Why would sophisticated investors listen to advice from a 12-year-old? Just ask Tim McAdam.
McAdam is general partner of
McAdam, who sits on the Fluid board, cites a handful of large gaming companies that are also moving into massive multiplayer online games, virtual worlds shared by an unlimited number of gamers simultaneously. As a result, he was guarded about details of Fluid’s new product, which is slated for release in May and which is rumored to involve a “green” environmental theme.
What is clear is the sales potential. The computer and video game industry reached new revenue highs in 2007, topping $9.5 billion, according to industry trade group Entertainment Software Association. Sales overall grew by 28% last year. In the “family entertainment” genre, growth hit 110 percent.
The formation of Fluid dates back to the late 1990s when founder Scott Mathews was a contract developer creating characters based on such properties as the Harry Potter, Disney and Mattel franchises. He was getting paid on a per-title basis, McAdam says.
Indeed, the problem for online game developer is getting paid. The computer game model is simple, says Hany Nada, managing partner of
“Players spend $5 to $60 for a game running directly on a computer, game console or handheld device. But it’s a different ballgame when players access games on a website,” Nada says.
Currently, many online models tend toward subscription-based payments, in which developers receive a percentage of the sales. But there are problems in this scheme, Nada points out, including limited upside for the designers of the most popular games.
McAdams, however, sees the near-term shifting toward the Asian model of micropayments.
“We’ve yet to see it take off here, but in Korea and other Asian nations, that is the way gaming is monetized,” McAdam says. “Everything is subscription-based. In the next 10 years we’re going to see more free games and microtransaction payments.”
Nada argues that “pay by session” is not yet supported by existing technology, but the concept is viable. He envisions online game publishers will soon allow consumers to buy tokens for a set price. Then, much like going to a physical video arcade, the players will redeem the tokens to play various online games.
Online publishers, such as Fluid, can charge more tokens for the popular titles, and offer discount for new games, using the tokens as marketing tools.
Meanwhile, advertising revenue models are catching the attention of investors, too. When McAdam refers to free games, the charges paid by advertisers can produce quantifiable results. Gaming platforms such as Glu Mobile and PopCap have embraced the advertising model.
McAdam says that the direction of new gaming platforms is headed is into virtual worlds, environments where players are engaged with each other through common missions. He also says that Fluid’s games will feature engaging educational elements.
“If you look at (Disney’s Club Penguin title), there’s really no moral content or purpose,” he says. “With Fluid, there is a moral underpinning and fabric that runs on top of what we’re doing. It comes to education content and doing good.”