MARCH 12, 2008 • PlayFirst is a venture-funded company launched in 2004 as an online casual game publisher with $5 million in initial funding. At the time the casual game market was led by the large portal sites that specialized in aggregating games from many different small developers. There were some big hits such as Bejeweled, but many casual game products looked very much like commodity products simply designed to drive traffic and deliver the eyeballs needed to sell advertising. The primary revenue stream for developers was the handful of customers willing to pay an average of $20 to download and own games that were available for free online.

PlayFirst’s mission was to play the role of a more traditional publisher. The goal was to work with developers to build brands based on characters, story and, most importantly, original IP. In other words, PlayFirst would provide the funding, marketing, sales, and distribution support necessary to build a solid branded product line.

Almost immediately PlayFirst had a hit on its hands when it launched Diner Dash in early 2005. Diner Dash had an emphasis on character and storytelling and it proved a big hit with adult females. Diner Dash has been spun off into several sequels, including a version featuring Spongebob Squarepants. Eidos even published a version of the game for the Nintendo DS and Sony PSP. In a three year period from 2005-2007, PlayFirst claims the Diner Dash games had over 200 million downloads and generated over $35 million in customer spending.

While Diner Dash games are available at retail, the core business has been online distribution. The original Diner Dash is available for free online with advertising. Consumers can download a free trial version that allows them to play for a limited time. If they want to buy the game they pay $20. This was very much the classic business model for the casual game industry.

Although Diner Dash was a success it is also clear that the classic casual game business model of trying to get consumers to pay $20 to download and own a game they can play for free online is limited. Only a handful of games can reach the level of success of Diner Dash and none of PlayFirst’s other products came anywhere close to that level of success.

It is clear that companies like PlayFirst need a better way to monetize a hit product like Diner Dash. In late 2007, PlayFirst launched a new Diner Dash product, Diner Dash: Hometown Hero. Hometown Hero represents a major increase in development and most importantly a new focus on virtual item sales and products priced at $5 and less. Most casual games are developed on a shoestring budget of between $150,000 to $300,000. The budget for Hometown Hero was $800,000 and the game starts to blur the line between simple casual games and more complicated virtual world products where users feel like they are part of a community.

Diner Dash: Hometown Hero is still sold as a $20 full product. However, users can also download the first seven levels for free. This is unlike previous games where users were limited to downloading a time-based trial. After downloading the initial levels users can buy extra levels (restaurants) for $5 each. There are also all kinds for sub-$5 items available for purchase.

So far, PlayFirst claims Hometown Hero has been a success and in its first two months the game has sold more copies than any other product on PlayFirst.com. PlayFirst is also finding that more than 50% of SKUs purchased come from sub-$5 items and 57% of purchasers are new buyers that had never purchased from PlayFirst before. In other words, the product is reaching a new group of consumers that previously had shied away from purchasing a full $20 game online.

To understand where PlayFirst sees this market going, DFC Intelligence talked with Ann Chen, senior director of marketing for PlayFirst.

DFC: Can you give an overview of Play-First’s business model and corporate goals and how they evolved over time?

Ann: PlayFirst’s founding vision was to bring accessible games to everyone on any interactive platform. While the company strategy may have evolved over time, this vision has always stayed consistent. In 2004, when PlayFirst was formed, we established the first true publishing model for casual games.

Now that the publishing model is accepted industry-wide, PlayFirst continues to seek more ways to bring games to an even wider audience. PlayFirst believes this goal can be achieved by developing multi-faceted casual game play experiences around lasting original brands. Customers care about quality and innovation and seek to connect to story and characters – in games as well as any in any other form of entertainment.

In order to deliver quality, innovative game play and strong story and characters, Play-First is focused on partnering with talented internal and external developers dedicated to bringing mass market games to multiple platforms, including PC, Mac, mobile, handheld and console. Currently, PlayFirst is focused on exploring new business models and innovative game play.

DFC: PlayFirst has had a big hit with the Diner Dash franchise. There are many ways consumers can access Diner Dash products. There are multiple versions, including one with Spongebob Squarepants. The game is available for free with advertising, can be purchased at retail, is available for purchase as an online download and offers the ability to purchase virtual items. Can you talk a little about these different forms of distribution?

