VCON 2010 How Games-as-a-Service and Virtual Items Have Changed the Playbook Forever

March 01, 2010

DFC Intelligence has long articulated how online connectivity would shift games from a pure product model to more of a service-based model where revenue is generated based on continuing consumer usage. Online access allows for more flexible business models including subscriptions, rental, demos (try before you buy), and the ability to buy low cost digital items. Furthermore, online social networks allow companies to leverage the masses to reach millions of users AND distribute products to those users at a low cost. Zynga and its use of Facebook is a great example.

One of the many partners DFC Intelligence has been working with to better understand these complex trends is Live Gamer. Live Gamer provides a commerce solution for online games, social networks and virtual worlds. On March 10, 2010 Live Gamer will be sponsoring VCON, a full-day event within the Game Developers Conference (GDC), to be held at Moscone Center in San Francisco. VCON will explore how games-as-a-service and virtual items have changed the gaming and entertainment playbook forever.

At VCON, DFC Intelligence and Live Gamer will be revealing the results of a major new study into the purchase habits of gamers buying virtual items and other digital content. This study consists of a full historical analysis of actual digital transactions in games from 2002 to 2009 in several countries including the U.S., Korea, Japan, Germany, the Philippines, and Vietnam. This usage data has been combined with a 2010 survey of about 5,000 gamers in North America and Europe.

The results clearly show how building a games as a service business using a virtual item model can result in products that have five-year plus life spans in several regions around the world. This is clearly a new business model that is already proving substantially more profitable than the established packaged goods business.

The virtual item model has been firmly established in markets like Korea for several years. However, in a market like the U.S., the idea of buying digital content is still somewhat new. However in our survey of consumers, 89% of respondents in North America said they had purchased some form of digital content (including music and video, as well as games). More impressive was when we asked the question: Have you ever purchased an in-game good that is not a full game, but consists of a game component such as virtual currency, avatars/characters, items/weapons/vehicles, extra levels, etc? Nearly 63% of respondents in North America answering the question (and 37% of all those surveyed) said yes.

It is also clear that free-to-play games (F2P) are becoming very popular in North America. Furthermore, among a core game audience conversion from free play to paying for virtual goods and/or getting a subscription seems surprisingly high. On average, over 20% of users that said they had tried a free to play game said they had also bought a virtual item or paid for an optional subscription.

The survey revealed many interesting habits of game consumers, and perhaps one of the most surprising items was the high purchase rate of games for the iPhone and iPod Touch. In North America, among users answering the question ” Do you own an iPhone or iPod Touch?” 24% said yes (15% of all respondents). Furthermore, 60% of iPhone/iPod Touch owners indicated that that they had bought a game for the system in the past three months.

Not surprisingly, as DFC forecast in the recent report “The Market for iPhone and iPod Games and Applications,” the iPod Touch appears to be the system of choice for gamers. Among those that said they owned an iPhone or iPod Touch, 77% said they owned an iPod Touch.

Showing the power of popular core brands, the most popular game for iPhone/iPod Touch owners was Call of Duty: World at War: Zombies which a whopping 18% of iPhone/iPod Touch owners in North America said they had purchased. However, classic casual games like Bejeweled, Tetris and Peggle were also popular with around 10-14% of iPhone/iPod Touch owners indicating they had purchased those products.

In March, DFC Intelligence will be issuing a complete report summarizing many of the findings from the survey and the analysis of historical data on microtransactions from Live Gamer. During Live Gamer’s VCON 2010 event at the Game Developers Conference, DFC will be presenting a presentation on findings on the size of the microtransaction business on the afternoon of March 10 at 2:30.

For more detailed findings from our survey please contact DFC Intelligence  (info at dfcint dot com) and be sure to signup to receive our monthly report, the DFC Dossier.

