Casual game biz serious about growth

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It's got a business model that's drastically in need of repair, which may be one reason why the casual games audience is spreading like wildfire. Indeed, because the typical casual game comes with a "try before you buy" offer, fewer than 2% of those played are actually purchased. Conversely, that means that 98% of casual gamers are playing for free without a cent going to the games' developers or publishers.

Still, sales of casual games -- small, downloadable video games with simple rules that make it easy for a mass audience to begin playing almost immediately -- have skyrocketed from practically zero in 2002 to over $600 million in the U.S. alone in 2004. They're expected to top $2 billion domestically by 2008, according to a white paper prepared by the International Game Developers Association (click here to download PDF of paper).

While Jason Kapalka didn't invent casual games -- that honor goes to Microsoft with its Microsoft Solitaire which came bundled with Windows as early as 1990 -- he has had a lot to do with its growing popularity. In 2001, he created "Bejeweled" which has sold 10 million copies, spawned countless "match three" clones (so-called because the goal of the game is to create a line of three identical pieces), and is available on nearly every platform, including cell phones, PDAs and in-flight versions, with a slot machine adaptation on the way.

As chief creative officer and a founder of Seattle-based developer and publisher PopCap Games, Kapalka has also designed nearly two dozen of the company's hit titles, including "Zuma," "Bookworm," and "Chuzzle."

HollywoodReporter.com columnist Paul Hyman chats with Kapalka about new business models, non-existent marketing budgets, and the dangers of clones and knock-offs.

The Hollywood Reporter: What's been the main driver for the success of casual games?
Jason Kapalka: If you want to boil it down to one factor, it's got to be the Internet, which was the first popular method of accessing these games. That's changed a bit because, of course, you can now get casual games on your mobile phone and you can walk into Wal-Mart and find a copy of, say, "Bejeweled" for sale ... but that wasn't true when casual games started. The only games they carried in computer stores back then were hardcore games with exploding mutants and so forth. And so that was one of the appeals of the genre, since my mom certainly wasn't going to go into a game store and find anything that appealed to her. The Internet became this alternate channel that made the availability of casual games possible for an audience that nobody had really thought of as consumers of games before.

THR: Yet, despite their success, casual games still don't get the respect that hardcore games get, do they? I mean, when the next version of "Halo" comes out, we all expect there to be lots of hoopla in the press. But not much is written about upcoming casual games and, in fact, they're not even heavily promoted by the people who make them or the Internal portals that sell them. Doesn't the casual games industry believe in marketing?
Kapalka: Some of that has to do with the fact that a hardcore game -- like, say, "Halo 3" -- stands to make hundreds of millions of dollars. If a casual game sells 100,000 at $20 each -- or $2 million -- that's considered a pretty big hit. On that basis, you can see why we don't generate the same attention. There have been a few attempts at creating magazines to cover casual games, but none have really taken off. And I can understand why. I mean, if the games are "casual," how many casual players are going to subscribe to magazines that detail the games? That's the sort of thing hardcore players do. Sure, there are so-called "casual players" who spend ridiculous amounts of time playing their favorite games -- which is almost a contradiction in terms. But they represent only a small portion of the audience, most of whom play these games just to kill five minutes at lunch. I'm pretty sure they wouldn't be subscribing to a casual games magazine.

THR: Then where does one market a casual game? When a game is released now, it just seems to appear and, if it's good, the word spreads virally. What does the casual market need to grow beyond where it is right now?
Kapalka: I think we need to be seen in the mainstream press, in something like "Oprah" magazine. The challenge is to reach an audience that doesn't even believe that it is a gaming audience or (that it) has an interest in casual games. We have a pretty high level of confidence that, if you get a soccer mom to sit down and play "Bejeweled" for five minutes, she's going to enjoy it and may go ahead and play it more and maybe even buy it. The problem is getting her and people like her to try it in the first place.

THR: What's the typical budget for developing and marketing a casual game?
Kapalka: Very low compared to a hardcore game, which can take a team of up to 100 developers or more maybe two years to build. The first "Bejeweled" game [pictured at right] took three people two months to complete. I can't even tell you what that cost because the three people were my two partners and me and we didn't pay ourselves anything. More typically, casual game budgets range from $100,000 to $500,000 and they're rising slowly. Some day you may see a $1 million casual game, but that's nothing compared to the $10 million that's the entry level for any sort of serious next-gen console game.

THR: Does that $100,000 to $500,000 include your marketing budget?
Kapalka: What marketing budget? We might put something on Google AdWords or do a bit of Internet advertising, but nothing significant -- and not because we haven't thought of it. But it just doesn't seem very cost-effective. Instead, we rely on word-of-mouth. The Internet is great for that sort of viral marketing. If people really enjoy something, they are likely to tell other people.

