access to substantial development resources in Japan and Korea. And it provides the company with a larger audience base so that it can attract more developers who want their games launched around the world.

Each company will continue its own operations and maintain its brand identities. The focus of the merger is on sharing technology and know-how, cooperation on mobile development, and close coordination for licensing and publishing global game properties. The companies will be run by a U.S.-based holding company headed by Hiroki Totoki, the chairman of Gamepot and chief financial officer of So-net Entertainment (a subsidiary of Sony and Gamepot’s parent company), and by Lan Hoang, the chief executive of Aeria, which publishes titles such as DK Online (pictured right). Both will now be chief executive officers.

“This strategic partnership further helps to cement our position as a truly global multiplatform publisher and developer,” said Hoang. “We are adding significant mobile games and development resources while expanding our core PC publishing business and increasing international reach and resources to acquire and publish triple-A titles. The combination strengthens every facet of our business — strong financials, global reach, a large and dedicated community of mid- to hardcore players, and a shared technology and distribution platform.”

Aeria was founded in 2006 and has a variety of online games, including action shooters, anime-style social games, multiplayer mobile titles, and fantasy online role-playing games.

Gamepot was founded in 2001, and it went public in 2005. It became a subsidiary of So-net Entertainment in 2008. Gamepot owns the Wizardry property (pictured at top).

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Meteor Entertainment, the publisher of the highly anticipated free-to-play online multiplayer mech combat game Hawken, has raised $18 million in a second round of funding.

The new investors show that Meteor continues to gain support from the financial community for its potentially disruptive game from Pasadena, Calif.-based Adhesive Games. Hawken is a high-end console-like game with cool 3D graphics and a Call of Duty style approach to giant mech combat.

In addition to existing backers FirstMark Capital and Benchmark Capital, new investors in this round include Rustic Canyon Ventures and Chinese mobile entertainment company KongZhong, which plans to publish Hawken in China. The goal is to create a billion-dollar free-to-play gaming company.

“We are doubling down with the launch of Hawken and we have put another title into product,” said Mark Long, chief executive of Seattle-based Meteor Entertainment, said in an interview with GamesBeat. “We are also gathering a war chest to acquire another title that could be on the same quality level as Hawken.”

To date, Meteor has now raised $28.5 million in two rounds of funding. The new money is an endorsement for free-to-play games, and digital publishing of art house style games.

“It’s clear from this investment that we do not believe the game industry as an investment category is going down,” said Nate Redmond, managing partner at Rustic Canyon Ventures, in an interview with GamesBeat. “From watching disruption in multiple industries and seeing it come to games, that is appealing to me as an investor and a gamer. We see how quickly it is happening. The incumbents see it, but they can’t change quickly enough to capture it.”

Rustic Canyon has also invested in Trion Worlds, a publisher of massively multiplayer online games. After watching that part of the industry evolve, Redmond believes that taking hundreds of employees to build large games is not the only way to publish hit games. He thinks that taking smaller teams and publishing them directly on the web has a lot of potential.

“It doesn’t take a $50 million or $100 million budget to do this,” Redmond (pictured right) said. “You can now invest more heavily after the game launches and you see how it is a success and the game mechanics are working properly. We look at a lot of possible game investments. It continues to be one of the most interesting sectors of digital media. This is the first important one that we’ve seen in the last few years. It comes down to whether they have built great game play. The core mechanics are pretty amazing. The team is very technical, and they really understood their engine and how to squeeze performance out of it.”

“A year ago, we didn’t even know if this was going to work,” Long said. “Trying to run dedicated servers on an Amazon Elastic Compute Cloud (Amazon’s data center outsourcing service) was something nobody had tried before. Early on, we tested it to see if it would work. As we move into it, it works better than we could have hoped for” as it can handle 10,000 players in simultaneous gaming without any hiccups. The latency, or delays in interaction, is so low that the service quality is good in beta testing, Long said. That saves a lot of money on data center costs, he said.

Because the technology worked so well, Long decided to get more games in production. It also looks like Hawken will reach a lot of new territories relatively quickly. Those developments led to the new round.

“All indications are that Hawken is going to be a hit,” he said. “How well it monetizes is an open question. But we are confident Hawken will go out strongly.”