Ann: The majority of Diner Dash revenue comes from the online-download business model. The newest game in the Diner Dash series, Diner Dash: Hometown Hero, incorporates virtual item sales and micro-transactions which is now where the majority of transactions derives from, and the percentage of transactions coming from sub-$20 items is growing at a rapid rate. Additionally, PlayFirst is capturing a new audience (people who have never purchased a $20 download game from PlayFirst), by offering a lower-cost entry into the game. Because of the significant growth and momentum PlayFirst has seen with virtual item sales model, the company is currently focused on maximizing this opportunity. In the long run, we do believe that advertising and subscription models will be significant contributors to our revenue.

DFC: How do you see that mix changing in the future? How does it vary by product? Do you see all of your future products fitting into a similar type of business model?

Ann: Due to the success we have seen in Diner Dash: Hometown Hero, we believe that the virtual item sales model will work in the future for a variety of other franchises. We’re enthusiastic about the initial success of this model and will be evaluating ways to incorporate it into future products on a title-by-title basis.

DFC: What can you tell us about the demographic for your products in terms of age and gender? How does it vary by product?

Ann: Approximately 70% of our gamers are women, the largest segment being women between18-25. Our most active segment is women between the ages of 25-35, half of which are married with kids. The demographic profile of our users does vary by the different products; Diner Dash: Hometown Hero appeals significantly more to females than males, while games like Nightshift Code appeal more to men.

DFC: The Diner Dash: Hometown Hero product has a big focus on virtual item sales. Can you walk us through the business model? What kind of items are available for purchase?

Ann: Our decision to implement virtual item sales into Diner Dash was based on three primary considerations. We knew that Diner Dash was a property with a broad customer base that included millions of customers who loved the game, but weren’t ready to pay the $20 upfront cost. We also knew that our own existing customer base wanted more Diner Dash content, more frequently than a full $20 download model allows. Finally, there were many customers out there seeking a more connected experience than individual game play. These factors led us to the creation of Diner Dash: Hometown Hero and a new business model for Play-First.

Diner Dash: Hometown Hero gives users unlimited use of certain parts of the game, while providing an accessible pricing structure to encourage them to enhance their experience. Users can play seven levels for an unlimited amount of time. They also have unlimited access to the multiplayer version of the game – with the choice to play either competitively or collaboratively. New restaurant packs, which serve as additional levels of game play, cost $4.99 and are released each month. Virtual items such as clothing or restaurant accessories for decorating avatars and restaurants are available from $.59 – 2.99.

DFC: Products like Diner Dash seem to have significantly greater production values than what you think of with “casual games.” What is the development budget for the products you produce and how is that changing over time?

Ann: Much of the additional investment in Diner Dash: Hometown Hero was focused on putting the right infrastructure around the game so that the virtual item sales/social interaction model could be easily incorporated into any future PlayFirst games.

DFC: In recent years, casual games have a reputation as products that consumers will play a lot, but only if they are free. However, historically consumers have paid a great deal for simple games if they are packaged right. Do you see a blurring between casual games, traditional games, MMOGs, virtual worlds, etc as a growing number of consumers access their entertainment online as a matter of course?

Ann: We believe that there is a blurring between casual games, traditional games, MMOGs and virtual worlds. Our consumers have historically paid for casual games because they are easy to learn and enjoyable while maintaining an element of challenge. If the creators of traditional games, MMOGs and virtual worlds continue to commit to providing easy to learn, fun entertainment for the masses, then the lines will continue to blur.

DFC: Who do you see as your biggest competitors and what do you feel gives you a competitive edge?

Ann: If our industry chooses to stay the course with our current business model, failing to adapt to the need to change the way we offer content and monetize our consumers, our biggest competition will likely come from an innovative venture backed company that is yet to be identified. What sets PlayFirst apart is the company’s history of innovation, both in game play and in business models, and a commitment to providing quality games on a consistent basis to everyone anywhere they play.