Game Landscape& The FutureAndi S. BoedimanChief Innovation OfficerMojopiaandisboediman@gmail.comwww.ideonomics.com

Global Game MarketVideo games has exceed movie box office.

Console

Playstation (Sony)

Playstation 2 (Sony)

Xbox (MSFT)

Game Cube (Nintendo)

PC Based

Handheld

Game Boy(Nintendo)

Game Boy Advance (Nintendo)

Single Player (SP) – Individual game experiences on a single console or PC. Retail Business Model. (e.g. Nintendo)

Multi-Player (MP) – Groups of 2-64 players hosted by a single server. Games are a set length and high-twitch. Subscription Business Model. (e.g. Xbox Live)

Massively Multi-Player Online Games – (MMOG) Thousands of people play on a hosted server game environment. Games are running 24/7. Subscription Business Model.(e.g.Everquest)

Shooters

Family Entertainment/Children

Simulation

Strategy & Role Playing (RPG)

Sports & Extreme Sports

Racing

Action/Adventure

Fighting

2001: $27B

2003: $40B (source: Forrester)

2008: $61B (source: CITL)

Platform Number of PlayersGenre

Global Games Market

$1 Of Every $4 Spent On Entertainment Is On Video Games

DVD Purchase26%

DVD Rental7%

Movie Tickets9%

Music (Recorded)16%

Music Concerts17%

Video Games24%

DVD Purchase And Rental Includes Movie & TV Show DVD Purchase

Music (Recorded) Includes Music CD, Music DVD, Digital Downloads, Ringtones, Tracks For The Cell Phone

Video Games Includes Game Discs & Downloads

Source: The NPD Group / Entertainment Trends In America

• There is not that much difference in market tastes around the world for mobile games. That being said, there are few games that work well for all global markets

• Focus now is on networked games and other 3G type content

• Female gamers making up a bigger % of users monthly

• No matter how good game is, proper marketing support essential

• Fast gameplay better than slow gameplay. Also, in general, arcade games easier to market than puzzle or board games

• If at all possible, brand your game

• Operators becoming much more picky about which games they offer. This means differentiation and uniqueness to markets a key for companies to make money:

• Branding

• New genre of game for a certain market

• Different look and feel in playability

• With new phones coming out faster than ever, ability to port quickly becoming more important

• Mobile gaming business slowly getting bigger. However, expect rapid consolidation globally in the near future

• Mobile games to look like Xbox and PS2 games

• Developers should focus less on game volume and more on quality

• Almost 90% of successful games have beautiful graphics, and main character of game should be visually appealing

Global Game Summary

PC Game MarketBROAD PLATFORM

Where there are just over 100M current generation console owners there are over 1B PCs in use globally.

In many markets like China, the presence of Internet cafés makes online gaming accessible to virtually anyone.

NICHE MARKET

However, while PCs are more prevalent than game consoles, PC gaming has a few limitations.

Including MMO and other digital distribution / pay to play revenue streams, the PC Gaming Alliance pegs the total PC game market at $10.7B.

Sources: Company data, Hudson Square Research

Mobile Phone TrendsBRICKBREAKER

Global market for mobile phone games reached an estimated $3.5B in FY09.

Growth in the industry appears to have fallen short of earlier expectations.

Limitations of handset technology, and a generally restrictive distribution mechanism likely explains the shortfall.

iGAME

Apple is solving two key hurdles to mobile phone gaming: 1) customizing every game for every device; and 2) distribution challenges.

The iPhone/iPod Touch appear to be significantly altering the mobile phone game market.

Still, control mechanics limit the scope of games that can be effectively played. For instance, using tilt to control games tilts the screen away from the player's field of vision.

And, using onscreen virtual buttons that leverage Apple's touch sensitive screen also reduces the available space for depicting the game itself. Sources: Company data, Hudson Square Research

What’s Driving this Growth ?

• Increasing availability of digital content, and input/output devices to take advantage of digital content

• Next Generation game consoles

• Mobile Phone handset upgrades

• The convergence between Hollywood & Silicon Valley

• Broadband penetration - global households up from 82M to 320M, 31.3% CAGR

• Key technology innovation & industry adoption of open standards and exponential reductions in storage, processor & networking costs

Online Games is seeing significant growth.

