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Moving with the Latest Pendulum Swing: Right Before Our Eyes, Another Gaming Industry Transformation

April 4, 2014 — by Mariia Lototska


Nick ThomasNick Thomas, CEO and Co-Founder of SomaTone, Inc., is a video games industry veteran and thought leader with 10+ years of proven executive leadership results with a focus on developing strategic industry partnerships, innovating creative outsourcing solutions and managing talented teams that contribute to more than 100 games annually from nearly all major publishers and developers, as well as independent developers. He discusses the transformation occurring in the industry in this article.

It’s happening again, right before our eyes; we’re in the midst of yet another era of redefinition and reinvention in the ever-evolving gaming industry. While the landscape is changing dramatically, history shows us that something new and good will invariably emerge. After all, (and despite many attempts), you cannot own or control creativity, or predict the future of gaming.

We at SomaTone are ten years deep as a leading provider of creative content for mobile, social, and casual games, working at the forefront of gaming over the last decade’s explosive growth. Having produced audio content on hundreds of games for many of the top publishers as well as for the indies, our vantage point gives us a sweeping perspective across the landscape of the games industry– from AAA console games, to MMO’s, to Social/Mobile, to Casual, and beyond.

We’re seeing the cyclical pendulum swing of innovation, homogenization, and reinvention continuing to keep the publishers of gaming content guessing as the smaller, faster, and more creative start-ups are yet again redefining the gaming industry.

Creative comrades in the face of an ever-changing industry
Creative comrades in the face of an ever-changing industry, SomaTone’s Nick Thomas with Tap4Fun CEO Kevin Yang at GDC 2014

The Ripple Effects of Converting Players into Users in Mobile Gaming

Casual games continue to go through a familiar pattern, and we are currently emerging from a decline of the smaller “Mom and Pop” game developers, who have been squeezed out by the realities of mobile publishing and the dominance of Free-to-Play (F2P) games. This economic model has sought to systematically convert game “users” into a currency that has been hoarded, sold, and traded in an effort to control access to “game players.”

As a consequence, the industry was stratified into large game publishers–who controlled the access to “users” and thus the majority of the market–and new start-ups and Indies, who were either being gobbled up by these same publishers, or self-publishing and hoping for a Flappy Bird-style anomalous hit.

The middle-class of game development–studios of 20-50 working on games that were sold via standard pay-to-play standards with supportive publishing partners–has suffered. With limited access to users, who are carefully controlled by game publishers, it was nearly impossible for mid-sized independent game developers to make and sell their own games and support their teams. The result was a polarized and stratified industry in which a small fraction of game publishers own the vast majority of market, making it extremely difficult for small game developers to independently make and sell their games without yielding to the requirements of the publishers, who will own the IP, take the lion’s share of the revenue, with no clear obligation to bring “users” to their game.

“Every time the industry has homogenized itself by the few having control of the many, a new era of gaming has invented itself.”

Now while all publisher models attempt to control access and distribution to customers (this is in fact what publishers are supposed to do), there is a dramatic new variable at play, with the F2P economy. This “race to the bottom” business model, which has led to disruptive game-play mechanics designed to extract fees from “users”, in their efforts to enjoy a fully featured game-play experience and be “players”, is highly dependent on publishers’ access to users, and their ability to monetize these users. Those “old school” game designers, who sought to develop great games, that offered fully featured immersive game-play experiences at the outrageously expensive price of $.99, never stood a chance against “free” games, which are developed by game publishers and promoted to their “users”, requiring players to pay for the features included in a 1-dollar competing title.

This Latest Cycle Will Induce a Painful Rebirth

This cycle of innovation, homogenization and reinvention is not a new trend. We have seen this same cycle in gaming in the past, with Big Fish Games‘ consolidation of the PC Downloadable market and subsequently, Zynga‘s dominance of browser-based Facebook, and in both cases, there was a painful rebirth of the industry. Those fastest to adapt to the new ecosystems survived, and those who could not evolve, died away.

However, it is also true that every time the industry has homogenized itself by the few having control of the many, a new era of gaming has invented itself. Just after Big Fish unequivocally took control of PC downloadable, Facebook came along and completely disrupted their reign. A few short years later, the kings of Facebook (Zynga, Playdom, Wooga) have been dethroned, only to be replaced by the current leaders of the mobile industry. With each successive attempt to control and “own” the industry, new life has begun.

“You cannot control game players or ‘own’ creativity. A new era is currently percolating under the thin crust of the mobile/casual games ecosystem, and by my observations, we are onto a new dawn of gaming.”

This reminds me of Jurassic Park. Life finds a way. In this case, creativity finds a way, and despite the attempts of the current reign of publishers to own and control this inherently creative marketplace, they are discovering, just as all others before them have, that you cannot control game players or “own” creativity.

A new era is currently percolating under the thin crust of the mobile/casual games ecosystem, and by my observations, we are onto a new dawn of gaming. One in which, and Kabam, or perhaps even the Apple Store and Google Play store, will soon find themselves trying to catch up, and wondering what happened as the world they felt so sure of has shifted beneath their feet.

“Mom and Pop” developers, take heart. The pendulum swings both ways. And from our vantage point, which reaches from the largest publishers to the smallest indies, the playing field is leveling.

2014 will be a year of reorganization and consolidation, as the bubble of Mobile/Social games refocuses its efforts, and quality will retake its place as the leading factor in a company’s success, rather than simply a publisher’s control of access to users. And developing innovative and high-quality games has always been what the “Mom and Pop” game studios have done best and are continuing to do.

Look forward to the next installment of this series next month, a case study on Zynga’s Puzzle Charms!


