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Casual video gaming is now serious business

About 2 million people have helped transform a virtual greasy spoon into a four-star restaurant by becoming Flo–a character in a video game who diligently seats customers and takes orders.

The ponytailed waitress is the central figure in Diner Dash–one of the best-selling casual video games. These online amusements are usually filled with cute cartoon images and can be played on a variety of devices, from personal computers to cell phones.

“We target a large audience: gamers who don’t own a video game console,” says Eric Zimmerman, co-founder of Gamelab, which created Diner Dash in 2004. “We make innovative, small-scale games.”

The company is one of several local firms that have ridden the casual game wave; they have even created a gaming district of sorts in Manhattan. So far, they have had the field to themselves. But some giants have taken note of the games’ popularity and are expected to step into the market soon.

Gamelab, the most established of the New York firms, launched in 2000 and projects sales of $4 million in 2007. The 32-person shop recently moved from its digs in TriBeCa to a 5,000-square-foot office in Chelsea, near the headquarters of rival developer Large Animal Games.

Competitive edge

large animal, which was founded in 2001, has doubled its staff in the past year, to 17, and expects to expand to 35 by 2009. The company has produced more than 50 games, which are distributed by major Web portals and online game sites, including RealArcade.com and iWin.com.

The New York firms say they have a competitive edge because of their development experience and the flow of creative talent from such local schools as Parsons, The New School for Design and New York University’s Tisch School of the Arts, which offers the Interactive Telecommunications Program.

“Art talent is strong here,” says Wade Tinney, co-founder of Large Animal and a Parsons graduate. “There are lots of people who do not want to move to the West Coast.”

Revenues from casual games are expected to rise 68% this year from 2006, to nearly $750 million, and are projected to reach almost $2 billion by 2009, according to research firm IDC.

The games, which include other hot titles like Solitaire, cost relatively little to produce–$50,000 to $250,000–and generally retail for about $20.

“There’s a lot of growth in casual games,” says Michael Gartenberg, an analyst at JupiterResearch. That growth is attributed primarily to improved access to affordable broadband.

The audience has also become more diverse. Forty-four percent of online gamers are female, the vast majority of whom play casual games, according to the Entertainment Software Association.

Hard core

even with more users, the smaller New York City developers face an uncertain future as major players–most recently Electronic Arts in Redwood City, Calif.–enter the gaming market.

The larger companies are trying to move beyond the hard-core gamers–typically males aged 18 to 34 who own a Sony PlayStation or Microsoft Xbox console.

“Companies of their size will shake the casual game space up,” Mr. Tinney says. “It hasn’t been supercompetitive until now.”

As competition intensifies, production costs are likely to rise and distributors are likely to be more selective, analysts say.

In an effort to avoid getting squeezed, Gamelab is developing multiplayer games, while Large Animal is exploring alternative distribution methods, such as pay-as-you-play rather than downloads.

Large Animal also recently launched Playwidgets, which lets players customize games with photos; they can then be shared with friends or added to blogs.

Because advertisers sponsor Playwidgets, Large Animal expects the product to increase revenues. Though the company, which is privately held, declined to disclose financials, it says that it is considering raising venture capital funds.

“It is important that we are well-funded so that we can move quickly and make products on par with or better than those made by companies with deep pockets,” Mr. Tinney says.

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