In the world of casual games, RealArcade is huge. Since pioneering the space back in 2001 (RealNetworks was one of the first companies to sell casual games as downloads), RealArcade has evolved from a distribution channel into developer, publisher, and distributor of games across multiple platforms (PC and mobile) and worldwide. Every day, over 700,000 games are downloaded through the RealArcade network, including RealArcade, GameHouse, and Zylom.

We sat down to talk with Michael Schutzler, senior vice president, Games Division at RealNetworks, about everything related to casual games — how RealArcade started, how a game gets picked to be offered to its millions of users, even how casual games will change the world (for the better of course).

A little experiment

RealArcade was the first service launched to offer casual games for sale. Can you share with us the story of how RealArcade was started?

RealNetworks got into this space a little over five years ago as an experiment. A couple of engineers decided that electronic games were just another form of software. Real has been good at figuring out ways to download software so they said, “Why don’t we try games?” We started to offer video games like Doom and Quake for download and that was a dismal failure for a whole host of reasons – including that broadband was in its infancy. Also, it turns out we were targeting the wrong audience; we just did not know it yet.

So one of the early team members said, “Hey, let’s try a puzzle game.” Everyone laughed at him, but fortunately did put a puzzle game up (a little known game called Bejeweled) — and it sold like crazy! We tried another puzzle game and it sold like crazy too.

Then we contacted the customers to find out why and discovered it was women over 30 buying these games. I think we need to re-vamp the marketing plan. So, the casual games business was born and it has grown into quite a substantial percentage.

How big is RealArcade today and how has your business changed since you started as a “little experiment”?

Right now, the games business represents about 25% of the company’s revenue and we are growing 50% year-over-year. We do about 700,000 downloads a day on average. There are days we peak at over 1 million downloads a day of free games.

We started out as a strange experiment inside the bowels of RealNetwork but decided to get serious about the space. First, we bought GameHouse. Instead of just being a distributor of games, we became a creator of games overnight. Then we bought Mr. GoodLiving last year to get us out of strictly being a PC games company and started getting into mobile games. And then, as you know, this winter we completed the acquisition of Zylom to cement our leadership in Europe.

So really, the truth is we are no longer a games distributor nor are we a games studio — we are actually a games publisher. We do still create our own games but we also use that competency to help other games studios do a better job of creating games that sell well. And we supply all these games to MSN and AOL and Yahoo as well as sell them through our own global network.

An apple a day. . .

What do you think accounts for the growth of RealArcade and for the entire casual games industry for that manner?

This is a fascinating thing to me. There are 100 million people that played casual games on the PC last year and there are going 150 million who will be playing these games this year. 90 million games were downloaded on cell phones in 2005 in the US alone. That is huge!

So we’ve been asking ourselves: What is going on here and why are there so many people playing these games?

Those are my questions — you should be doing the interview. So, what are the answers?

So we’ve been doing some digging into this. What we’ve discovered is that everyone plays casual games. Grandma and Grandpa are playing games. The kids are playing. And mom and dad are playing. This is the case in Japan, Germany, and in the US. Essentially, there is no real demographic for game play.

Game purchasing, on the other hand, skews heavily female and that’s true globally. In the US, game purchases are skewing about 65% female. In Europe and Japan, its more like 70+% And everywhere, its purchase are by women over 30.

One of my favorite sayings is that men play, women buy. What accounts for this?

Well, we’ve now begun digging into the question, of why women are buying casual games in droves. Just to give you a taste of what we’re finding out is that one reason some of these 30+ women are playing is not so much an escape from work but more an essential part of their sanity management.

Research is also showing that casual games are really helpful for a variety of health and education issues — from managing dementia in seniors to building really strong excellent brain development in children. Assuming that our research continues to support the case that casual games are good for you, casual games serves as an interesting counter-balance to a lot the hype that we’ve heard as to how bad video games are for the sociological implications there are for kids playing Halo for 24 straight hours.

Casual games are not about destroying the 725th alien. This is about strategy, solutions, or clever puzzle manipulations or word games and things like that are actually good for you.

Just like an apple a day.


How a Game becomes a Hit on RealArcade

Thousands of games are submitted to Real but only a few are chosen. How does RealArcade decide which games to offer to its millions of users?

There is both a qualitative and a quantitative process. The qualitative is we put a highly qualified producer on it. Our producers have a good judgment for balance, game play, whether or not the sound effects will really make sense for our audience.

Then we have a “secret sauce” that I am not going to share specifics on, but is fascinating to me. We take a number of elements of the game that we enter into a model we have developed based on the thousands of games we have evaluated and tracked in terms of how well they have done in sales. Our model predicts reasonably accurately how well the game will do within the first week. And frankly, if we know how well the game will do in the first week, we pretty much know or can predict how well the game will do over the course of the year.

The only thing we can’t predict is whether something or not is going to become a franchise. Nobody would have believed that Luxor would become a franchise, it’s been phenomenal.

When we work with developers as publishers (and again, I think we are more a publisher than a distributor, although we do both), we will assign someone who will help that game developer tweak and tune their game to be as successful as it can possibly be on RealArcade. And if a game does well on RealArcade, it will do well almost everywhere.

Click here to continue to read Part 2 of our interview with Michael Schutzler, senior vice president, Games Division at RealNetworks.