Paul Thelen, chairman and chief strategy officer of casual game distributor Big Fish Games, said his company grew faster in the fourth quarter than it did at any time in the past two years. That raises the question: Just how is the recession affecting casual games?
“We do see a little delinquency in credit cards,” he said during a panel at Casual Connect in Hamburg. But he also said those players who do pay are actually buying more than they did a year ago. (Seattle-based Big Fish is a beacon of the industry, since it scored a record $83 million venture round last year).
But Daniel Bernstein, founder of Sandlot Games, believes that casual games are dependent on consumer spending –- and whenever consumer spending goes down, casual games will follow.
“Overall, the industry is only going to improve over time,” said Matthias Schmidt-Pfitzner, the managing director of German casual portal King.com.
Meanwhile, Russian casual game publisher Alawar has seen an increase of sales in local territories, according to founder Sergey Zanin, who expects to do even better this year than last.
Bernstein said that those in the business must expect some late payments. He reported seeing a substantial increase and said that cash is king for those hoping to survive. “There are banks going out of business, so people are going to be late.”
Thelen noted it will be difficult for ad-based game companies to survive, because the first thing to go during cost-cutting are discretionary advertising budgets.
Schmidt-Pfitzner said his company has the funds to make acquisitions. He said the consumer sales of virtual goods during the recession is a big opportunity, because games allow people to obtain things in virtual life that they can’t afford in real life.
Bernstein also addressed the issue of venture capital. “If you’re not profitable now, get profitable. Because there is no more money.” He believes investors are more likely to invest in companies that are profitable. He also said that Sandlot Games has budgeted for 20 percent lower revenues than in 2008 as a precaution, but that he expects to do better than that.
Thelen said that if you’re already profitable, things look bright, “As long as you keep doing what you’ve been doing.” But if you’re planning on a future profit — from a massively multiplayer online game, for example — “you better hope the revenue model is solid.”
When asked how long casual game companies must survive before they can thrive, Bernstein cited the five to 10 years that the Great Depression lasted and said, “I’m going to go with five.” But he’s learned from Russian business partners to approach it one day at a time.
We’re not looking to raise any more money, said Thelen, describing the amount his firm raised last September as a hedge. “We’re profitable.”
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