Indie Gamers Hit the Right Buttons

Startup design outfits are staking their claim to a small-but-growing market niche -- so-called "casual games"

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When Andy Schatz left an executive-level job at game maker TKO Software in December, 2004, to start his own gaming studio, he figured he would have to stretch his $100,000 savings for as long as four years before his new business caught on. His math was way off. Schatz's Pocketwatch Games just sold the rights to its first title, an animal-adventure game called Wildlife Tycoon: Venture Africa, to distributor MumboJumbo after a three-way bidding war. Schatz is hoping that MumboJumbo regulars including Wal-Mart (WMT) and Best Buy (BBY) will opt to carry Tycoon as early as next year.

Schatz is now looking for a full-time programmer and an artist to develop more animal-themed titles that would build on the success of Wildlife Tycoon, where players earn jewels by increasing the population size of elephant herds, flamingo stands, and crocodile congregations (see accompanying slide show "Big Fun with Small Developers"). And that's just the opening act of his grand gaming plan. "We want to be the Discovery Channel for games," Schatz says.

His timing couldn't be better. Independent game developers such as Pocketwatch now have a better chance of success in the cutthroat industry than they've had in years. For that they can thank a boom in what's known as casual gaming.


  Until recently, the market for electronic games was mainly young, male, and diehard. These days, a bigger, more age-diverse group that increasingly includes and women is joining in the fun, spending anywhere from a few minutes a day to long stretches on online poker or games such as Bejewelled, Tetris, and The Sims.

As more people sign up for high-speed Internet access (almost 60% of the U.S. population now has access to broadband), the gaming experience -- both for games playable online, such as Bejewelled, and CD- or DVD-ROM titles with an online component, like The Sims -- has become more appealing. Casual gamers now make up about 1% of the $20.5 billion game-software market. By 2010, that figure may surge to $2.1 billion, or 5% of sales, says David Cole, an analyst at gaming consultant DFC Intelligence.

Little wonder that companies ranging from RealNetworks (RNWK) to Time Warner (TWX), which just launched a Web-based games channel called GameTap, are devoting more attention to casual gamers (see BW, 10/3/05, "Making a Play For All Those Non-Players").


  Many indie game developers are jumping into casual gaming partly because the barriers to entry are low. It costs a lot less to come up with a casual game than the graphics-heavy blockbusters developed by giants such as Electronic Arts (ERTS) and Take Two (TTWO).

Casual games are typically played on PCs or mobile phones and involve less complicated features and graphics. And costs can run as low as the mere thousands of dollars -- vs. $20 million to $100 million for your full-blown, hardcore video game that can take dozens of developers years to design. The price tag for Wildlife Tycoon: about $6,000.

Smaller developers are also benefiting, because big-name publishers don't yet pose much of a competitive threat to their niche. Casual games cost anywhere from $2 to $20 -- or else they're offered free, with publishers making money through ads that run alongside the games. Those markets "are still small potatoes for most of the big guys" accustomed to selling a million copies of a game that costs $50, says DFC's Cole.

What's more, casual games often venture into specialized areas of interest outside the core competency of traditional publishers, which tend to focus on sports and shoot-'em-up storylines.


  "As we see greater diversification of genres, it's less practical to be working [on niche projects in-house] than working with different teams that ended up in this genre to begin with," says Patrick Kelly, vice-president of studios at Activision Value Publishing, an Activision subsidiary that puts out casual games. That's why Activision Value has bought all of its dozen or so casual titles, such as bike-building game American Chopper, from indie developers. The company plans to increase its casual-game portfolio by 15% to 20% a year.

Console makers Microsoft (MSFT), Sony (SNE) and Nintendo are starting to give independent developers a helping hand rather than a cold shoulder, in hopes of widening their markets. After all, some casual games have proven to be surprising hits. Nintendo, for one, has found that titles such as Nintendogs, which was released in August and lets players raise a virtual puppy, have boosted its Nintendo DS sales and put the gadget into the hands of people who wouldn't otherwise have bought a portable gaming console.

Plus, some console makers are looking for a broader range of games than those offered by the larger publishers. Many publishers have become afflicted by "sequelitis," says Greg Canessa, a group manager at Microsoft's Xbox division. They create a hit, then milk it by releasing three or four sequels that are predictable and less creative.

"Some of the most innovative game play will come from the independent-developer community," predicts Canessa. "We view the future of gaming as driven by independent game developers," adds Canessa (see BW Online, 10/14/05, "Microsoft Seeds the Indie-Game Ecosystem").


  In fact, independent developers may be key to helping Microsoft grab share from No. 1 console maker, Sony. Microsoft recently sponsored the IndieGamesCon 2005 conference in Eugene, Ore., which attracted 300 indie developers from around the country. There, in an old banquet hall a block away from an abandoned car wash, the mostly male attendees crowded three rows deep to try each other's games, including Marble Blast Ultra, from conference organizer and indie label GarageGames.

Microsoft will distribute Marble Blast Ultra, which lets a player navigate a ball through a slew of 3-D structures and slides to score points, as an online offering for its Xbox 360 console, which will roll out Nov. 22. Marble Blast is the first indie game to be available through the Xbox 360 Live Arcade, a feature of the new console that lets users download games from the Web.

In the next year, Microsoft hopes to make it easier for indie developers to create and sell games through Xbox 360 Live, a service allowing gamers to download new game levels and to play against each other online, as well as MSN Messenger and possibly through Microsoft-powered mobile phones, says Canessa.


  Meantime, independent game makers eager to get distribution for their titles are relying on a relatively new class of middlemen, or agents, who say they can take an indie from obscurity to fame. Agent Joe Lieberman, based in Corvallis, Ore., says he can help developers find good artists, offer advice on improving games, or get a title reviewed by specialized gaming magazines.

Lieberman and other agents also try to push their clients' titles to content aggregators and distributors, which sell games online, at retail stores, or market to larger publishers. It's a tricky business, Lieberman says. "If I screw up, that was that guy's second mortgage," he notes. Still, his fees are pretty low, running around $100 for a press release and $30 to $40 an hour in consulting.

With demand skyrocketing, many indies have little difficulty selling games to publishers directly. Eric Hartman, a Web-design student in Arlington, Va., recently spent three months developing a game in which Lego-sized players build structures out of Lego pieces on the floor of their bedroom. He then contacted Lego, the toy company, met with its reps, and now the company wants to buy his game, Hartman says. He declined to elaborate on the pending deal.


  Other developers believe they can recoup costs by selling games over the Web. That's Robert Clegg's plan. Clegg is chief product officer at indie outfit Tabula Digita, which will soon debut Dimenxian, its first algebra title, online. In Dimenxian, players use coordinates to hunt and measure various alien creatures. It's aimed at teachers and parents.

Mark Frohnmayer, president of GarageGames, summed it up for conference attendees this way: "It's definitely possible for independent developers to make a living from making games," he said. "If you can quit your day job, now is the time." That's just what Andy Schatz did. And look where he is now.

Before it's here, it's on the Bloomberg Terminal.