Casual Games Could Boost 360

So-called casual games—simple, inexpensive games that are small enough to download quickly over a broadband Internet connection—are an important component of Microsoft’s consumer strategy, particularly for the Xbox 360, where they broaden the appeal of the console and provide opportunities for game developers who cannot afford the development budget for a typical console game. They are also one of MSN’s only successful transactional businesses and could provide a new source of revenue for the company’s mobile business. To better focus on this market, Microsoft has consolidated its casual gaming efforts within a single product group.

The Opportunity

According to IDC, casual gaming revenues will amount to US$760 million in the United States by 2007. To help capture this opportunity, in mid-2005 Microsoft consolidated all casual games development, licensing, and strategy within a Casual Games group led by Studio Manager Chris Early.

One impetus for this move was the fact that MSN Games had an average conversion rate (that is, the rate at which users upgrade from free trials to become paying customers) of more than 5%, with occasional spikes above 20% when certain new games were released—much higher than the average conversion rate for online services, which is less than 2%. By consolidating casual games into a single group, Microsoft now hopes to leverage this demand to drive incremental adoption and revenue on other platforms, particularly the Xbox 360, which launches worldwide in late 2005.