The video games sector has yet to gain from a downturn where consumers stay home to play, but social games creator Playfish says the industry is just beginning a new growth spurt. The company that invented Pet Society, Restaurant City and Who Has The Biggest Brain? - games played by tens of millions on sites such as Facebook and MySpace - believes the $50 billion industry has many more converts to win.
Two-year-old startup Playfish makes games for people to play on ordinary computers with their family and friends, unlike traditional video games that need dedicated consoles. The London-headquartered company is backed by Accel Partners and Index Ventures, and is already profitable - thanks to the virtual goods such as clothes, furnishings and weapons it sells for real money within its games.
"What social gaming allows us to do is to grow the aggregate size of the industry by getting those people who are not so interested in slaying the monsters on their 42 inch plasma screen but are really interested in playing with their friends and family involved," said chief executive Kristian Segerstrale.
The video games industry is facing crunch time this December holiday season, with publishers and console makers pinning their hopes on a slew of big games releases to make up for sales that have fallen 13 percent this year so far in the United States. Mr Segerstrale believes, however, that engaging non-traditional gamers to play within their existing social networks represents the next paradigm shift in the industry.
"The video-gaming market is in the middle of this fundamental tectonic-plate shift, away from being a physical product-driven industry to being a digital service-driven industry," he told Reuters Television in an interview. Pet Society, in which players custom-design virtual pets who then interact with their creators as well as other pets in the game, has more than 20 million active Facebook users per month. With this many users, even micropayments of just a few cents for a virtual item soon add up. Playfish sold 4 million bouquets of flowers in Pet Society during Valentine's week this year.
Media executives sceptical of Playfish's ability to make serious money out of virtual goods asked Segerstrale at an industry conference last week how far he expected to be able to take it.