Meteor was founded earlier this year and it has fewer than 50 employees. Rivals include Infinite Game Publishing, a Canadian firm that is launching an online game, MechWarrior Online, that focuses on multiplayer mech combat. Long is encouraged that MechWarrior Online is monetizing well in beta testing and he is confident that mech fans will embrace both games.

Long said that the company is focused on a transmedia approach to publishing and it will work on one to two games at a time.

Long previous worked as head of Zombie Studios and he has spent more than 20 years developing games. He knew Mitch Lasky, general partner at Benchmark, who believes that free-to-play online games will steal an $8 billion to $10 billion chunk of the hardcore game market away from console titles and disk-based retail PC games.

“Our management team is full of gamers and we believe there is an opportunity to disrupt online gaming in China,” said Jay Chang, chief financial officer at Kong Zhong, in an interview with GamesBeat.

His company launched the Chinese version of Wargaming.net’s World of Tanks online tank combat game in China. And it has also taken out a license to publish a version of Hawken in the Chinese market, probably in 2013. Long said he believes Kong Zhong could become one of the top three online game publishers in China in the next couple of years.

“We think Hawken has the potential to be even bigger than World of Tanks,” Chang said. “The Chinese market is maturing and there are a lot of  users for free-to-play games.”

Benchmark and FirstMark are the same investors who backed the highly successful Riot Games, maker of League of Legends, a downloadable web game that was so popular that China’s Tencent bought Riot for more than $400 million last year. At the time, Riot had just a million users, but the company was valuable because of its fast growth — it has 70 million registered players and 32 million monthly active users — and the hardcore gamers were willing to spend real money for virtual goods in the free-to-play title.

Hawken is being developed by Adhesive Games, a small team in Alhambra, Calif., and it will be published by its parent company, Meteor Entertainment.

Hawken is scheduled to launch on Dec. 12, or 12/12/12. The title drew a lot of attention last year because the team posted cool game play videos on YouTube that collectively garnered more than 1.9 million views. Khang Le, chief executive of Adhesive Games, told us in an interview that the game is akin to Call of Duty multiplayer combat, but for mechs. After Lasky saw the YouTube video, he became obsessed with finding the Hawken team and he eventually succeeded in getting a meeting with them.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Adapting to the biggest wave of change in the game business, Big Fish Games is launching its first free-to-play game on its global PC and Mac app store today.

The free-to-play title — which lets users play for free and pay real money for virtual items — can be played in a browser or downloaded to a PC or Mac. Seattle-based Big Fish Games is a big contender in casual downloadable games, but to date it has been charging money upfront for many of the games in its catalog of 3,000 titles.

Big Fish is very late to the free-to-play party. But the change should have a big impact as Big Fish Games has 14 million monthly visitors to its games, which are offered in 10 languages and 150 countries. But Big Fish is starting slowly. The first free-to-play game is Big Fish Casino, one of the top 10 grossing games on the iPhone and iPad, year-to-date.

“F2P games are increasingly popular with gamers who have been introduced to digital games over the past few years via the rapid growth of social and mobile platforms,” said Paul Thelen, the founder and chief executive officer of Big Fish. “It is a natural extension to both our PC/Mac app store and to our mobile publishing business.”

Big Fish said it expects its free-to-play business to grow much like its new mobile-game business, which doubled the number of titles in the past year to more than 200. Game companies like the free-to-play model because it allows them to have a direct-to-consumer relationship with players. It can tap free-to-play games from more than 550 developers as well as its own in-house game studio. And free-to-play allows hidden-object games, a mainstay of Big Fish’s business, to change from a linear experience to a continuous online one.

In the next year, Big Fish will announce several new free-to-play games a month on its PC and Mac app store.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Casual games developer King.com announced that its free-to-play title, Bubble Witch Saga, is now available on the iTunes App Store. The bubble-popping puzzler is the first mobile game to offer full synchronization, including game progress and any purchased virtual goods, with its counterpart on Facebook, which currently has 4.6 million active players.