US$0

US$10,000,000,000

US$20,000,000,000

US$30,000,000,000

US$40,000,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008

Worldwide Online MP and MMP Games Revenue

CAGR = 49%(2000 – 2008)

$31.4 B

MMO Game TrendsWOW DOMINATION

Prior to the introduction of World of Warcraft (WoW), the market for MMO games was limited to a few million players, but since 2004, the market has grown to 17.9M subscribers, with WoW holding a 64% share.

Over the last two years there have been several high profile MMO game launches, though none of those appear to have established a material subscriber base, and two of those, Tabula Rasa, and Hellgate London shut down within a year of launch.

Because of the network effect (as the product base grows, the product becomes more useful to any one individual), we believe WoW is likely to maintain its leadership position for the foreseeable future.

We estimate MMO revenues totaled $1.5B in FY09, up from $1.4B in FY08, although we note that market research firm DFC pegs the total online gaming market at $5.7B.

Sources: Company data, Hudson Square Research

Online Games is growing world-wide• Worldwide - Game-savvy new generation leading the market

• Grow up with interactive entertainment, more comfortable with technology than any generation in history (source: IDSA)

• Over 15 Million people in the US & Europe will pay $1.4B to play online games by YE 2002 (source: Datamation)

• Advertising revenue will be 30 % of the market; bulk of revenue to come from subscriptions

• Asia Pacific• 25%+ of the WW $40B market in 2003 is in Asia Pacific (source: ABN Amro)

• Early adopters due to broadband push in Japan and Asia Pacific• Korea largest single market for MMP play.

• The Chinese say there are more people playing online games in china than Korea has people. But they overlook the fact that the Chinese are playing KOREAN GAMES!!

• Americas• 40% of US homes will have a video game by year end 2002 (source: Carmel Group)• US on line games revenue predictions range from $4.5B to $5B in 2005 (inputs: Forrester,

Accenture)

• Europe• UK considered proving ground for on-line console services; France/ Germany lead total

console market); Germany largest broadband market• 27.5% of the WW $40B market in 2003 is in Europe (source: Forrester)

• 12.7 M European homes will have the technology to play on-line console games by 2005, with 50% expected to subscribe to online games.

Online Games - Industry Snapshot• Revenue vs. expense challenges

• Online games can cost as much as a movie to create

• Online games can earn as much revenue as a movie

• Changing business models

• Industry moving from software development model to media/entertainment model

• Risk & cost is driving fragmentation

• Increasing game complexity

• Higher quality graphics, realism - drives up cost, code complexity

• More complex game play - drives up development & test time

• Collaboration, voice, etc become expected features - creates barriers to entry

• Eroding barriers between what’s real and what’s virtual (in-game pizza?)

• Game device fragmentation

• Multiple major consoles companies: Nintendo, Sony, Microsoft

• PC’s, PDA’s, phones - and hybrid devices - more every day

• Connectivity challenges

• Low bandwidth (phones, some PC’s); vs. broadband required for xBox

• Broadband has widely varying penetration - US vs. Korea

• Piracy, Digital Rights Management

US & Canada Europe Rest of Asia-Pacific• If at all possible, brand your game

• US carriers do not require exclusivity for games so easy to launch the same game with multiple operators

• Gamers are heavily influenced by PS2, X-Box and other console games

• US & Canadian gamers less advanced than those of Asian or European gamers

• Be ready to port your game for both BREW and Java to achieve maximum coverage

• Europeans prefer simple and easy to understand games such as recognizable board games to classic shooting games

• Over 90% of carriers use Java platform, thus distribution of a game easier than it is in other areas

• Language not a big an obstacle as would be expected, as English is tolerable for most countries

• Network games in high demand at European carriers as well as traditional RPG-like ones

• Revenue somewhat correlated to total population of a country, not size of carrier

• Risque content matter not acceptable, as several countries hold devout religious beliefs

• Many operators looking for 3G and networked games as opposed to simple standalone games

• Trend of popular games being more and more similar to console games as well as being gender neutral

Korea Japan China• Koreans are highly advanced gamers, as

evidenced by the huge following of MMORPG games such as Starcraft, Lineage, and Ragnarok. Console games still slow to take off

