Those following the mobile gaming industry paid notice that the Finnish gaming studio Universomo was shut down (in Finnish) by its owner THQ Wireless, which acquired the Finnish firm back in 2007. Rumors started to spread on Tuesday this week and pretty soon THQ confirmed the liquidation of the studio. This is part of a bigger shift in the game industry.
The piece on Universomo is a continuation of bad news for the Finnish game industry, which has suffered from a drop in sales similar to the rest of the globe. The hard time THQ is having is of course related to the traditional Java J2ME mobile gaming market having bad times as well. The high porting costs due to the fragmentation of the Java handset market and inflexible operator-run marketplaces have made it quite impossible to maintain a profitable business for more than a handful of the biggest mobile publishers.
Heard through the grapevine, it seems, however, that the now-ex-Universomo employees are not paralyzed by the outcome, and we might see multiple gaming startups being born, which is definitely a good thing for the industry. Another positive Finnish news are of course Redlynx’s reported success, and that the preorder figures of Remedy’s much expected new Alan Wake are rumored to be rather good.
Nevertheless, the gaming business is changing fast with climbing digital distribution, and browser based web and Facebook games increasing their share of the consumption. Also the much-praised iPhone market has quickly become very much hit-driven, so saturated with new releases that without effective cross-promotion from existing installed base, known brands, or Apple featuring it is hard for developers to make any meaningful revenues.
Another big change is the rise of the Games as Service model, most elegantly demonstrated currently in the social games on Facebook and Myspace. The development is very much according to the rules of agile software and web service development – launch early, launch fast, and iterate the acquisition, retention, and monetization rates based on real user data. Furthermore, as with software business in general, the service business is very, very different to product business.
I am actually somewhat surprised, and worried, that I have not heard about that many Finnish firms developing Facebook games (and likewise for the rest of the Nordic and Baltic countries – if you are a Facebook game developer in any of the countries in the region, let me know!). I hope the lure of the “cool” consoles and devices will not take all the focus. As many game developers are enthusiastic “gamers” themselves, understandably the next generation devices and more “hardcore” games often interest the most. Sometimes the product development decisions are rather emotional and based on intuition as opposed to marketing and business driven, as elaborated in the study done by Pyry Lehdonvirta.
Of course the traditional console game market won’t cease to exist, one can still do business there as well. But the digital games market will explode, and it will not happen on consoles. Facebook is without question the biggest market opportunity available to new game developers at the moment.
More and more people will start playing games online when it’s made dead simple to discover games and start playing them (i.e. “installing” and the actual gameplay). Then, pretty much everybody plays, like the stories about grandmas playing Mafia Wars on Facebook demonstrate.
Also, the monetization will likely follow the growth path. Already the Facebook social gaming market estimated to be several hundreds of millions of dollars in size. And looking at the examples of iTunes (music and games), and for example Spotify, people are willing to also pay for content they value when it is made extremely easy for them to do so.