Will Sudoku Revive RealNetworks? (RNWK)

| About: RealNetworks, Inc. (RNWK)

The Stalwart submits: Interesting article in the Financial Times (from Tuesday) about RealNetworks' (NASDAQ:RNWK) involvement in the video games market:

RealNetworks, the digital media company, on Tuesday announced plans to bolster its position in the online gaming market with the $21m acquisition of Netherlands-based rival Zylom.

Privately-held Zylom will add around $8m in annual revenues, around 54 employees and a portfolio of 70 games to RealNetwork’s games business, helping the company position itself against rivals such as Electronic Arts, Microsoft and Yahoo in the casual games market.

Casual games - simple arcade-style or puzzle games - are a small but rapidly growing part of the global games market.

In contrast to console games, which typically feature shooting, racing or sports and take tens of hours to complete and appeal primarily to younger men, casual games are modelled on traditional card, board, puzzle and word games. They can be picked up easily, played in small time slots of a few minutes and appeal primarily to women over the age of 30, a demographic not otherwise reached by the games industry.

According to the company, the casual gaming market currently makes up about 10% of the global $25 billion video games industry. Within the company it's the fastest growing division, though off a heretofore very small base.

While the really big money is in selling blockbuster releases for the Playstation or Xbox, casual gaming has obvious advantages. It's going to be steadier, less hit-driven, have lower upfront costs and therefore be less risky. There's an addictive quality to good casual games, and they even get played at work, which expands the playing time available to them (some might argue that they're exclusively played at work, though that must kill worker productivity numbers!). There's obviously a lot of competition in this space, and there isn't much in the way of barriers to entry, so RealNetworks (and anyone else) will have to keep spending in order to stay fresh.

The company has been quietly clawing back. Their subscription music service, Rhapsody, is a compelling alternative to the iTunes/iPod monopoly. If they could only make their Realplayer actually work, there might be a compelling story here.

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