SAN FRANCISCO – Mon Mar 5: The $64 billion global video games industry, shaken up by the likes of Zynga in recent years, may be on the verge of another identity crisis.
Hardware and software sales for consoles keep dropping, market-leading Activision Blizzard, which makes the “Call of Duty” and “World of Warcraft” mega franchises laid off 8 percent of its staff in February, and a proliferation of games on app stores is making it costlier to stand. So, an estimated 20,000 video game industry types, executives and game designers will descend on this week’s Game Developers Conference in San Francisco looking for answers.
The interactive entertainment industry has been trying to cope with the rapid growth of online and mobile gaming for a few years, but now even the companies making games in these burgeoning areas are finding it harder to turn a profit.
Also, young companies that are not as big as Zynga or Electronic Arts are finding it difficult to stand out in increasingly crowded app stores on mobile devices without spending heavily on ads, executives say.
“The number of apps is growing exponentially and with that, costs of user acquisition is going up. If you are not a company with a series of franchises like us, it becomes a lot tougher,” said Ben Liu, the chief operating officer of PocketGems, the makers of hit casual mobile games “Tap Zoo” and “Tap Pet Hotel.”
The increasing marketing burden is driving some fledgling companies into the arms of deeper-pocketed partners.
Philip Holt, CEO of Row Sham Bow, said it has 5,000 daily active users but it was getting expensive to attract players to its Facebook strategy game “Woodland Heroes,” where raccoons fight to make the forest safe from an evil bear.
The Orlando-Fla.-based company said last week it had signed a revenue-sharing agreement with Zynga, where the gaming giant promotes the animal game on Facebook and on its own new platform, Zynga.com.
“Working with Zynga was better than going to spend money on Facebook ads to acquire users and spending per click. For an independent developer without a lot of cash, you end up with a significant marketing spend,” Holt said.