It's a time of big changes for Bigpoint. The company has ceased all internal mobile development (cutting jobs in the process), said goodbye to some senior members to staff, and hello to some new ones. Proof that even when your online games are racking up 10 million registered users, you can't afford to be complacent.
GamesIndustry International spoke to CEO Heiko Hubertz to find out why they were making the changes, and how the free-to-play landscape has changed, and will continue to change, over the coming year.
Q: This seems to be a time of transition for Bigpoint, what are the goals of the recent changes?
Heiko Hubertz: I think the main change, and the one everyone is always asking me about, is the mobile change, and why did we step out of mobile? So first of all that is not really right, it's just that we don't want to develop mobile games internally anymore. We still believe mobile has a bright future but on the other side we have online gaming, free-to-play, browser gaming, social gaming, this is at the moment the market where we generate revenues, and this is what we want to focus our resources on.
If you take a look at the newest research reports you see that the mobile market is the fastest growing market in the mobile space, but by far behind, in terms of revenues, the online gaming market. So we just wanted to focus our resources on that.
It doesn't mean we're not entering the mobile space, we just look at mobile studios who are developing games looking for fundraising, studios that might have already finished development and are just looking for a marketing partner, and those are the kind of partnerships we want to do in the future.
But internally we need all resources, in terms of development, game design, producing and so on, on the online gaming. So for that reason part of this department into the online gaming, browser gaming area and unfortunately all the real pure mobile developers we had to let go a couple of weeks ago.
Q: And on the online gaming side?
Heiko Hubertz: On the other side we see there is a big change in the online gaming market going on. This market is still growing very very very fast, but on the other side there are much more competitors in the market. Much more companies that are doing online gaming, browser gaming, free-to-play and so on. So we think we're going into a situation that we would call consolidation, and this will be a very rough time over the next 12 to 18 months. We saw this coming last year, and for that reason we started to change the company, to reorganise the company, to bring very senior people on board who know exactly what to do if a market starts to consolidate. And so we brought senior management on board and structured the company to be prepared to be different and unique than all the other gaming companies.
We just don't want to develop browser games and then hope that one of these games will be successful, we want to build a very strong distribution power in our company. For that reason we opened offices in different countries, bringing senior people on board, doing better CRM, marketing, and all this kind of stuff.
Q: So it's all about being prepared for change?
Heiko Hubertz: The market is already in the process of changing, it's not just about what's going to happen. One example I give very often is just what you have to pay per user. So when you acquire a user for your online game you pay now around triple what you paid around 8 or 9 months ago. The beginning of the year to today has tripled, and there was already a strong increase last year. So if you compare what you pay today for a user with what you paid two years ago, it is eight or nine times more, so your entire margin is going away. You have to find a way to think about user lifetime, product lifetime, user acquisition, CRM, so all these things you never thought about in the past in the gaming industry.
So we've brought experts on board who know how to deal with that, from other completely different industries, but who know how to extend lifetime, to increase lifetime value, to have good customer relationship management and so on.
Q: And are those user acquisition costs going up purely because of the amount of competition?
Heiko Hubertz: I think it's mainly the competition. So much venture capital and private equity capital went into the market that traditional publishers and developers, Electronic Arts, Ubisoft, Sony and so on, they're all entering the free-to-play space. Two years ago it was just enough that the game was for free, it's free-to-play or its browser based, you don't have to download anything, that was enough for the user to say 'hey, I'll give it a chance.' But now the user says 'OK, there's one game, I'll give it a chance,' but but if he doesn't like it he's changing and trying a different game. He has so choices, and that's the reason I mentioned user lifetime, that he doesn't play your game for months anymore, maybe he just plays for a couple of weeks and then moves over to the next one.
And that's something you really have to deal with. You have to manage your product strategy, your product lifecyle that you know exactly when you need to start to churn maybe present them with a different game, to a second game and then to a thirds game and so on and so on. It's a completely different management of users and products than ever before in the gaming industry. It's quite interesting but it's also challenging to know exactly how to do that. In other industries it is quite normal and it happens very often, but for gaming it is really new.
Q: Battlestar now has 10 million registered users, I imagine trying to retain and manage those players is a challenge in itself?
Heiko Hubertz: It's not about making everyone happy, it's more about knowing what your user wants. You have to know what the user wants exactly in the game, does he really still like to play the game? Or did he achieve everything already? Does he just not want a Battlestar Galactica game anymore? Now he wants he play a car racing game. Then you have to open the right game at the right time. So it's more you have to know exactly, in this game, Battlestar Galactica to update this feature, or to fix a bug, or maybe this user wants to churn anyway, it doesn't matter what you do in the game and now you have to offer him another game. Or the third one is maybe the game is just to expensive for him now, so you have to offer him a discount or whatever. You really have to think about different user clusters and what you have to offer them.
Q: Does working with big franchises like Battlestar Galactica and Game Of Thrones make any of those things easier?
