Getting Formal About Casual Games

For those who like puzzle games like “Tetris” and “Bejeweled,” which require minimum neural processing but provide maximum stimulation—not to mention big revenues for game developers—things in Seattle may get a bit more interesting in the coming months.

RealNetworks, one of the largest casual-game publishers and distributors in the world, announced plans last spring to spin off its global games division, RealGames, into a new publicly traded entity. By the end of the year, the company is expected to decide whether it will launch the new business with an initial public offering of up to 20 percent of the new company’s stock, or do an IPO first and then do a spin-off.

Expected to stay in Seattle, the as-yet-unnamed new firm will focus on expanding RealNetworks’ multiplatform presence from PC and mobile-phone markets to systems like the Nintendo Wii, Xbox and PlayStation.

Speaking at Seattle’s Casual Connect conference in July, RealNetworks CEO Rob Glaser said that casual games had reached a point where they were no longer merely a “PC phenomenon” but a legitimate contender to the more complex console-based genre.

One telling statistic helps explain Glaser’s decision: Revenues for RealNetworks’ gaming division rose to $34.9 million in the second quarter of 2008, a 40 percent increase over the same quarter last year. This July, the company set a new milestone by delivering its 400 millionth in-game ad impression, proving to investors that casual games can also be used as a viable marketing space for reaching consumers. By calving off RealGames as a stand-alone company, growth can occur at an even faster rate, Glaser says.

With more than 200 million estimated web gamers in the market, the casual games industry has proven to be a huge money maker. In the past three years, the total revenue for casual games has more than tripled, growing from $700 million in 2005 to an estimated $2.25 billion for 2008, according to the Casual Games Association.

In 2001, RealNetworks entered the casual games arena with the launch of RealArcade.com, an online gaming portal where visitors can play and download games for a nominal, one-time fee or for free with the addition of displayed in-game advertisements. To help distribute original in-house titles worldwide, RealNetworks acquired Seattle-based developer GameHouse in 2004, the European Zylom in 2006 and Santa Clara, Calif.-based Trymedia earlier this year.

During a conference call to discuss RealNetworks’ second-quarter results, Glaser said his company continues to “march towards our plan” to file for the separation of RealGames by the end of 2008. However, after acknowledging that the “extraordinarily turbulent” financial markets of late will most likely continue through the rest of the year, Glaser was unable to provide a more detailed timetable for the spin-off.

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