Jumping the divide: Social gaming vs Console gaming

Posted on October 26, 2010

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Lately it seems as though there has been a lot of news going around about the share value of social game producer, Zynga, compared to that of established gaming behemoth, Electronic Arts. Today VentureBeat reported that the makers of Farmville, FishVille and Mafia Wars, among other titles is worth $5.27billion, a hair’s breath over EA’s $5.24 billion value, according to SharesPost. Bear in mind this prediction was made on a secondary stock exchange yet at the same time Zynga was established in 2006 to create Facebook applications, so if the prediction is correct it took them four years to beat EA who’ve been around since 1982.

Image representing FarmVille as depicted in Cr...
Image via CrunchBase

This is either good news or bad news for those in the gaming industry, especially entry level programmers, artists and other game developers. Some of you have probably unfriended people for the sheer fact that they asked you to help harvest their digital crops. And even South Park got in on the Farmville-bashing bandwagon when Kyle (being the unfortunate victim of social media economics by friending an unpopular character) had to beg his “best friend” Stan to show some activity on his Farmville app.

Irregardless of how you feel about social games such as Farmville the companies that make them will manage to trump larger publishers, such as EA, by the simple fact that they are “social”. I will admit a technical bias to them because the barriers to entry for users and developers are so low.

Consider an Adobe Flash game like FishVille, what would the fixed costs and marginal costs be? A few weeks ago the creators and owners of Studio Cypher, another social gaming company started by Indiana University alumni, gave some solid advice on how young developers and gaming enthusiasts could get into the industry without having to pander to the whims of large publishing houses. One of their points was that new developers can cut down on the costs associated with making console and PC games. Besides paying for the initial development of the game (salaries, software, hardware and all) the marginal cost of selling one more copy of your game, via downloads, would be next to nothing if nothing at all, leaving a lot more profit for you.

In terms of the costs to the user there is no need for them to invest in a new console or to update their computer in order to compensate for all the resources that will be directed towards running that game. You don’t buy your iPod, iPhone or iPad just to play Mafia Wars but the fact that you have that affordance is an added advantage that cannot be ignored.

One’s opinion is that this is why social gaming companies like Zynga (though they are an exception for their size compared to the average social game organization) will grow to be more dominant in the new future and beyond. And with smart phones encroaching further into Africa, with the announcement by Tech4Africa that Nigeria will be receiving the iPhone at the beginning of 2011 so we can look forward to seeing the growth of smart phone gaming in the continent.

 

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