Video Coverage

Charlie Moseley on the Rewards and Pitfalls of Game Development in the Chinese Market

January 3, 2013 — by Catherine Quinton


Charlie Moseley is the Creative Director of Tap4Fun, an iOS game developer based in Chengdu, China. Their specialty is massively multiplayer online (MMO) strategy games, with four games currently available and plans to release another this year. Moseley has this to say about his experiences and insights in the game development industry in China.

I’ve been in China for seven years. It’s a great place to be for this industry. For the game development industry, I think China is a really dynamic, exciting place for several reasons. One is because of the emerging Chinese domestic market; this is the largest mobile app market on earth and it’s growing at an incredible pace. More and more developers around the world want to develop products that target the Chinese domestic audience, and, as well, you see developers based inside China that are better able to compete with competitors in places like San Francisco or Tokyo or Sol. There are things that are possible inside China now that definitely weren’t possible even just a few years ago. The Chinese game development industry has grown in every way and in every sense. In terms of number of users, it’s grown a lot. In terms of the variety and demographics of those users, it’s grown a lot. But it’s also grown in terms of revenue and potential revenue and business opportunities and also different types of games. There are more types of games that are popular now than ever before.

Attention is a must

There are things that are possible inside China now that definitely weren’t possible even just a few years ago.

It is difficult for independent developers or for new developers to get a foothold in the market because the market is so flooded with different games. I think the real currency in this market is attention, and that is difficult to get if you don’t have a history of releasing popular hit games. You have to have an audience to rely on. Without that it is much more difficult; you really have to work hard on launching your first game and capturing people’s attention and making your mark. That can be challenging, but there are definitely greater rewards for being a game developer than ever before.

Mobile & Tablet dominate

You have to embrace the dynamics of the new market. Developing games now is really not much like developing games ten or fifteen years ago. The primary platform for game development has changed to mobile devices. And with that platform change there are a lot of changes in the game mechanics and concepts. So the games are developed differently, they’re played differently, the usage scenarios are totally different, the demographic is different. Gaming has opened up to people that it was never open to before. Now, with games like Angry Birds, you have everyone from three-year-olds to grandmothers playing. So the new market is open and it’s accessible to everyone. You need to embrace these new features of the market to really see success in this era.

Going Local

One of the advantages we have at Tap4Fun is direct access to the increasingly valuable Chinese domestic market. As the Chinese market grows and becomes more valuable, it’s very easy and straightforward for us to effectively target them because ours is essentially a Chinese company that’s filled with mostly Chinese people. We understand how this market works, and that understanding is very valuable.

Our second advantage is that we have access to high quality, low cost development resources in the way of engineers and artists and employees for our company. The city we’re located in has a well-known technology university with thousands of graduates coming out of the university every year looking for work. A lot of them are interested in the game industry specifically, and in that situation, our company would be a great place for them to work. The result is we have high quality resources at a low cost. Right now we have over a hundred employees. This kind of operation simply would not scale in the same way if we were in the United States, for example, just because of all the obstacles to expanding a team to that size. The cost would be far too great. In China, we have a lot of freedom in that regard and, with that, more flexibility.

This kind of operation simply would not scale in the same way if we were in the United States, for example, just because of all the obstacles to expanding a team to that size.

A third advantage is that the startup capital required to get off the ground is less in China, and that gives us a more freedom over what kind of games we make and what we include in the games. It allows us to take a few more risks. One of the games we’re developing now is essentially an experiment. It’s a cool idea that we wanted to do, we weren’t really sure if it was going to work, but the idea is to take a risk and maybe it’ll pay off big. Maybe it won’t, but we’re in the position now where we have a little bit more freedom to do things like that.

China is very different from any other markets. The top one hundred apps in the app store are dominated by apps which are developed by people in China. That’s because developers have an understanding of the unique features of that market. A lot of our apps are directed at Chinese players in several different ways. One of the ways is a lot of historical references to different periods in China’s history. Games that have that setting in China are always popular. Obviously your app is not going to be very successful inside China unless it’s localized into Chinese, and that is a difficult process unless you’re working with local Chinese speakers. But that is a requisite feature of a successful app inside China. So we have six or so different localizations of each of our games in different languages.

I think the biggest pitfall is committing a lot of resources and time into developing a project without a deep understanding of what the market really wants and then releasing an app and having it flop. That can be devastating. If you’re a foreign developer and you seriously want to target the Chinese market, you need to cooperate with Chinese people in some capacity; otherwise it’s going to be extremely difficult for you to understand the intricacies of the market and of the Chinese people and the kind of games they play. Their context for gaming is totally different from ours. Developers in China adopted the free to play business model first and that has been the prevalent business model inside China. Most games are free-to-play with in-app purchases, in-app currency, things like that. The Chinese market has a totally different context to how games work. Without that understanding, it’s difficult for foreign developers to crack the market.

If you’re going to cooperate with the Chinese people, that means being overseas and cooperating with Chinese people that are based overseas or cooperating with people inside mainland China. Otherwise, you can get yourself into risky territory pretty quickly. There are a lot of organizations that do outsourcing in China, but it’s difficult to work with them. Maybe they won’t totally understand exactly what you want, or they could be bad communicators. There are definitely a lot of risks to cooperating with an organization inside China. The language barrier is significant, the cultural barrier is significant, and even if you can communicate exactly what you want to say linguistically, you have to realize that it could be considered in a different context because Chinese come from a very different culture that has a different system of values. It’s quite the process. But I think that more and more developers will realize it’s worth it to figure these things out.

While working on updates of their current games, Tap4Fun is also working on a few games — two of which will be released in the fourth quarter this year, one of which will release very soon, and there are some other games they’re working on that will be released next year.