“As consumers and the industry focus more on games for mobile devices, launching a truly cross-platform Facebook game has been a top priority for King.com,” said Riccardo Zacconi, the chief executive of King.com, in the press release. “We’re excited to be the pioneers in making this available for our players. Gamers can play signed in or not and progress either way, enabling them to experience the excitement of Bubble Witch Saga whenever and wherever they wish, without losing their place in the game.”

In Bubble Witch Saga, you progress through levels by matching three or more of the same-colored bubbles, which then fall into cauldrons that net you bonus points. The game already contains more than 150 levels, with more being added every week.

“This type of fully synchronized functionality is going to be expected by gamers moving forward,” said Tommy Palm, the “mobile guru” at King.com, to GamesBeat when asked if this feature will be implemented in future releases. “Players do not want to have to start all over again…just because they switch devices. Therefore, we feel it’s critical to focus on cross-platform experiences for our casual social titles to come. Also, much of the functionality built for [Bubble Witch Saga] is reusable for coming games, which means we will be able to more easily ensure the quality of future mobile games much faster.”

Another casual games developer, Big Fish Games, is also focused on maintaining this type of progress across different devices (albeit not on Facebook). It released Big Fish Unlimited on Tuesday, a cloud-based streaming service that allows players to access a variety of casual titles from any device as long as a constant Internet connection is available. King.com, however, believes that native applications, at least for now, are still the way to go.

“Our current mobile strategy is to offer a high quality native-game experience for tablet and smart phones,” said Palm. “We feel that the game experience that consumers are looking for is best catered by fast [and] responsive native apps. In the future, mobile networks may be good enough to make great game experiences using streaming technology, but today they are just not there yet.”

Founded in 2003, the London-based King.com is the fourth-largest publisher on Facebook, with 2.5 billion matches played each month on the social-networking site alone. In addition to other popular titles from its Saga series, the Android version of Bubble Witch Saga will launch later this year.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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The successful launch of Star Wars: The Old Republic notwithstanding, the business model of mandatory subscriptions for massively multiplayer online (MMO) games seems to be on its way out. A new user survey by online core gamer network Curse indicates that free-to-play games and microtransaction purchases are gaining ground even among subscribers of MMO market leader World of Warcraft.

64 percent of the 11,800 online gamers surveyed by Curse play free-to-play games and 43 percent of those buy in-game items. That’s an impressive number considering that any rate of converting players into paying customers above 5 percent is typically viewed as a success.

The explanation lies in the kind of user Curse attracts. 91 percent of the survey participants currently play a subscription MMO (most likely World of Warcraft, as Curse operates popular community sites that cater to the information needs of that audience). Dedicated players are more likely to pay for in-game extras than the casual crowd, which is why companies like Kabam are focusing on free-to-play games for hardcore gamers.

According to the Curse survey, the most popular microtransaction category is cosmetic upgrades for game characters (52 percent of those respondents who make optional purchases in free-to-play games), followed by virtual gear (21 percent) and experience points boosts (15 percent).

The biggest incentive for still playing subscription games is “overall quality including story and graphics”, as claimed by 50 percent of all survey participants. Their main reason for trying free-to-play is to avoid commitment to a monthly subscription (43 percent) and to try a game out (29 percent) before subscribing to a premium or full-access edition.

There’s clearly a limit to the number of recurring fees even dedicated gamers want to pay for, as most of World of Warcraft’s competitors have found. Plenty of recent subscription-based MMOs have converted to the free-to-play business model. The likes of EverQuest, The Lords of the Rings Online, Star Trek Online and Dungeons&Dragons Online will soon be joined by NCsoft’s Aion, which is scheduled to abandon mandatory subscriptions from April 11.

Curse reports that its website STOwiki.org saw a drastic increase in traffic after Star Trek Online switched to the free-to-play model in January 2012, going from 697 to 10,055 unique visitors and from 4,736 to 170,000 page views per day, representing a 1343 percent increase.

One of the most highly anticipated MMO 2012 releases is not a free-to-play game, as customers will have to make a one-time payment for the software. But Guild Wars 2 will forego subscription fees in favor of optional microtransactions, as explained by ArenaNet President Mike O’Brien.

