Do you think it’s possible in the future that some high-profile games could be entirely ad-supported?
Absolutely. In Asia we’re already seeing games that are based around the combination model of digital item sales and advertising. These are large-scale free games that reach literally millions of users. I think that model is going to come to the U.S. relatively quickly. It’ll be a little while before the retail game publishers will try this out, given the high development costs of the really big games. But there’s no doubt that we’re getting there.
I would expect that next year, if not this year, you’ll see big free games, and probably in about three years, you’ll see some of the larger retail publishers testing this as a model.
Highly unlikely. The only way up until now that a publisher’s been able to fund his games has been through retail, unlike the film industry, where you’ve got all the merchandising and the DVD’s and God knows what. With the cost of game development increasing from $10 million up to $30 million, how the hell are publishers going to make their money back? One of the ways they can do it is in-game advertising.
I do not see an ad supported model for free games. I see it on what are called B titles, which are a bit like a B-film: lower budget creations, smaller developers might be doing that kind of thing, but I don’t see the EA’s or the Ubisofts, or the THQ’s of this world basing their business upon ad-supported models. And I wouldn’t recommend it either.
If it sells at 50 dollars retail, after marketing, distribution, development costs, the net revenue of any game for any publisher is about 6-7 dollars. In-game advertising revenue is bringing in … between 1 and 2 dollars right now. Over the next 3-4 years, if the market grows correctly without any media fragmentation, we expect to see that [reach be] about 3-4 dollars per game, an increase of 50% on their net revenue. The in-game advertising revenue can go well towards assisting game publishers and developers in creating smaller games, better games, higher quality games. But I don’t see a scenario whereby those mainstream publishers will be producing blockbuster games for free based upon an ad model.
I don’t see why not, [if] the economics become more and more compelling, [if] we’re putting the right number of ad units and delivering a high quality experience to gamers. Right now we have several titles within the network that are actually free, Anarchy Online being one of them. As we begin to migrate more dollars and more revenues and higher yields to the publishers, I [don’t] think it’s outside the realm of possibility.