GALA NETWORKS Europe says that its unusual business model, which involves distributing its games for free, is allowing the firm to grow at a time when other gaming companies are suffering.
The Dublin-based subsidiary of Japanese video game publisher Gala is announcing a new recruitment drive for jobs in IT support, marketing and administration.
“We announced with the IDA that we’re doubling from 50 to 100 jobs in our Dublin office – we’re on track to double by this time next year,” said Gala Networks Europe’s marketing manager, Jamie McCormick, speaking from Gamescom, an industry fair in Cologne, Germany.
The company, which distributes internet-based multiplayer games known as massively multiplayer online games (MMOs), including Allods Online and Dragonica, says that it is bucking the downward trend in games caused by the recession by making payment optional.
Gala's business model owes much to the "freemium" concept pioneered by Wiredmagazine editor Chris Anderson in that the games are free to play but users can pay for additional services.
Players exchange cash for a virtual currency called G-Potatoes that is subsequently used to purchase in-game items. However, Gala’s games remain fully playable without paying.
“Our business model is called micro transactions – it changes the game from being a product to a service. The majority play for free but some do pay,” said Mr McCormick.
Gala Networks Europe declined to provide concrete figures on paying players or revenue.
Mr McCormick says Gala’s micro-transactions model originates in Korea, where MMOs are the single most popular form of video game. MMO games have traditionally relied on charging users a monthly subscription fee as their main source of revenue, although all MMOs have internal economies that have spilled over into the actual cash economy as players spend real money to buy imaginary items in the games.
The games industry as a whole has remained bullish about profits throughout the downturn.
In December 2008, Nintendo of America chief Reggie Fils Aime stopped just short of saying that his company was “recession proof”.
At the time, Michael Pachter, an industry analyst for Wedbush Morgan Securities, told reporters that middle-class consumers would cut out other expenses before gaming.
However, figures released in June showed that Nintendo’s revenues fell by over 40 per cent compared with the same month the previous year.
Competitors Sony and Microsoft both revealed drops in gaming division revenues.
“Gaming works out, per hour, as one of the cheapest forms of entertainment and during recessions people do tend to stay at home more,” said IT commentator Simon Brew. “MMOs in particular are borderline recession-proof – they’re spectacularly good value.”
But he sounds a note of caution over Gala’s business model: “My gut feeling is that micro-transactions are coming to the fore because [some] publishers are having a difficult time attracting players away from the established games like World of Warcraft. Developers are having to look at alternative ways to fund their games because players tend to stick to one game for months on end, automatically paying via credit card every month.”
Gala Networks Europe’s entire European operation is based in Dublin and is in receipt of IDA funding. In the coming weeks the firm plans on releasing its next game, Canaan Online, an in-browser game developed using Adobe Flash technology.