With the number of quality free-to-play MMOs available and the increasing acceptance of microtransactions, launching games with a mandatory subscription model seems unlikely to succeed – unless you have one of the most powerful brands and well-respected videogame developers in the known universe at your disposal, that is.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Kersting’s Karlsruhe, Germany-based Flaregames is focused on free-to-play mobile games, where users play for free and pay real money for virtual goods. Previously, the company was focused on mobile reality games that blended virtual and real worlds, but the company decided that free-to-play mobile games had more potential.

Kersting plans to launch five games by the end of the second quarter. As the founder of Gameforge, Kersting created a downloadable online games company that grew to more than 400 employees, $150 million in revenue, and 200 million registered users.

“Our first focus is on getting fun, high-quality games to market and reaching the mass-market as well as mid-core gamers with our line-up this year,” said Kersting. “Our investors see the opportunity for mobile game companies to grow fast, and the team’s extensive knowledge of the free-to-play gaming market is an asset that will enable us to create new mobile games that are both fun and commercially successful.”

Kersting started the company in April 2011 along with Andreas Suika, former lead game designer for Ubisoft Blue Byte. Flaregames now has 30 employees.

“The mobile games business will likely be larger than the social games business,” said Harry Nelis, partner at Accel Partners. “We’re backing Flaregames because we believe in the team, technology, and business model and most of all know that Klaas will drive the company to its full potential as it strives to become a major mobile games company.”

Accel has backed more than 300 successful companies, from Admob to Facebook. In gaming, it has invested in Rovio, maker of Angry Birds, and Playfish, which was acquired by Electronic Arts.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Consumers spent a total of $4.9 billion on free-to-play (F2P) MMO games across thirteen key Western, Asian and emerging markets in 2011, with 47 percent ($1.2 billion) of all MMO spending coming from the United States, according to the 2011 MMO Games Market Report. This is significantly higher than the 39 percent spent in 2010, but is still lower than spending in European (53 percent), Asian (51 percent) and Emerging (59 percent) markets.

The report also found that consumer preferences differ significantly across regions and countries when it comes to business models and genres, or whether players prefer browser or client-based games. Twenty-four percent of Asian MMO players prefer only client-based games, a figure that drops to 15 percent in Emerging markets, for example. In all regions, Newzoo says approximately one-third of gamers play both browser and client-based MMOs, but the fastest growing F2P games widely vary across countries. According to iQU tracking data of 80 million online gamers around the world, Wargaming’s World of Tanks tops the charts in Europe including Russia, Riot Games’ League of Legends is number one in the U.S. and AeriaGames’ Shaiya leads in Latin America.

Despite growth in the MMO market, however, the report finds individual games and publishers are struggling to grow or maintain revenue level and market share, especially in Western markets. Due to the number of high-quality MMO games now available to consumers, Newzoo predicts 2012 will be a year of consolidation, where the increasing number of Asian online game companies seeking expansion outside the continent could play a key role.

“The MMO games market is rapidly turning global. It has become increasingly important for MMO developers and publishers think carefully about which titles to publish in what territories and how to adapt the games according to local preferences, including monetization models that work best,” said Peter Warman, Newzoo CEO and co-author of the 2011 MMO Games Market Report.

Warman said that recent layoffs and the sudden death of Lego Universe are serious warnings for the MMO games industry. He said that success will also strongly depend on “how MMO companies extend their unique game play and intellectual property across other game platforms, specifically mobile.”

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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The move reflects the growing importance of free-to-play, the business model where users play for free and can purchase virtual goods with real money.

Burlingame, Calif.-based OpenFeint has hired Ethan Fassett, a former Playdom executive with expertise in free-to-play Facebook games. Fassett will lead the development of next-generation social networking features with distribution channels for free-to-play developers.

OpenFeint, which was purchased in April for $104 million by Japan’s Gree, makes tools that developers can use to make their games more social. The company’s tools are used by 6,000 games on Android and the iPhone, with a total of 90 million players for those games.

Fassett will be senior vice president for product at OpenFeint. He will help develop new communications and player acquisition features for OpenFeint’s platform.

“We’re very excited to bring on Ethan, whose expertise in free-to-play games and social communities will drive product strategy and shape the evolution of the network,” said Jason Citron, CEO of OpenFeint. “Ethan truly understands social games, the social networks they need to be successful, and the tools game developers need to properly engage and monetize their players.”