• Overall, Koreans love cute characters, bright graphics, and humorous game titles

• Men prefer PC-like & MMORPG games, where as females enjoy casual puzzle games. Female gamers make up a good 40% of mobile gamers

• Board games enjoying a revival thanks to so-called ‘board game rooms’. Most network games also board games

• Heavy saturation, most advanced game players, many quality game companies: toughest gaming market in the world

• Although ‘F1’ market have the most handsets in Japan, it’s the ‘M2’ market that actually buys and plays mobile games

• Porting job consists of at least 5 or 6 different phones per carrier. Also SDKs are almost entirely in Japanese only

• Network and 3G games in full swing for all carriers

• Many popular games have look and feel of console games

• China Mobile just recently launched their paid game service, so too early to collect precise information about games

• Shooting games, RPG, and ‘Chinese-style’ games are doing well

• However, most games currently just mobile versions of existing PC & arcade games

• Good ‘people relations’ essential to getting games launched in

• There are many handsets out in the market (~240 million) but few phones can play color games (less than ~10%)

US Game MarketBranded games and music is the driving force for game market in US.

38 Studios: Rhode Island Economic Development Corp.

Top U.S. Interactive Software Publishers and Key Titles

* % of total company U.S. sell-through attributable to top ten brandsSource: Wall Street research

2008 Top U.S. Interactive Entertainment Software Publishers 1

1 Based on U.S. Retail Sales

While the Industry Leaders Command a Large Portion of the Entertainment Software Industry, the Industry is Fragmented and Numerous Small, Privately-Held Players Exist

Publisher Top Brands (U.S. Sales 2008)

38 Studios: Rhode Island Economic Development Corp.

Industry Trends and Drivers

Inhibitors

Broadband penetration to the home, enabling digital distribution and online gaming.

More powerful PCs and laptops at lower prices.

Better graphic processors, more disc space, etc.

Improvement in quality of games, often with social elements (VoIP, text chat, etc.).

Longer console lifecycles.

Growth in adoption of smart phones and other handheld devices that support gaming applications.

Changing demographics: The web-literacy rate among the target audience has been growing constantly.

Current Drivers

Trends and Drivers

Macroeconomic weakness and uncertainty, which impacts consumer spending, advertisements and investment.

Piracy: Illegal file downloading / disks.

Free content available on the Internet, which lowers demand for premium titles.

Platform incompatibility: Some hardware cannot play select software.

High bar to produce sophisticated titles; costly and time-consuming to develop.

38 Studios: Rhode Island Economic Development Corp. 3

U.S. Interactive Entertainment Versus Other Entertainment Sectors

Source: Wall Street research

U.S. Entertainment Sectors

($ in Billions)

The U.S. Interactive Entertainment Sector Has Grown Substantially Since 2003, While Other Entertainment Sectors are Approximately Flat to Slightly Down

38 Studios: Rhode Island Economic Development Corp. 4

Interactive Entertainment Market Demographics

Media Use Over Time (8- to 18-year-olds)

1 19% of time is spent playing computer gamesNotes: Total media exposure is the sum of time spent with all media. Multitasking proportion is the proportion of media time that is spent using more than one medium concurrently. Total media use is the actual numbers out of the day that are spent using media, taking multitasking into account.

55% of the interactive entertainment market is comprised of males aged under 45.

Women now represent 40% of game players and 48% of game buyers.

Within the younger demographics (ages 8 to 18), time spent consuming video and computer games has increased dramatically over the past 10 years. Video games use has increased from 26 minutes a day to 1

hour 13 minutes in a typical day. Video games present 11% of media time allocation.

Media Time Allocation Among 8- to 18-year-olds

Source: IBISWorld, January 2010; Kaiser Family Foundation, January 2010

Interactive Entertainment Market Segmentation by Demographics (2009)

36%Males 18 to 45

29%Females 18 to 45

19%Males under 18

8%Females under 18

2%Females older than 45

6%Males older than 45

Although Interactive Entertainment Consumption is Well Distributed, Time Spent by 8- to 18-year-olds is Growing Dramatically

38 Studios: Rhode Island Economic Development Corp. 5

Interactive Entertainment Software Market by Genre

U.S. Interactive Entertainment Software Market by Genre

2008 U.S. Interactive Entertainment Software Market by Genre

Source: Wall Street research

Growth in the Family / Children Segment has Been Driven by Music Themed Games Such as Rock Band and Guitar Hero

38 Studios: Rhode Island Economic Development Corp. 6

Online PC Gaming in the United States

Source: IDC, March 2010

U.S. Online PC Gaming Subscribers and Purchased Digital Game Downloads

U.S. Online PC Gaming Revenue

The market for online PC gaming continues to advance, with more than 190 million

Americans, or approximately 60% of the population, forecasted to play some kind of

online PC game by 2014.

