Are social games poised to topple the console platform?

While Angry Birds are out to destroy evil green pigs, casual games on social media sites and mobile phones may be on track to destroy the billon-dollar blockbusters of console video games.
At the GameOn conference in Toronto two years ago, the spotlights were trained on games like Assassin’s Creed, one of the top selling console games that helped Paris-based Ubisoft Entertainment rake in more than $1.5 billion in sales.

However, itinerant hitmen and special forces commandoes that are mainstays of box-set role-playing games could soon be bumped off by a fast growing gaming segment now characterized by games such as Farmville, a virtual farm where players can raise tomatoes to their heart’s content, and Angry Birds, featuring slingshot-launched birds with a variety of destructive abilities.

The global gaming industry makes over $60 billion annually. Social games, although hugely popular, only account for about 10 per cent of that figure. “But they (social games) are a growing phenomenon that has yet to hit its peak,” according to Marc Jackson, founder and CEO of Seahorn Capital Group, a boutique executive advisory and management consulting firm specializing in interactive entertainment. Jackson was part of a panel that spoke on the topic Building Bricks for Game Financing at the GameOn Finance 2011 conference in Toronto.

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Meanwhile, it was reported on Friday morning that Disney Interactive Studios has closed down its Propaganda Games studio in Vancouver. Seventy people working in the studio founded in 2005 lost their jobs. In October last year, 100 people from the studio were reported to have been layed off after Disney cancelled the development of a game based on the Pirates of the Caribbean movies.

The most recent work of Propaganda was a video game based on Tron: Legacy which didn’t do well in theatres.

Jackson said social games are drawing investors because of the new model’s wide and growing player base and a very low barrier to entry compared to traditional gaming models.

“The issue in the industry is that we have to deal with hitmakers. Investors want to put their money on sure things. But that traditional cost structure is under threat by the new model,” he said.

While publishers and financiers might put in tens of millions of dollars on a new game for Nintendo, Sony and Xbox machines, investors are likely to fork out only hundreds of thousands of dollars for a game that will be played on Facebook or a smartphone, Jackson pointed out. In this scenario, investors can place their bets on more games that they could with the traditional model.

Furthermore, the Seahorn executive said, set-top games appear to have reached their peak. “Consoles won’t disappear in the next five to 10 years, but the growth of their user base is slowing while social game players are just experiencing rapid growth.”

“It makes total sense for start-up game developers to be in the low-cost social space and for traditional companies to adopt this new model,” he said.

Lance Davis, CFO of Slant Six Games, is banking on the longevity of the console format. His Vancouver, B.C.-based company first made a name for itself when it developed SOCOM for Sony’s PlayStation in 2005. Since then, the tactical third-person shooter franchise has been hitting bull’s-eyes for Slant Six.

“Companies like Sony, Microsoft, and Nintendo have put a lot of money behind their consoles and they have a strong following. I don’t think they’ll be ready to abandon the model that soon,” he told
But Slant Six is also eyeing the social gaming arena, Jackson adds. His company is working on a social game, but he declined to give further details pending its release.

At the other end of the spectrum, Blue Fang Games is committed to the social net and mobile structure. Its first Facebook game, Zoo Kingdom was nominated for the Best Online Game Design Award by the Game Developers Choice Online Awards. Zoo Kingdom is free to play here.

“When gaming on Facebook woke up, we saw just how huge it was. And the social space is so much larger and still growing,” said Hank Howie, CEO of Blue Fang.
A few years back, hank said, his company had 75 people working on console game development. But when they realized that the trend was shifting towards social games “we had to do some very painful cuts,” he said.

Blue Fang was down to 22 people mostly specializing in social games when it launched Zoo Kingdom. The company also recently made its Lion’s Pride available for iPad and iPhone users.
“There’s certainly lots of opportunity for independent developers in those areas,” Howie said referring to the social and mobile space.

But shifting gears may not be as easy for larger game outfits. Careen Yap, vice president of acquisition and franchise development for Konami Digital Entertainment, said her company has numerous valuable titles and identifying what platforms to place them are critical.

“Obviously we need to think about how to bring our IP (intellectual property) into the right arena,” she said.

Picking the right platform can be difficult she said. “Not long ago there was talk that PCs were dead. But look at what happened when the social media craze took hold.”

Nestor Arellano is a Senior Writer at Follow him on Twitter, read his blog, and join the IT Business Facebook Page.

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