The move is similar to one by Flurry, the mobile analytics and recommendation firm, which recently hired game developer Jason Valadares to lead its efforts with developers. Fassett worked on games such as Market Street at Playdom. He also worked at Gaia Online.

We’ll be exploring the most disruptive game technologies and business models at our third annual GamesBeat 2011 conference, on July 12-13 at the Palace Hotel in San Francisco. It will focus on the disruptive trends in the mobile games market. GamesBeat is co-located with our MobileBeat 2011conference this year. To register, click on this link. Sponsors can message us at sponsors@venturebeat.com. Our sponsors include Qualcomm, Flurry, Greystripe, Nexage, Tapjoy, Fun Mobility, TriNet, Zong, Sibblingz, Open Feint, Spil Games and WildTangent.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Free-to-play and in-app purchase business models on mobile have changed the gaming landscape – thanks to a new segment of mass market casual gamers, proliferation of connected devices and revolution in digital distribution.  In this new world, monetization now depends on engagement, retention and driving micro-transaction purchases.

This panel, “Making succesfull free-to-play and in-app purchase driven mobile games,” addresses the challenges and opportunities head on from the point of view of the studio, and is made up of successful free-to-play and in-app purchase mobile game studio leaders, who have learned from trial-and-error, constant measurement and relentless iteration.  The panel discussion is led by Jeferson Valadares, a veteran studio exec who has held various senior production roles at Playfish, EA Mobile and Digital Chocolate.

The GamesBeat 2011 conference takes place July 12-13 at the Palace Hotel in San Francisco.

Jeferson Valadares is the general manager of games at Flurry. He has more than 10 years of experience in leading mobile and Facebook game studios. He has built critically acclaimed original games as well as titles for brands such as EA Sports, FIFA, Harry Potter, Need for Speed and Hasbro. At EA, he was the first creative director for EA Mobile and was studio director at Playfish for both Facebook and mobile games. Prior to EA, he ran Digital Chocolate’s largest studio, based in Finland, and was responsible for hits including Tower Bloxx, Crazy Penguin Catapult and Rollercoaster Rush.

Gabriel Leydon is co-founder and chief executive of Addmired, a mobile social gaming company that created top-grossing hits such as iMob Online, Original Gangstaz, and Global War. Before Addmired, Leydon spent seven years in the coin-operated arcade business working at Atari, Tsunami Visual, and Global VR.

Lou Fasulo runs day-to-day operations at Z2Live and oversees two hit franchises: TradeNations and MetalStorm. He previously led the publishing team at New York-based Sonic Boom Games. He was also vice president of distribution at Vivendi Games Mobile and helped launch the hit game Surviving High School. He also held positins at AT&T Mobility, Earthlink, and GroovePort.

Dave Castelnuovo is a veteran flash games developer, entreprenuer and consultant. He is the CEO of Bolt Creative, creator of the enormously popular mobile game Pocket God. Castelnuovo founded Bolt Creative in 2001 and helped lead the charge onto the iPhone in 2008 and 2009. He has worked at a variety of game publishers, including Electronic Arts.

Our previous announced speakers include David Marcus, founder and CEO of Zong; Rich Wong, a partner at venture capital firm Accel Partners; Chris Bergstresser, executive vice president of online gaming portal Miniclip;  Neil Young, founder and CEO of Ngmoco; Andrej Nabergoj, founder and chief executive of Outfit7; Jason Citron, founder and chief executive of OpenFeint; Steve Perlman, chief executive of games-on-demand firm OnLive; Bart Decrem, head of mobile games at Disney and former chief executive of Tapulous; Trip Hawkins, chief executive of Digital Chocolate; Peter Relan, chairman of YouWeb and chief executive of CrowdStar; Si Shen, chief executive of PapayaMobile; David Ko, senior vice president for mobile at Zynga; our keynote speaker, longtime game entrepreneur and founder of Atari, Nolan Bushnell; Tim Chang, partner at Norwest Venture Partners; Daniel Terry, co-founder of mobile game maker Pocket Gems; and Bing Gordon, partner at Kleiner Perkins Caufield & Byers and former chief creative officer at Electronic Arts; Jennifer Lu, director of business development at TinyCo; Sana Choudary, CEO of game startup accelerator YetiZen; and Tim Merel, managing director of Digi-Capital.