Core business models include premium monthly subscriptions mainly associated with

virtual worlds and Massively Multiplayer Online Games (“MMOs”), paid digital

downloads, and advertising and micro-transactions (i.e., sub-$5 virtual item

purchases).

Digital game downloads (i.e., purchased full game and add-on downloads) are expected to

grow the fastest, reaching 237 million downloads in 2014, a 36.9% compounded annual growth rate from the 49 million in

2009.

U.S. online PC gaming revenue is expected to reach $9.5 billion in 2014, a CAGR of 22.6%

from 2009.

38 Studios: Rhode Island Economic Development Corp. 7

Rise of MMOs in the United States

U.S. Premium MMO and Casual Subscriptions(in Millions)

U.S. Premium MMO and Casual Subscription Revenue($ in Millions)

Source: IDC, March 2010

CAGR: 28.7

%

CAGR: 20.9%

The number of paid monthly subscriptions (including MMOs and casual gaming

subscriptions) has historically grown at a CAGR of 27% and is projected to grow rapidly

at a CAGR of 29%, from about 18 million in 2010 to nearly 49 million by 2014.

Revenue from MMO and casual subscriptions is projected to double, increasing from $2.0

billion in 2010 to $4.2 billion in 2014.

CAGR: 26.8%

CAGR: 25.8%

Strong Growth in Massively Multiplayer Online Games is Expected to Continue

Women Love Mario!

Wii

Nintendo DSXbox 360

PlayStation 2

PlayStation PortablePlayStation 3

All Other

Nintendo Platforms: 60% Of Revenue

U.S. Total Video Games Dollar ShareFemale As Recipient, 12 Months Ending 3/08

Source: The NPD Group / Consumer Tracking Service

The Music Genre Has Exploded

Source: The NPD Group / Retail Tracking Service

2003 2004 2005 2006 2007

1.6M

2.7M 3.1M

4.7M

17.0M

48.6M103.7M 132.2M

258.5M

1229.6M

Units Dollars

YTD 2008

+264%Units

+375%Dollars

2003 2004 2005 2006 2007

1.6M

2.7M2.9M

2.4M

5.1M

48.6M

103.7M122.4M

101.1M

228.7M

Beyond Guitar Hero and Rock Band

Source: The NPD Group / Retail Tracking Service

Units Dollars

YTD 2008 +112%

Units

+126%Dollars

China Game MarketA young market with internet cafe as main distribution channel.

NO CONSOLE MARKET

Largely for fear of piracy, first party platforms have largely ignored the Chinese game market. Because consoles are often sold at a loss with profits made from software and royalties, the degree of piracy in China makes the console market effectively untenable.

INTERNET / GAME CAFÉ BOOM

With a low rate of PC ownership, the Internet café has become the primary distribution point for games in China.

According to Pearl research, China’s online game market rose 63% Y/Y in CY08 to $2.8B.

But, China is banning foreign investment in online games.

YOUNG MARKET

According to Pearl, 70% of China’s 298 million Internet users are under the age of 30, and 65% of those have played online games.

