How Consoles and Mobile Games Could Help This Rising Game Star
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Cryptic Studios, the online video game developer owned by China’s $1 billion-market-cap Perfect World (NASDAQ: PWRD), is celebrating the registration of 2 million players for its newest title, the free-to-play Neverwinter. That should cheer investors in a company that's bet heavily on new games and new markets -- especially after its Q1 revenue lagged year-ago figures.
The best days for Perfect World, which bought Cryptic from Atari in 2011 in part to help it reach non-Asian gamers, may lie further down the line. In a July 30 interview, Cryptic CEO Jack Emmert said the continued growth of mobile gaming and the next round of consoles from Sony (NYSE: SNE) and Microsoft (NASDAQ: MSFT) stand to offer companies like his the chance to push brands well beyond their traditional PC borders.
Cryptic makes free-to-play MMOs -- "massively multiplayer online" games that generate revenue through a marketplace for virtual gear and currency -- for a marketplace that's almost entirely online and conducted over PCs. Their audience, Emmert says, exists largely outside the world of console gaming.
"The free-to-play market is something that's largely invisible,” Emmert says. Consequently, traditional publishers “don't really know how big it is, and they really grapple with it."
Free games coming to new consoles
That may be changing. As the web site Massively recently noted in a useful rundown, a number of current and coming free and subscription MMOs are set for both PC and console platforms. (Some may allow players to play across platforms.) Activision Blizzard's (NASDAQ: ATVI) standard-setting World of Warcraft, meanwhile, is seeing subscription numbers decline.
What this all points to is an interesting opportunity for Perfect World and other game makers to expand free-to-play game brands broadly -- giving, say, a PlayStation 4 owner who doesn’t play games on a home computer a chance to check out Neverwinter and its brethren. Some MMO purists say the experience may suffer without a keyboard and other PC trimmings, but others -- including Emmert -- are unconvinced.
"I wouldn't rule out going on consoles,” Emmert said. “It just increases our reach. It would increase the number of eyeballs on our games, and there's nothing wrong with that."
Mobile opportunities could help spread game brands
Then, there’s the mobile platform: Emmert says he could see Cryptic offering mobile experiences that connect the experience of handheld players to their PC or console accomplishments. (Neverwinter allows players to tackle some tasks through a go-anywhere web interface, but those tasks are more akin to maintenance than the full game’s swords-and-spells play.)
“Mobile is just another platform, just like consoles or tablets or anything else,” Emmert said. “I believe that is a market that will only continue to grow. Like the PC, it’s going to be something you want to push your games on.”
Today, Emmert says, it’s mobile gaming that’s leading the way in innovation and PC and console gaming that are, mostly, improving around the edges. This means mobile game developers are not only re-imagining the experience of play but also leading the search for new ways to get players to pony up cash -- a quest console makers launched themselves upon soon after high-speed internet connections could be attached to their machines.
“For decades, somebody would go to the store and buy a box product,” Emmert said. “Now every mobile game has a different way of monetizing the player.”
Cryptic hasn't announced its next game or how it will be played. It also has yet to disclose any revenue figures associated with Neverwinter, which emerged from an open period after the first quarter ended and for which it is still developing content in hopes of attracting new customers and addicting current ones.
The company, and its stock, is performing
Investors are pretty well-tuned to what Perfect World's current (and growing) game lineup could do for the company: Its shares have risen steadily and sharply, dramatically outperforming the S&P 500, since just before its May earnings release as new games have been well-reviewed and received. Neverwinter, for its part, has yet to launch in much of the world, and the company has not publicly discussed revenues associated with the game.
Given that, investors may think twice about jumping into a stock that's doubled since April. But there are certainly signs that the company is well-positioned to take advantage of current trends in its industry -- and future ones as well.
David Marino-Nachison has no position in any stocks mentioned. The Motley Fool recommends Activision Blizzard. The Motley Fool owns shares of Activision Blizzard and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!