If you look back on the year 2007, the thing that seemed to catch most people by surprise was the growth of what is often referred to as "casual games" or the "casual gamer." The big products were the Nintendo Wii and DS, systems that are not the power technology leaders of their generation. Electronic Arts started its own Casual Entertainment division. Ditto Vivendi Games with its revival of the Sierra Online brand. One of the biggest acquisitions of the year was Disney's purchase of Club Penguin for $350 million+. Club Penguin was a cute, simple 2D virtual world that was less than two years old. Meanwhile, the media has jumped onboard with all kinds of stories about the explosion of the game demographic to soccer moms and even senior citizens.

So what exactly is new in the video game industry? Are casual games the new frontier where pioneers will strike gold? It is easy to see why so many are bullish on what is now referred to as the casual game industry. As development costs soar for high-end games, the risk/reward ratio starts to go out of whack. A product like Club Penguin can be developed for a very low cost, but its developers got acquired for more than just about any other game company in recent years. Could the game industry really be headed towards a market where low cost games also make the most money?

Of course, everyone probably knows that it is never simple to make money in a competitive environment. DFC Intelligence would take it a step further and argue that what is called the casual game industry has always been a huge part of the video game business. However, in recent years, casual games have been overshadowed by the growing success of monster epic games with complex controls and deep storytelling and role playing elements.

It should be first noted that DFC Intelligence is not a big fan of the term "casual games." This term has generally been used to refer to PC games that, in recent years, have been available for free to play online. Probably the most played games of all-time are the products like Free Cell that have been bundled for free with Microsoft Windows. In some Asian markets, the term casual games refers to any product that is not a massively multiplayer online game (MMOG). When DFC Intelligence forecasts the "casual game market" we are generally referring to games in categories such as puzzle action, arcade action, classic puzzle games (crossword), traditional card and board games etc. Our forecasts are for products in those categories that are not distributed at retail, but instead rely on an online business model. On the PC side alone, DFC expects this category to grow to over $2.3 billion a year by 2012, but in reality that is only a small part of the "casual" game story.

DFC prefers to look at the market in terms of simple games versus epic games. In today's game industry there is a huge market for both products. The problem with simple games is that, because they are often easy to develop, barriers to entry are low and these products can often start to look like a commodity. It is hard to get consumers to pay for something that is widely available for free. In contrast, the epic games are few and far between, a new version of Halo has taken an average of three years. These games are clearly not a commodity, but the obvious downside from the manufacturer's end is that the development costs alone are soaring to an average of over $20 million.

What became very clear in 2007 was that not only do a large portion of consumers like simple games, but they will pay big bucks for those products if they are packaged right. Making money from simple games is really a question of proper packaging, marketing and distribution. One way to sell a simple game is to package it with a fancy controller. The Wii was marketed for its controller, the DS has a touch screen, the PlayStation 2 EyeToy features a camera, SingStar uses a microphone, Guitar Hero has an actual guitar, Wii Fit has a balance board, Dance Dance Revolution has a fancy dance pad and so on. These are all very simple games, but they were also some of the most expensive and successful products on the market in recent years.

One common misconception is that "casual games" are only played by "casual gamers." The other misconception is that casual or simple games are easy. Games like Tetris, Pac-man, Dance Dance Revolution and Guitar Hero are not complicated, but they are definitely not easy. Furthermore these products appeal to a full range of gamer types. Many of the so-called epic games appeal only to fairly serious gamers. More simple games can appeal to not only serious gamers, but also the casual gamer. The difference is that hard-core gamers will often play both simple games AND complex epic games. More casual gamers will only play the simple products.

Simple games have been the driving force for the video game industry since its rise in the 1970s. Back then, games like Pong, Space Invaders, Asteroids, Pac-man, Donkey Kong and others had consumers spending billions of dollars a year in the arcades, one quarter at a time. However, when game systems went into the homes, and later when PCs went online, these products became widely available commodities that consumers could easily play for free. Arcades and amusement centers that survive today, like Dave & Buster's, still feature relatively simple games. However, these simple games are packaged in a way that is definitely not simple or cheap. For example, Daytona USA is a simple car racing game that was widely promoted by Sega for its home game systems in the 1990s. However, for the arcade version, up to eight life-size racing cars, each with their own screen and controls, can be linked to a close circuit television for a competitive racing experience with simulated motion. The game is simple, but this is not an experience that can reasonably be emulated in a household.