“Serious Games, Serious Play” Research Study: “Where Are the Opportunities?” By Michael Cai - Serious Games Conference 2

1. Serious Games, Serious Play An Industry Overview Presented by: Michael Cai VP Research, Games and Technology at Interpret August 22, 2012

2. Date: 08/22/12 Study Specifications Presenter: M. Cai Key Discussion Points  Overall landscape of the serious games industry  Growth dynamics in different industry segments  Market opportunities and challenges in various sectors  Cost for developing serious games  How the industry is currently addressing measurement and effectiveness Methodology  Survey Methods Section: Telephone interview & E-mail survey 1  Timing July/August 2012 Page: 2

3. Date: 08/22/12 Study Participants Presenter: M. Cai Interviews with Experts  At least 10+ years in industry Hold positions such as: Section: 1 Page: 3

4. Date: 08/22/12 Sector Composition Presenter: M. Cai The experts’ experience covers all the major categories Section: 1 Page: 4

5. The Serious Games Landscape Defining the Market

6. Date: 08/22/12 Defining ‘Serious Games’ Presenter: M. Cai Common Themes: Section: 1 Page: However… 6

7. Date: 08/22/12 Defining ‘Serious Games’ Presenter: M. Cai “There’s a tech answer and a marketing answer.” Section: 1 Page: 7

8. Date: Opportunity Today vs. Three Years Ago 08/22/12 Presenter: M. Cai Acceptance outpacing adoption Serious Games Acceptance Adoption Section: 1 “I don’t expect an upswing as the industry as a whole is still pretty much in its growth stage, but there has been much greater improvement in the profile.” Page: 8

9. Date: Opportunity Today vs. Three Years Ago 08/22/12 Presenter: M. Cai Reasons Acceptance is growing: • Stigma of ‘game’ is vanishing • Gamers getting older • Traditional ways of training, education not working • Games seen as valid substitutes • More powerful technology • More tools available Section: 1 Page: 9

10. Date: Opportunity Today vs. Three Years Ago 08/22/12 Presenter: M. Cai Reasons Adoption is falling behind: • The economy • Growth is niche- specific • Employers hesitant to spend on the workplace Section: 1 Page: 10

11. Date: 08/22/12 Size of Industry in Revenue Presenter: M. Cai “The answer to that question is very elusive, difficult to pin down. It’s hard to find research on the subject.” “There are indicators of growth, but it’s difficult to quantify.” “It’s all about definition. Should Bejeweled count, since it’s known to reduce stress? Or Wii bowling, for all the benefits in nursing homes.” Section: 1 Page: 11

12. Date: 08/22/12 Revenue Generation Presenter: M. Cai Direct Indirect Revenue generated by the game itself Revenue not generated by the game itself • Grants • B2B contracts • Corporate sponsorship • Licensing software/ subscriptions • Microtransactions (in virtual worlds) • Games for marketing (used as assets to sell something else) • Sales training (improvement in sales efficacy) • Process optimization (process efficiencies gained) Section: 1 Page: 12

13. Date: 08/22/12 Growth Sectors Presenter: M. Cai Agreement that there is: Section: Growth in Healthcare Growth in Military 1 Page: 13

14. Date: 08/22/12 Growth Sectors Presenter: M. Cai Differing opinions for Education and Corporate • Government/institutional involvement is growing • More money than ever • Game feature usage (leader boards, etc.) growing • Companies have the budgets Section: 1 • Games lack production value • Designers don’t know how to make educational games • Economy causing frugality • Less likely to spend on innovations such as games Page: 14

15. Date: 08/22/12 Growth Trajectory Presenter: “Much bigger” in the next 5 years due to: M. Cai More gamers More platforms As gaming becomes the norm, barriers to entry get lower Section: 1 Page: 15

16. The Serious Games Landscape Costs and Timing

17. Date: 08/22/12 Average Cost of Game/Sim Presenter: M. Cai HUGE variation depending on sector and sales model Licenses; Per Classroom ~$100 Education Subscriptions; Bundles $5K-$10K Healthcare Range $30K-$500K; Average $65K Corporate Section: Fixed Grants; Phase 1 $90K, Phase 2 $750K 2 Government Page: $1M $0 $500K 17