VCON 2010 Speakers

Keynotes:

Dave Perry | CEO & Founder | Gaikai.com
Nanea Reeves | SVP and COO Global Online | EA
John Smedley | President | Sony Online Entertainment

Speaker Line-Up:

Atul Bagga | VP Equity Research | ThinkEquity
Brandon Beck | CEO | Riot Games
Edward Castronova | Assoc. Professor of Telecommunications | Indiana U. Bloomington
Patrick Chung | SK Telecom | Cyworld
M. Lee Clancy Jr. | SVP Product Management and GM of Direct Revenue | IMVU
David Cole | President | DFC Intelligence
Mitch Davis | CEO and Co-founder | Live Gamer
Dennis Fong | CEO | Raptr
Dan Fiden | GM | Playfish
Eric Goldberg | Managing Director | Cross Over Technologies
William Grosso | CTO & SVP Product | Live Gamer
Kai Huang | Founder | Guitar Hero
Daniel James | CEO | Three Rings
Min Kim | VP Marketing | Nexon
Vili Lehdonvirta | Researcher | Helsinki Institute for Information Technology HIIT
Howard Marks | CEO | Acclaim
Jeremy Miller | Senior Analyst | DFC Intelligence
Andrew Schneider | President | Live Gamer
Jordan Weissman | Founder | Smith & Tinker
Susan Wu | CEO | Ohai

VCON 2010 Agenda

Agenda:

10:00am – 10:05am – Opening Remarks: Mitch Davis | CEO | Live Gamer

10:05am – 10:30am – Keynote: David Perry | CEO | Gaikai.com

10:30am – 11:15am – Nanu Nanu!: How to bring social functionality into traditional game design…and actually make it work

Amy Jo Kim | CEO | Shufflebrain
Kai Huang | Founder | Guitar Hero
Dennis Fong | CEO | Raptr
Dan Fiden | GM, San Francisco Studio | Playfish
Mike Verdu | SVP, Games | Zynga

11:15am – 12:00pm – The Virtual Fed: Unleash Your Inner Bernanke with (Little-Known) Virtual Item & Currency Strategies

Eric Goldberg | Managing Director | Crossover Technologies (Moderator)
M. Lee Clancy Jr. | SVP Product Management & GM Direct Revenue | IMVU
Patrick Chung | Managing Director | SK Telecom Ventures
Daniel James | CEO | Three Rings

12:00pm – 12:30pm – What Safeway Can Teach Us: Applying Retail Strategies to Item Merchandising

Presentation by: William Grosso | CTO & SVP Product | Live Gamer

12:30pm – 1:30pm – LUNCH

1:30pm – 2:00pm – Keynote: John Smedley | President | Sony Online Entertainment

2:00pm – 2:30pm – Dev-onomics: Economics 101 for Game Designers

William Grosso | CTO & SVP Product | Live Gamer (Moderator)
Vili Lehdonvirta | Researcher | Helsinki Institute for Information Technology
Ed Castronova | Associate Professor of Telecommunications | Indiana University Bloomington
Eyjolfur Guomundsson | Economist | CCP Games

2:30pm – 3:15pm – The Well-Rounded Roundtable: A conversation on the shifting game industry from different sides of the coin

Tim Chang | Principal | Norwest Venture Partners (Moderator)
Min Kim | VP Marketing | Nexon
Jordan Weissman | Chairman & Chief Product Officer | Smith & Tinker
Niranjan Nagar | Chief of Game Operations | Outspark

3:15pm – 3:40pm – Eating An Elephant One Bite at a Time: How buying in small increments is likely to cause consumer spending to soar

Presentation by:
David Cole | President | DFC Intelligence
Jeremy Miller | Senior Analyst | DFC Intelligence

3:40pm – 4:25pm – “Its not Fair!”, said the T-Rex: How Monetizing Games-as-a-Service will Save you from Extinction

Atul Bagga | VP Equity Research | ThinkEquity (Moderator)
Brandon Beck | CEO | Riot Games
Howard Marks | CEO | Acclaim
Susan Wu | CEO | Ohai
4:25pm – 5:00pm – Keynote: Nanea Reeves | SVP & COO, Online Global | EA



 
 
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