Sources: Company data, Hudson Square Research

China a Vast but Hard to Tap Market

Online Game Type• MMORPG(Massively Multiplayer online Role Playing Game)

(ex: Chinese Hero. Lineage, Huang Yi Online, World of Warcraft)

• Strategy: Team work strategy (ex: Sango Online)

• Competition: race game or shoot game (ex: CS online)

• Casual game: gambling game or game for fun(ex: porker. Mahjong)

Source: The NPD Group / Consumer Tracking Service

MMORPG

Strategy

Casual game

Competition

MMORPG StrategyCasual game Competition

Casual GameSimple games for the mass

Casual Games Sample

Time Management Games

Hidden Object Games

Matching Games

Casual Games Lessons

• Everyone will buy games on the Internet if they’re designed to appeal to cater to their interests

• Online, games need to be at the right level of difficulty appeal to the intended audience

• Work with portals to achieve a large enough audience to generate enough transaction for profitability

• The success of Xbox Live Arcade shows that hardcore gamers work on consoles too

• The logic of light-weight MMOs:• 6 or 7 figure budgets (initially)• Free to play, upsell with status items (clothing, leaderboards,

furniture, etc.)• Far shorter development times• Modest technical complexity• 10-20% of your audience will pay

Runescape

• Browser-playable, traditional fantasy MMO

• 9 millions active players

• Of which 1 million pay $5/month for premium services

• Plus advertising revenue

• Player acquisition largely by word of mouth

Club Penguin

• Flash minigames aimed at kids held together with a virtual world metaphor

• Free to play

• $6/month premium membership for status items

• Key distribution arrangement with Miniclips

• #1 free game site on the Internet, >40m monthly uniques

• Receives 50% of lifetime revenue from users who join CP via Miniclips

• Sold to Disney for $350m

Mobile Games in JapanAs the most challenging mobile market in the world, Japan got various new trends.

Japan’s main Social Network Service Players

Mixi DeNA(mbga) Gree

Users 18M 15 M 16MFY08 Rev $121M $196M $139MARPU $0.60 $1.09 $1.04

Casual Games in Japan

“Pet Calendar” by Success

“Pencil Puzzler” by Cybird/K-Lab/Sekai Bunsha

Very simple game formats popular in print magazines throughout JapanOne engine gets refreshed with new puzzle content everydayFree download includes a couple of trial puzzles but you can register directly within the appli for more

Blending the lines between pre-installed and downloaded apps

“Shit Panic” by Nekozone

A fun little rumpCatch poop falling from the pink bum at the top of the screenThis game spread virally like wildfire in Japan much like “gnome bowling” on the US ‘net

Brand Extension: TV Game Show

“Jeopardy”, “Wheel of Fortune”by Sony Pictures Digital Entertainment

• “Very very profitable”

• Mobilized web games

• Game rules mimics shows

• Monthly game packs add new answers, puzzles

“Funmail”

• “Text to picture” engine

• Type in text message (eg SMS)

• Send to funmail shortcode with your targets address

• FunMail engine picks images to match your text

• Sends as EMS/MMS/… based on recipient

Multimedia Composition

“Kitty Mail” by Imagineer

• Use SanRio’s “Hello Kitty” to send messages to your friends.

• You can choose what outfit she wears and different compositions

Multimedia Composition

“Petit Appli” by G-Mode

• New games every month to stop unsubscribing

• For $1/month take up to three games

• Using Tetris to bring people in and other games to keep them

Trend: Game Packs - bundling

“Table Game Jam” by G-Mode

• Ranked #3 on docomo’s game pack menu

• Good variety of games including board games and sports like Billiards

• Packet fees are still very high and ICPs don’t get a cut, so little motivation to get users rack up huge packet fee bills.

• Example: a game of othello will cost 50cents per player

• Korea is much more flourishing for multiplayer where the biz model supports CPs

Trend: Multiplayer games

Trend: 3D Games

• Docomo regards the ‘505’ handset as a PlayStation 1

• Currently many japanese game companies are porting hit 3D PS1 titles to mobile

• RidgeRacer was the pack-in game for the PS1. Different makers are bundling games with their handsets.

“Chokobo” by Square for Mitsubishi

“Psychic Force” by Taito

“Aqua Mode” by Moss/Bandai Networks

• Create your own virtual aquarium, bring up fish and then beam exchange them with your friends!

Trend: p2p networking

“Habbo Hotel” by Sulake

• Play on PC

• Pay via Mobile.

• Purchase virtual objects using Premium SMS

• Multiplayer Graphic Chat

Cross Media: link to Web

Social Entertainment Virtual GoodsGames

Social game portal

• Raise pets with your friends

• Non-realtime Battle games with other users

• Paid gifts and other virtual items

• Write blog articles to raise your in-game level

• Your avatar shows up in games and also on your blog and home page

JooJoo: Social Game Portal

• In social games the post-launch service operation is a critical success factor. Pikkle has deep experience in running these services. Japanese users also expect a high-level of customer support. We also know how to build activity in the fan communities around our games.

