Emily, a 30-year-old economist, became so addicted to Candy Crush Saga, a free iPhone game, that she would lie awake at 1am imagining her finger swiping across the screen to line up rows of brightly coloured lollies.
Three in a row would deliver a satisfying squelch as they burst and moved the Melbourne mother-of-two closer to the next level.
Candy Crush Saga is a simple game but the hold it has over its devoted followers is complex and incredibly strong. They are reminiscent of gamblers who can’t help but feed another $20 into a poker machine or take one more spin of the roulette wheel.
For Emily, the urge to play Candy Crush Saga was so strong that she would drive to work in the morning and before getting out of the car would squeeze in a few games.
“It had completely taken over my life,” says Emily, who asked that her real name not be used. “It was taking my mental energy and interrupting my ability to go to sleep.
“I would be playing instead of interacting with my children.”
However, her low point was yet to come. Walking along, with her phone out in front, fingers swiping and her gaze fixated on the screen, Emily fell down a flight of stairs. A bruised hip and smashed iPhone screen later, she went cold turkey and deleted Candy Crush Saga from her phone.
“I was pretty horrified,” she says. “I thought, ‘I’ve definitely got a problem.’ ”
Months later, enough time has passed for Emily to see the funny side of her obsession. And there’s some small comfort in her knowing she wasn’t alone in her enslavement to Candy Crush Saga.
Almost 100 million people played it in 2013, a staggering number of players only exceeded by the equally eye-popping $US1.54 billion ($1.65 billion) in revenue the game generated for its developer, King Digital Entertainment.
While Candy Crush is free to download, King makes its revenue from users who buy new lives and extra features.
Still, most of these developers are one hit wonders, which explains the disappointing debuts of such companies as King and Zynga on Nasdaq. Zynga developed the widely popular Facebook game Farmville, where people can pay to tend a virtual farm.
Now developers such as King and Zynga are being challenged by new entrants into social gaming: poker machine game manufacturers, such as Australia’s Aristocrat Leisure and global gaming giant IGT.
Tending a virtual farm
When Aristocrat was founded in 1953 no one would have imagined that 60 years later the company would earn money from Facebook users. But social gaming is proving a natural extension of the pokies business for those companies that have built billion dollar empires by hooking in punters.
As Aristocrat’s head of strategy Craig Billings notes: “At first blush as a society, because it’s so new to us we [are] a bit incredulous that somebody would pay to tend a virtual farm or that they would want to play a pokie without winning a prize. But these games are consistent with the needs and desires of completion, competition and engagement.”
Social gaming is proving a natural extension of the poker machine game business for those companies, who are well familiar with player addiction.
Aristocrat, a $2.7 billion company, does not break down what it earns from this new business of social gaming. It intends to give more detail on that segment when it delivers its full-year results next month. A good indicator, however, of how it might be doing is rival IGT’s performance.
The United States’ International Gaming Technology is the biggest poker machine game manufacturer by market share, and it paid $US500 million for Facebook casino game developer DoubleDown in January 2012. After adding its pokie games into the DoubleDown platform, IGT’s average revenue per user “sky-rocketed” 60 per cent to US40¢, says Citi analyst Michael Goltsman.
Not to be left behind by IGT, Aristocrat bought a rival Facebook casino game maker Product Madness for $10.6 million in late 2012. As with IGT, Aristocrat’s customers now play digital versions of the company’s famous titles on the social network. The players still feed in money like they would to a Queen of the Nile or Big Red machine in their local pub or suburban RSL.
But, crucially, there’s no jackpot on offer on these Facebook “social casino” games.
It was a small investment for Aristocrat to buy Product Madness but potentially a big pay-off when you consider that total revenue in the social casino market hit $US2.8 billion in 2013. Goltsman expects the market to grow to $US4 billion by 2016, at which point he estimates it will account for 24 per cent of IGT’s revenue and 7 per cent for Aristocrat.
“When you look at the demographic of who’s playing social casino games, it’s the same as the core slot-machine gambler,” he says. Pokies are known in the US as slot machines.
“Who has got the best content for that gambler? It’s the poker machine makers.
“It’s a new distribution channel for these companies.”
Apps as a starter for gambling
Gambling researcher Sally Gainsbury says poker machine makers got into social casino games, which are also offered as smartphone apps, because they thought it would be a good marketing tool to encourage more use of their machines in pubs, clubs and casinos. But the result they got was quite different.
