2004 Web and Downloadable Games White Paper 

IGDA Online Games SIG 

One indicator that broadband is good for games is a recent study from ComScore/OPA

9

 which shows that 

66.7% of users purchasing content related to Sports, Games and Entertainment online have broadband   

the highest of any of the categories of content surveyed. 

3. 

Market Saturation 

A year ago many small developers saw the success of games like 

Bejeweled

 and believed they had 

found an easy path to fame and fortune. Today the market is flooded with games, many of them hastily 

put together with very little if any originality. This has resulted in a high level of competition for available 

launches on major game sites. Many sites are launching at least one new game every week and 

sometimes two. Not only does this make for a crowded market but it also limits the amount of promotion 

given to each new title. If a game is not a hit in its first week, it is likely to be removed from the 

promotional rotation and relegated to an alphabetized list of games within its genre. Developers react by 

quickly putting together another game and the cycle starts again, exacerbating the problem. 

For the consumer, this is a blessing and a curse. There are dozens of games to choose from but few that 

are worth purchasing. In addition, from a consumer's perspective there is less incentive to purchase a 

game when your favorite site already has more than you can possibly play for free, with additional new 

games coming every week. With most games allowing an hour of free play, players are guaranteed at 

least a few hours per week of free game play, and if they want more there are plenty of other sites to visit. 

4. 

Will Downloadable Games Grow Up? 

While in the console and PC game business it is common to align with a well known brand, downloadable 

games are typically produced by very small companies and few of them are attached to major intellectual 

property. As the downloadable market matures, it is likely that the branding pattern will begin to emerge 

as a natural way for developers and publishers to break through the marketing clutter to get players to try 

their game. As more original yet unbranded content is produced, using recognizable intellectual property 

as a differentiator could become a viable strategy. 

The downside to this is the further division of royalties from sales. Downloadable games are lucrative from 

a revenue perspective precisely because they are so much  cleaner  in their chain of royalties and 

commissions. A retail game has a Retailer, Distributor, Publisher, Developer and Licensor typically all 

vying for a piece of the game revenue. Downloadable game revenue, on the other hand, is usually just 

split between the transaction provider, the publisher and the developer   with the developer and the 

publisher usually splitting the post transaction revenue 50/50. Once a brand enters the picture, the royalty 

will need to be paid from somewhere. It is unlikely that the publisher will want the burden, and as a result 

this will usually cut into the developer's revenue. 

The other part of this question is at what point will the larger game producers such as Activision, and THQ 

take downloadable and online games seriously enough to enter the market. All of these companies have 

the brands and resources to make a major play in the space. Some of them today are selling their PC box 

games direct to the consumer via a download. Similar to the casual online gaming space, the player has 

to download the entire game and then receives a free trial period. After the trial period is over, players are 

persuaded to purchase the game. The two main differences between the PC box games and the web and 

downloadable games are that the PC box games range in size from 50 650MB and usually do not have a 

free online web version. Thus this offering is limited to only broadband users.  

5. 

Will casual skill based gaming move from a niche audience to mainstream? 

Over the last few years, every major portal and online gaming site has added skill based gaming 

tournaments.  By offering skill based game tournaments on their site, portals and gaming sites are able to 

offer their user base a desired platform in which to compete, while at the same time generating 

incremental revenue. The question outstanding is how many casual web users will pay to compete 

against other casual web users in games of skill.  

Security remains the primary concern of most online consumers. It is because of this concern that not all 

online game players are willing to participate in skill based gaming tournaments.  Concerned about 

9

 http://www.online publishers.org/opa_paid_content_demo_09192003.pdf 

Page 20 of 93