Gaming companies that have social as “part of their DNA” will win out as the gaming industry transitions from the traditional model of retail game distribution to games delivered via the internet, according to games developer Kabam. Speaking to StrategyEye, the firm’s VP of marketing, Ted Simon, says that the games sector is in the middle of a “dramatic” disruption as barriers to entry drop and consumers can increasingly play games via any internet-connected device, rather than specific hardware, and play for free, rather than having to fork out upfront for a game. While this opens up a whole new opportunity in gaming, Simon predicts that it will result in a different set of leaders as traditional firms struggle to adapt to a new era of online, social gaming.
“What we see happening is very much akin to what the industry has witnessed every five-to-seven years during hardware transition cycles,” he says. "Only this time the change is even more dramatic as the digital delivery method, streaming technology and free-to-play model upends every aspect of the value chain from discovery to pricing to distribution to access, striking at the very fundamental upon which the retail market has been built. Social is part of our DNA as a company and that DNA is not easily acquired or transferred, which gives us an advantage versus companies that are trying to ‘figure out’ this environment, the technology and the consumer experience.”
While Kabam is a social games firm, it publishes what it terms as ‘hardcore social games’ aimed at the traditional core gamer, rather than the typical social gaming audience of females aged around 40. Simon suggests that this segment of players has previously been “under-served” as publishers such as Zygna aimed for the mass market. While Zynga has seen huge success with its model, Kabam believes that its titles have the potential to generate more revenues because while they attract fewer users, those users have established habits of paying for games and are more likely to spend.
“Kabam designs games for the game enthusiast audience,” he says. “It’s their hobby and their chosen use of disposable time and income.”
Despite its different target audience, Kabam still adopts the same business model as its social gaming rivals, choosing virtual goods and in-game payments over paid downloads, subscriptions or advertising. Simon says Kabam chose the freemium business model because it believes it is a better model for consumers, offering a frictionless experience that allows them to be in control of the game and their spending with no upfront costs or risks.
“Once they play and derive some value from the game, consumers can decide for themselves whether they want to continue playing and whether they purchase virtual goods or items to enhance their game experience,” he says. “In this regard, the gamer is in control, rather than the company. That feeling of control is a very powerful emotion and motivator for consumers – it’s a very positive experience.”
Kabam is reticent regarding paying user numbers, but its most successful titles attract millions of users, with its most popular, Kingdoms of Camelot, hitting more than 15m registered users. However, its active user numbers appear to be slipping, with figures from Appdata showing thatKingdoms of Camelotnow has just 470,000 active players. Nevertheless, the average active user still logs in three times, suggesting that players are highly engaged with Kabam’s games. Simon dismisses concerns over the drop in Facebook players, highlighting that the firm is focusing on a multi-platform strategy that has seen it deliberately attempt to reduce its reliance on Facebook as competition for players, and revenues, on the social network increases. Kabam recently launched its first hardcore social game for mobile, which saw more than 1m downloads in Apple’s App Store in its first month and a half on sale, and its games are also available on Google+, as well as gaming portals Download.com and Kongregate.
“Facebook offers a significant audience, but it does not have a dominant position in all markets around the world, particularly when you look outside the US,” he says. “There are a lot of core gamers who we cannot reach solely through Facebook. Our goal is to focus on making Kabam games available for our audience regardless of platform.”