Heiko Hubertz: In general I'm a really big fan of franchises, that's why we do that, because it helps us in different ways. And the most important of those is again, the user acquisition. If you are a Battlestar Galactica fan, you have seen the TV show, you know the characters, you know the story, you know who is your opponent, that helps us a lot to bring users into the game because they know exactly what they should do. If you don't have a franchise people have to understand 'what is the team I want to join, what's the story?' And many people will just churn, very often. As I mentioned in free-to-play games people try the game, and if they don't understand it after a couple of minutes they churn. And if you have a franchise behind that, they are big fans, and they don't churn after a couple of minutes even if they maybe don't understand the game. They like the TV show that much they give it a chance and they try the game a little bit longer. And then they get in deeper, start to play, and hopefully go on to pay in the game. It's mainly about getting the right users for the game.
Battlestar Galactica was the first big success we had, Game Of Thrones is the other big IP we're going to launch next year, and there's a huge fanbase. Not just from the TV show but also from the books. So that's mainly why we do franchises, because the user has a chance to play a game where he knows the story and the characters and hopefully he loves them.
Q: What is it about mobile that makes it such a difficult market?
Heiko Hubertz: I think the biggest issue that we all have is that you don't have control of the user flow. You don't have control of the user in general. In the past you had retailers, you just needed the right place on the shelves, or something like that. You need to do the right marketing and then everyone knows there's a big brand. And in the online gaming space was even easier, you just book your online advertising and you get in contact with the users. On mobile that's different. You have the app stores who control where you are ranked, how you get found, they control the monetisation, they control everything. Even if you're a publisher you're not really a publisher, you're just a developer . You can buy users but it's so expensive and the entire monetisation model doesn't really work. If you have to spend $1, $2, whatever to get an install of your app but you offer your app for 99 cents, you never will get your money back.
So in app purchasing was the first right step to offer, because with that you can increase lifetime value and so on. But now the user has so many options in the app store, he maybe doesn't play your game because there's in app purchasing, or it's too expensive. There's maybe another game that is also quite good and completely for free, so he plays that game. So I think it's very tricky here, I think you need a combination of the hardware manufacturers, the app store providers and the app developers to altogether find a solution to make this market a really profitable market. because at the moment I don't think can really become a sustainable business for the gaming industry.
You see that the user behaviour is changing, including myself, I really like to play games on mobile. I play more games on mobile than on my PC or console just because I'm travelling very often and I like to play games. But I've spent much much less money on mobile than games than I spent on console or PC games, so this is what has to change.
The user behaviour has already changed, we're all going to mobile, now the industry has to find a solution to control the user flow and control the monetisation better than they do it at the moment. But I don't think this is going to happen in the next few months or so, I think this is a developing process we could see over the next one or two years.
Q: How does Amazon tie in with Bigpoint's plans for the future? Is it just a case of being as many places as possible?
Heiko Hubertz: That's what we've done already for a long time, working with with many many partners. We also work with GameStop in the US, working with German TV stations, and Amazon is one additional partner. I really think that Amazon can become a very important player in the gaming industry if they do it right because they have the monetisation models because they have all the user credit card data, the user data, the user base, so if they do it right they can become a very important player.
For us at the moment we're just a distribution partner. Let's see if they become any more important partner in the future.
Q: You've also partnered with Square Enix recently, can you see more of that in the future? Big gaming companies joining forces?
Heiko Hubertz: We are looking for those sorts of partners. We started almost two years ago our first partnership with Electronic Arts, just with publishing their game. With Square Enix now we've developed a game together, we're talking to other big industry distributors and publishers to get their games as well. To optimise the games, transfer them to browser based and so on. The Square Enix partnership has really worked, we like what we have done together and we want to do more of that. With Square Enix and with other IP owners and publishers.
Q: So where do you see Bigpoint and the industry a year from now?
Heiko Hubertz: I think in a year or so we will see that more people will use mobile connections to play online games. That doesn't just mean they will play on mobile phones or a tablet, I think just using mobile connection more and more. So we have to understand that maybe just the broadband connections are not the only way users are connecting to our games, in terms of latency, in terms of download speed, all this kind of stuff. Maybe even technologies, HTML5, Flash and so on, how do we deal with that, how do we get in contact all the time with the users, whatever kind of device and in whatever location the user wants to play? This is what we will see, users going more mobile, but not just only from a device point of view.
The other thing, from an industry point of view, I think we will really see a big change. I think we are in a consolidation time now, especially in the online gaming industry. So I think we will see companies merge together, they will get acquired, or whatever. The industry will not be healthy if we have thousands of developers and publishers fighting for the same users, it just doesn't work. They cannot be profitable with that. So I think the landscape of the industry will look different, not in a year, but maybe in the next 18 months.
Q: You spoke a lot there about consolidation, so you're not planning any big acquisitions, anything like that?
Heiko Hubertz: [Laughs]
No, we are in no talks and we have no decision made on that.