“The experience seen by the industry is that conversion [from social to real world gambling] isn’t happening easily,” she says. “But what has happened is they’re generating revenues they had not expected.”
The companies have already proved that their tried and tested pokies content is better than standard social casino games at “monetisation”, the process of turning a player who participates for free into someone who will pay for the extras.
And there’s a lot more upside. There are 150 million active players of web and app games that mimic casino activities without the offer of a prize.
Jamie Odell, Aristocrat’s chief executive, says Candy Crush might not be operating in the casino segment but it reveals some of the secrets to monetisation. He says Candy Crush is “very sticky” – another way of saying people find it hard to put down.
“It’s doing a great job driving monetisation for a casual game,” says Gainsbury, who is a clinical psychologist and Southern Cross University academic.
She says the most addictive games are simple at first. “You can download it, there are no instructions and you just start playing. For a lot of people that’s appealing. They don’t have to invest time in learning to play.”
The game then relies on a trick of psychology, which poker machine makers also rely on, called an “intermittent reinforcement schedule”. “The way they’re set up is they get you to chase status.”
Players win easily at first and that makes them happy. But as they progress, getting to the next level is a bit harder, which makes the payoff even more enjoyable.
Emily’s description of this feeling is eerily similar to a junkie talking about needing their next hit. “At first there’s that sense of achievement and it’s in quite short bursts,” she says. “Then it got harder, and in some ways you’re more invested in it. It goes from being easy and fun to quite challenging. It’s in that more challenging phase that the addiction is stronger. You want to get that high of getting to the next level.”
Crucially on Candy Crush, when a player loses all of their playing lives, the game installs a time-based lock, starting at seven minutes, but quickly increasing to hours, before they can try again. That is, unless the player is willing to pay a fee to unlock the game. And many do.
Emily says when she began playing she did not want to pay. But after a few months she estimates she spent about $20 on new lives. “I wasn’t that happy about doing that.”
Her experience pales in comparison to a new mobile game, I’m MT, sweeping China.
The Financial Times reports that the cartoon cow game is earning developer LocoJoy 100 million yuan ($17 million) each month. The way LocoJoy founder Xing Shanhu describes his top players is strikingly similar to descriptions of casino gamblers. Xing says of the game’s 7 million users, about 700,000 “whales” – a term usually reserved for high rollers who bet hundreds of thousands of dollars per hand on casino baccarat tables – generate 90 per cent of the revenue from the game.
Top-tier players, who play in tournaments for prizes such as luxury cars, spend $10,000 a month on their I’m MT habit. This is extraordinary given that in the whole social gaming sector – which includes both the casino games and apps like Candy Crush – only about 2 per cent of users ever pay any money to play despite the best efforts of developers.
IGT’s early experience in increasing the amount earned per user shows the potential for the poker machine makers to improve this statistic. While the social gaming industry has become a somewhat happy accident for poker machine manufacturers, it’s raising the hackles of some social policymakers. There is concern that although social casino games are not gambling they’re just as addictive and increase the prevalence of actual gambling.
In November 2013, South Australian Premier Jay Weatherill called for social casino games to be restricted to adults only. Research by AppData shows that 5 per cent of all social casino players are children under 18.
Gainsbury says the industry is, so far, self-regulating and does not target children, a position confirmed by Aristocrat’s Odell. But she warns the games are easily accessible and says the bigger concern is there’s very little known about how social casino games affect people who are either problem gamblers or could develop a problem.
Her preliminary research shows that 15 per cent of people who gamble online also play social casino games. “What we want to know now is: what is it about social casino games that is appealing to gamblers and which way the directionality occurs?”
That is, do online gamblers seek out social casino games for extra entertainment? Or are social casino games encouraging people to take up online gambling? She notes a small study from Britain that found among people who have gambling problems there was a group who said the social games actually “triggered their urge to gamble”.
On the other hand, Gainsbury comments that some problem gamblers say they play social games to avoid gambling. Odell says Aristocrat’s social casino games are offering entertainment and Gainsbury agrees for many players that is simply the case. “These games are being used as entertainment or a stress reliever or a way to pass the time.”
The rise in popularity of social gaming, however, and the addiction that goes with it doesn’t just mean social challenges for developers and poker machine manufacturers. They also have to work out how to keep users.
In Emily’s case, she quit after a bruised hip, smashed phone and because “it had stopped making me happy”.
The Australian Financial Review