Operation: events, goods, community, metrics

Hina Matsuri Halloween Christmas Easter eggs

“Girls Day” Japanese fes1val

Limited period virtual goods

Avatar very quickly sold 6,000 units strong, Tamaggo (another item that will hatch date is the avatar of the special treatment.)Focused on pre-notification before the end of the post, a success.

JuJu the virtual currency (Zuzudama) is "omake" comes as a special item. In addition, valuable rare items "Omake 2" as a grant.Payment, DoCoMo mobile phones not, WebMoney, compatible au payments together.

Mysterious creatures, grow together looking for charm, Juju most popular content.Adjust the quantity of items needed to foster quality capture, has grown more popular content on par with avatars.

Consumable items

Gifts with hidden contents! Bundling and special offers

Offer walls and affiliate ads

Monetizing the Social Games

• The mobile phone is a PlayStation!

• Almost identical to the PlayStation version: Devil Car and Easter Eggs!

• Created a new high 500yen price point for premium content

• Blockbuster - the most expensive mobile game yet

• 100,000 downloads sold!

• The SH53 handset sold 500K units, so we achieved 20% penetration

Operation: events, goods, community, metrics

Ridge Racer Taiko No Tatsujin Appli Carrot

One game / PPV$5 / single payment

One game / sub$3 / month

Unlimited games /sub$3 / month

All you can eatPay-Per-View Subscription

Package: Monthly Rental

• Just like a game center, different games serve different purposes. The service needs the right mix…

Game Lifecyle

• Big brand titles like Ridge-Racer act as “acquisition” apps, bringing in new customers in and convincing them to join the service.

• Games like table-games have a lower but constant play factor. These are the “retention” apps that keep people subscribed to the service after they join.

• Evergreen “Killer Apps” like Pac-Man just keep people playing constantly month after month.

• This is just a brief snapshot but of course you need to keep adding new titles to maintain people’s interest in the service…

• Business model affects product development decisions:

• Pay-Per-Download motivates “take the money and run” flash branded apps

• Monthly Subscription motivates long-term playability and better value-for-money.

On mobile, branded games hugely outsell unbranded

• The tiny mobile phone storefront gives just an instant for consumers to decide which game to download

• Well-known games win every time

• Namco is a giant in the Japanese game industry with group consolidated turnover of $1.4BN in 2002

Killer Brands…Namco games have inspired a range of books eagerly taken up by fans.

This banner for Pac-Man had such strong recognition that it won the D2C award for best mobile advert. Even people who did not grow up with Pac-Man immediately recognized it as a fun game.

On the small screen: the brand is King

• Very high traffic mobile site which is a guide to what’s new on i-mode

• A way for the carrier to include more “editorial opinion” than just straight popularity rankings

• Introducing “what’s new”

• Special Feature

• Sites that use new tech or handsets

• Emoji graphics

• Tips and Tricks

• Single Banner ad

• From this “weekly guide” you could foresee Docomo’s stance like “contents magazine”.

• Docomo will never be a CP on their own to enable an even field for the content providers

Docomo Weekly Guide

• Site Ranking creates a fair competitive field

• Different carriers rank their games in different ways – number of subscribers, page accesses, or revenue.

Trend: mobile charts

Docomo games categories:Games 1 > Game pack Mini game total 26 sites RPG Communication Sports Table games simulation

Games 2 > Variety mail games quiz nurturing adventure, novel character general

• Voice ARPU is falling everywhere, but data is rising

• Games create significant data traffic – the second “S” curve

• Our well known brands are helping operators attract a mass-market mobile game audience and launch their data services

Mobile games boost ARPU!

0

2250

4500

6750

9000

1999

2000

2001

2002

2003data ARPUvoice ARPU

Source: Docomo

DoCoMo: Voice ARPU is falling while Data is rising

Source: Namco

Launch of the 503, japan’s first java capable mobile phone helped Namco subscriptions to take off and now similar Java launches are happening all over the world.

Launch of the 503 – first java phone

Andi S. Boedimanandisboediman@gmail.comwww.ideonomics.com