Insider Q&A: GameHouse’s Ken Murphy

Seattle-based GameHouse has been one of the most dominant casual game developers, publishers, and distributors for years, boasting a playlist of popular titles including Bayou Blast and Slotorama.

“GameHouse was one of the earliest developers of casual games, so back in 2004, when RealNetworks looked to expand, GameHouse was their very first acquisition,” explains Ken Murphy, VP GameHouse Studios. “Fast forward over the years, and our business expanded into mobile gaming and social mobile gaming, and we came to the determination that the GameHouse brand itself was really a terrific one to keep going to market with.

“We developed a lot of great brand equity, and we were better known as a gaming brand than RealNetworks was, so we transitioned all of RealNetwork’s game activities over to the GameHouse brand, and that’s how we’ve been going to market the last three or four years exclusively.”

A strategy that has paid off with millions of casual gamers, including one of the largest bases of female gamers of any game company on the market.

Inside Mobile Apps recently sat down with Murphy for an exclusive interview about the casual game market, the free-to-play model, and how he sees GameHouse adapting in the ever-changing gaming space.

Here’s what he had to say…

[contextly_sidebar id=”9c7bf03420f2976092e5a48664f244b5″]Inside Mobile Apps: What have been the biggest shifts you’ve seen in the casual games market over the past few years?

Ken Murphy: I think the massive transitions that have occurred in the casual games space have really been platform driven. Those early days, the industry really grew on downloaded games, then as broadband became more ubiquitous in the late 90s and early 2000s, it gave consumers the ability to download with heavier payloads. Then with the advent of Facebook and the mass penetration of smartphones, it really changed the places people played these games, and as the places changed, you had the situation where the social networks in particular really drove forward the free-to-play, freemium model for casual games. Up to that point, casual games had very much driven their business based on the single pre-game purchase model and various subscriptions that were built around that. Facebook really changed that, but it took smartphones a while to catch up to that. If anything, the smartphone market looked a lot like the early PC market, where everything was driven by premium purchases. But now you see the freemium model becoming the dominant model on smartphones as well, with the one constant among all of this being the games themselves. A lot of the games still have the same characteristics that they had in the early days. The casual games are easy to learn, but difficult to master. They tend to be very well indexed for short bursts of gameplay. They tend to have a very broad appeal, even if the female demographic is the largest purchasing demographic, the games are enjoyed by both genders of all ages. The business models have adapted. The ways that they’re monetized, the way that the pricing works, and some of the gameplay has changed, but the core fundamentals of what makes a game great, that’s still the same today.

IMA: From your internal research, what are the monetization trends of free-to-play versus the premium model?

KM: What we’ve seen in the free-to-play space is that conversion rates to purchases have remained relatively consistent in the low single digits, just as they were in the days of try before you buy pre-game purchases. The total number of games people play has continued to grow as the market has grown, but what we did find is that when people do purchase in the free-to-play model, they tend to spend a little bit more than they did in the premium space, especially when the premium games were being so heavily discounted. In the early days, you’d see a premium game for $20 online, now depending on the discount models, that same game might be $1.99 to $5.99 depending on which of the discount models is there. Once you get a player engaged in a free-to-play game, their lifetime value in that game tends to be significantly higher than that. So we’ve seen a lot of the same basic conversion rates, but a better long-term propensity to spend in the free-to-play model.

IMA: Were you surprised to see even AAA games like Plants vs. Zombies 2 go free-to-play this year?

KM: I think almost everybody has moved to that, and I don’t think it was surprising. One of the things that is interesting about that model is that it’s not a naturally easy one to pickup. So much of the industry, especially in the early days of development, had that notion of creating economic drivers in the game and creating what people in the industry call friction points or pinch points, basically creating something where there is this monetization decision to be made. In the early days, many of these were very positive, giving you the opportunity to move ahead and master the game. Along the way, as more and more people started to understand these models, these pinch points became more limiting, where you now had to pay to move past a certain level. Then they started to add choices, like either ask three friends to join the game or pay to be able to move forward. So I think it took a long time for traditional game developers, us included, to really understand how game design had to adapt to some of those models, and where that appropriate balance is in something that is limiting, like running out of lives for the day so you can only play so much, can actually become something enjoyable and profitable going forward, so the adaptation process was almost inevitable.

IMA: What should we expect to see from GameHouse moving into 2014?

KM: We still have a very strong distribution base to our business. We maintain several of the largest PC-based distribution services in the industry. These businesses continue to be large business, but like everybody in this space, they’re in decline as people play and move to other platforms. As a distributor, we are not entirely absent from the mobile space. In fact, we’re really ramping up our activities to help game developers get their games to larger markets on mobile devices. This is challenging, and it’s a very, very crowded marketplace with hundreds of thousands of games available on iOS and the Android platforms. It can be very difficult and very expensive for developers to get their games noticed. So we’re working with some of these very small, creative developers to bring their games to market with our cross-promotion tools on the mobile side of the business. We’ve developed some new technology in-house and are launching what we call the GameHouse Promotions Network, which is geared toward helping developers gain cross-promotion capabilities across their titles within the space. So we’ve been actively reaching out the last six months or so to sign up developers on that platform.

As a publishing partner, GameHouse is ideal for small to medium sized developers given the growing marketing expertise needed to successfully bring a new game to market. It’s not as simple as making a great game, launching it in the app store, and hoping for the best.  It requires strong competency in app store search optimization, design, editorial “earned promotion” and PR, customer base retention, and monetization (e.g. optimizing pricing and conversion rates). Moreover, paid customer acquisition continues to skyrocket, so publishers with existing networks of players can bring quality “free” installs through cross-promotion. GameHouse has invested in our cross-promotion player network with advanced data science technology that determines the offers that each player sees. The GameHouse Promotion Network has generated average conversion rates north of 1%, out-performing standard advertising networks by about 5x.

IMA: How about on the content creation side?

KM: We’re very, very active in growing our presence as a social mobile casino player. Just this past year, we launched our GameHouse Casino, which is now our flagship game in the space, and then in July of this year, we announced the launch of our Golden Dreams sweepstakes. What we’ve done here is create a mechanism where players can play any of our great games inside our casino – slot machines, poker machines – and they can win golden tickets that they can use to enter a drawing for a real cash prize. This is a life-changing prize every month, where we’re giving away $100,000 every month. Our goal here is to capture some of that same excitement you get playing in a real casino where you have a chance to win real cash prizes, and it’s proven really exciting. We’ve given away two $100,000 prizes so far, and it’s very fun making those phone calls. It’s a surreal experience calling someone up and convincing them that they just won $100,000.