Each year, GamesBeat follows a big trend. In 2009, we focused on how All The World’s a Game, with the explosion of games onto a global stage. Last year, GamesBeat@GDC focused on Disruption 2.0. This year, our theme is Mobile Games Level Up, and it focuses on the busy intersection of games and mobile technology. We’ll focus on everything from smartphone games to tablets and handhelds.

Console games dominated the news in the past, but the center of attention is rapidly shifting toward mobile as more and more users play games on the run. While there are hundreds of millions of gamers on Facebook, analysts believe the number could be much higher for mobile games. Our speakers are right at this intersection of gaming and mobility. GamesBeat 2011 targets an audience of CEOs, executives, entrepreneurs, investors, marketers and other key figures in the game business. Stay tuned for more speaker announcements.

We’ll be exploring the most disruptive game technologies and business models at our third annual GamesBeat 2011conference, on July 12-13 at the Palace Hotel in San Francisco. It will focus on the disruptive trends in the mobile games market. GamesBeat is co-located with our MobileBeat 2011conference this year. To register, click on this link. Sponsors can message us atsponsors@venturebeat.com. To pitch a startup at the Who’s Got Game contest at GamesBeat 2011, click here.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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Bigpoint is at the forefront of free-to-play online games, where users play for free and pay real money for virtual goods such as better weapons in small transactions. The company has built up an audience of more than 190 million registered users in the past nine years and now has more than 700 employees. That makes it as big as many console-focused game companies, and second in valuation only to Playdom (which was sold to Disney for $760 million) and Zynga (raising a round at a purported $10 billion valuation) in online gaming.

Summit Partners and TA Associates are purchasing the stake from Comcast Interactive Capital’s Peacock Equity Fund, which (under NBC Universal, now owned by Comcast) bought a 70 percent stake in 2008 for $110 million. Founder and chief executive Heiko Hubertz will retain his 30 percent share in Bigpoint, which is based in Hamburg, Germany, and is rapidly expanding in San Francisco and Brazil.

“We’ll have investors who can support our aggressive growth plans,” Hubertz said, as both companies will pour new capital into Bigpoint.

Hubertz said in an interview that the deal validates Bigpoint’s leadership within online games. In particular, Bigpoint focuses on browser-based online games such as the recently launched Battlestar Galactica game (pictured). Hubertz said he is holding on to his stake because he believes Bigpoint will be worth $1 billion one day as it becomes the “top online gaming company in the world.”

It has a ways to go before it gets there, but it has come a long way. Hubertz founded the company in 2002 in Hamburg. Among the company’s biggest titles are Seafight and Dark Orbit, which launched in 2006 and 2007, respectively. Those games are available in dozens of languages in 180 countries worldwide. Altogether, the company has 60 games available and 700 employees. Rivals include Gameforge, Jagex, InnoGames and Mail.ru Games. GMT Communications Partners and General Electric are selling the majority of their stakes.

John Meeks, managing director at TA Associates, said the scalable platform, diversified revenue, geographic diversification, and the attractive free-to-play model were big attractions for the investment. Scott Collins, managing director at Summit Partners, also pointed to the Bigpoint management team as an attraction. Both will join Bigpoint’s board.

Upcoming titles include The Mummy Online, RamaCity and Drakensang Online. Hubertz recently recruited Arthur Bastings as co-CEO of Bigpoint. Hubertz is heading the expansion in San Francisco while Bastings is heading operations in Germany.

Hubertz said Bigpoint has doubled revenue each year for the past eight years and has been profitable for some time.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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“For many Korean companies the market in North America has not taken off nearly as fast as they expected,” says DFC analyst Insun Yoon.

In free-to-play games, such as Electronic Arts Battlefield Heroes (pictured), users play a game for free. They can use real money to pay for virtual goods as they progress. See Industry Gamers for more.

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GamesBeat 2013 is our fifth annual conference on disruption in the video game market. You'll get 360-degree perspectives from top gaming executives, developers, and analysts on what’s to come in the industry. Our theme this year is “The Battle Royal.” Check out full event details here, and grab your early-bird tickets here!

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