THR: When gamers try and then choose to buy a casual game, the industry refers to that as the "conversion rate." What's the conversion rate these days?
Kapalka: It depends, but 2% or more is really good and represents a game that will probably be a huge hit.

THR: I can't think of another industry where it would be acceptable to give away 98% of the product it makes. Surely someone is cooking up different business models?
Kapalka: Yes, some portals are experimenting with subscription services and some, like Pogo.com, have found them to be pretty successful. Others are trying advertising, and I think you're going to start to see many more games with some sort of built-in advertising. RealArcade.com, for instance, shows a video ad between game levels and that's something I think we're going to experiment with too shortly.

THR: Which means that the casual games industry won't be making its money trying to convince people to buy $20 games?
Kapalka: Right now that's the most popular method of collecting income, and that may remain to some extent. But it will probably shift with some publishers selling ads, selling subscriptions and possibly charging for micro-transactions. You'd get the game for free but then have to purchase add-ons, like power-ups or extra features, for a small price each.

THR: Any predictions on which business model will work the best?
Kapalka: Well, I think advertising makes a lot more sense for casual games than it does, say, for MMOGs [massive multiplayer online games] where the ads can disturb the gaming experience. When you're in some dungeon and a big Coke ad comes up, it really breaks the immersiveness that is a key factor in MMOGs. Casual games are less immersive -- they're generally played while you're chatting with someone or taking a short break and they're frequently designed for that sort of multitasking.

THR: Casual games are anti-immersive?
Kapalka: Yes, that's a good way to put it. When my mom takes a break from her e-mail or browsing the Web to play a game, she doesn't want to be immersed in a 3-D world. She just wants something to occupy her mind for a few minutes, and that sort of game can be more easily interrupted with an ad than can other games.

THR: Despite the low conversion rate, many developers have entered the casual games space because it's considered an easy, inexpensive entry into the games market. Is it? Or are there challenges that don't exist in the hardcore space?
Kapalka: I guess creating casual games looks easy in the technical sense in the same way that writing a poem looks easier than writing a novel ... because it's less work. But, of course, sometimes writing a poem is harder, and the same is true of casual games. You can take a big first-person shooter and create a new one by adding a few new weapons, switching the setting from space to fantasy, and it works. But it's not easy to come up with a simple game. If it were, the developer of "Tetris" would have invented another hit just as big by now, but he hasn't. It's just not that easy. Sure, people have taken "Tetris" and "Bejeweled" and added some trimmings in order to create clones, but they usually just look crude and don't advance the genre much. There are already a zillion clones of both of those games out there, and they're not really doing anything because they don't have anything significant to add for the gamer.

THR: It sounds like you're saying that there are a lot of casual games out there, but not a lot of good casual games.
Kapalka: Exactly. And that's a bit of an issue right now. Many people are jumping into the market, and some of their games are good, many aren't so good. So there's a bit of a danger of flooding the market with mediocre titles.

THR: You mentioned clones, and I know that's a sore point with you. As soon as a casual game becomes a hit, a few months later there are a ton of knock-offs. For every "Bejeweled," there are a dozen copycats called "Gems," "Jewels," "Bedazzled," and so forth. How does that hit you in the gut?
Kapalka: It's hurt me more emotionally than businesswise. We don't actually think we've lost any sales to speak of because of the clones ... but it does bug me -- for two reasons. The first is the fear that it might take away some of our market. The second is that it's bad for our industry which, while still so young, is already full of knock-off artists and cloners. We're never going to get rid of those elements. But my preference would be to have them pushed back to the fringes and discourage them more than they are being discouraged now.

THR: How does one do that? Don't the copyright laws work?
Kapalka: Sure. And we've issued a lot of cease-and-desists for games that were blatant copies. But you can't copyright the actual rules to a game and so protecting it legally is difficult. If someone takes your game and changes the graphics and sounds a bit, they're probably safe from prosecution.

THR: How does one determine what is a knock-off and what is a variation on a theme? I recall that a Japanese developer claimed that "Zuma" was a clone of their arcade game "Puzz Loop."
Kapalka: I don't know too much about the legal side of that but, yeah, I think if you look at "Puzz Loop" and "Zuma" together, you'll see that "Zuma" certainly is a different game and not an exact clone. From my perspective, I've reached the point where I've accepted that clones are here to stay. Mostly I'm happy if the clones add something interesting to the gameplay because that is how games evolve. People do take ideas that were there before and then elaborate on them and add stuff. "Jewel Quest," for example, is a game that does borrow from "Bejeweled," but it adds some elements of its own that are unique and that we hadn't thought of. That's the sort of process that adds interesting things to the genre that didn't exist previously.

Paul "The Game Master" Hyman was the editor-in-chief of CMP Media's GamePower. He's covered the games industry for over a dozen years. His columns for The Reporter run exclusively on the Web site.
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