18. Date: Average Length of Development Time 08/22/12 Presenter: M. Cai For all sectors, more complexity = more time Education 3 mos. Healthcare 6 mos. Corporate 3 mos. Section: 2 Government 2-3 yrs. Page: 18

19. Date: 08/22/12 Variables Impacting Cost Presenter: M. Cai Complexity Assets # of Platforms Desired Music/Audio Graphics Labor Section: 2 3D Testing Page: 19

20. Date: 08/22/12 Acceleration in Cost? Presenter: M. Cai Some say Yes, some say No Yes, making games is more expensive! No, making games is getting cheaper. • Level of complexity has increased • Trying to make things simple actually costs more • Cost of labor has grown • More off-the-shelf tools available • Licenses are cheaper • Barriers of entry are lower Section: 2 Page: 20

21. Date: Types of Metrics 08/22/12 Presenter: M. Cai Section: 2 Page: 21

22. Marketing, Game Development, Measurement Industry Challenges

23. Date: Getting More Industries and Schools to Use Games to Teach 08/22/12 Presenter: M. Cai Consider first: Section: 2 Page: 23

24. Date: Getting More Industries and Schools to Use Games to Teach 08/22/12 Presenter: M. Cai Position I: Providing Proof  Publishing documentation that serious games do achieve desired training or educational outcomes  Offering evidence of cost effectiveness, particularly in comparison to other methods of training and learning Section: 2 Page: 24

25. Date: Getting More Industries and Schools to Use Games to Teach 08/22/12 Presenter: M. Cai Position II: “Stealth Mode”  Removing the stigma associated with the word “games” or taking it out of the name entirely  Hiding “games” within the words “activity” or “learning module” Section: 2 Page: 25

26. Date: 08/22/12 Making Games More Effective Presenter: M. Cai Focus on the end user Understand end user requirements • Avoid being “chocolate- covered broccoli” Appeal to all types of end users • How do people want to play (PvP, PvE, etc.)? Educate end users • The game has to make sense to the user Section: 2 Page: 26

27. Date: Games vs. Sims vs. Virtual Worlds 08/22/12 Presenter: M. Cai Analyze the task/information that needs to be taught  Don’t be afraid to combine! “Generally speaking, though, training games need to have a very strong simulation component while mere educational titles may indulge on a more traditional gaming experience.” Section: 2 Page: 27

28. Date: 08/22/12 Making Games More Effective Presenter: M. Cai Inherent to the game must be:  Design Mechanics Games need to promote learning through their very mechanics, i.e., the act of playing = learning  Point System Must assign points for participation, rewards; giving feedback, motivating, building a relationship  Stickiness Pay attention to the psychological effects, find out what motivates people to play Section: 2 Page: 28

29. Date: 08/22/12 Making Games More Effective Presenter: M. Cai However, the following pose challenges to innovation: Dearth of Talented Designers “Good developers are usually lured to big studios or become indies… dedicated serious games companies might not find it easy to get the right talent.” Costs Complex design and realistic simulations are not cheap. Also, some institutions are dependent on government funding. Section: 2 Page: 29

30. Date: 08/22/12 Making Games More Effective Presenter: M. Cai And the biggest criticism: Need for Measurement Aren’t enough tools that are proven to actually measure the effectiveness of a game; progress is slow on that end. Section: 2 Page: 30

31. Date: Improving Marketing to Increase Buyer Interest 08/22/12 Presenter: M. Cai Emphasize Outcomes • Market the outcomes being achieved, make the focus of games secondary Positive Press • Publish more success stories to improve category’s image, show positive side of games Section: 2 Page: 31

32. Research Inspires… More Research Future Opportunities

33. Date: The Ideal Trade Group 08/22/12 Presenter: M. Cai Section: 2 Page: 33

34. Key Questions Raised by Our Experts Date: 08/22/12 Presenter: Where do in? M. Cai mobile games fit What are the serious games fragment of parameters of the market? Is it a something else? Is one country game? ahead of the Where do lie beyond the usual suspects? Section: opportunities Does terminology matter? 2 Page: 34

35. THANK YOU!

36. Useful Links: www.seriousplayconference.com www.seriousgamesdirectory.com www.seriousgamesassociation.com Contact: sbohle@seriousgamesassociation.com