Consulting Assignment Case

Copyright ©2012 Deloitte Development LLC. All Rights Reserved. Consulting Learning | Campus Recruiting

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Pinnacle Games, Inc. Moving to the Cloud

Student Packet | Table of Contents

1. TABLE OF CONTENTS

1. Table of Contents.......................................................................................................2

2. Case Overview & Scenario........................................................................................3

Introduction..............................................................................................................................3

About Cloud Computing..........................................................................................................4

About the Client.......................................................................................................................5

Case Scenario..........................................................................................................................6

3. Case Competition Exhibits........................................................................................7

E-Mail Correspondence 1........................................................................................................7



Financial Reports...................................................................................................................10

Deloitte POV...........................................................................................................................11

Pinnacle’s Five Year Goals...................................................................................................12

Pinnacle’s General Organizational Structure......................................................................12

Deloitte Service Area Details................................................................................................13

News Articles..........................................................................................................................17

4. Schedule & Logistics...............................................................................................20

5. Rules & Guidelines..................................................................................................21

Signing Up..............................................................................................................................21

Preparing your Solution........................................................................................................21

Solution and Materials Collection........................................................................................21

Question and Answer Teleconference.................................................................................22

Presentation Day....................................................................................................................22


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Student Packet | Overview & Scenario

2. CASE OVERVIEW & SCENARIO

The case study is designed to give you a glimpse into a day in the life of a Deloitte consultant solving real-life business issues. The solution you generate should address the problem from three distinct perspectives: Strategy & Operations, Human Capital, and Technology. Many of the skills you utilize and ideas you generate in analyzing the problem and recommending a solution will be representative of what our analysts do at their respective client sites every day.

Within this packet you will find the relevant case information to get started on your presentation. In addition, external research is expected in order to create an innovative solution. Remember, this competition is not only a great opportunity to further develop your teamwork, presentation, critical thinking and analytical skills, but it is also a chance to network with Deloitte practitioners and learn more about our career opportunities and internship programs.

Finally, please note that Pinnacle Games, Inc. is a fictitious company. None of the information described within this case is representative of a specific Deloitte client. Any similarities between the company data and Deloitte clients are purely coincidental in nature.

Thank you for your interest and participation. Good Luck!

Introduction

Gaming, once a simple pastime, is now a big business. In 2010, worldwide revenues for the industry totaled $19.1 billion – a touch lower than the annual GDP of Bolivia. The key industry players, companies such as Electronic Arts, Activision Blizzard, and Zynga, produce a variety of games with staggering rates of sales. For example, Activision’s Call of Duty sold 6.5 million copies in the first 24 hours after its release. As a point of comparison, the final edition of the Harry Potter series sold 6.9 million copies on the day of its debut. However, even with these blockbusters, the overall pie is shrinking. Online and mobile gaming is stealing market share and redefining the gaming landscape. From 2008 to 2010, the sales of games for traditional consoles shrunk by $900 million. That being said, hardware sales have been growing, and consoles will remain the largest gaming segment for the next five years, even as revenue growth is expected to decline as gamers spend more of their time on social and mobile gaming.

Ten years ago, games were played on consoles and purchased on disks – now gamers can use mobile phones, tablets, or PCs to download a game in mere minutes. Innovations like 3D and HD graphics are increasing the file size of the products and necessitating changes to the delivery mechanism. Instead of sending out a game on two disks, online downloads are gradually becoming the method of choice. While these enhanced graphics are good for gamers, the constant state of innovation is putting a strain on the IT resources of many of the market leaders. In one interview, a developer admitted that instead of sending their development files over the terribly slow network, it was faster to ship them via FedEx. In order to please the game consumers and creators alike, cloud computing is becoming an integral part of any gaming company’s portfolio. In fact, new players like Zynga already use this operating model and have come to be known as the new brand of company “born in the cloud”.


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Student Packet | Exhibits

Picking up on the trends, established gaming companies are turning to social and mobile games to provide new revenue streams via ad revenue. They are also drawn by the lower costs of the social media games – development can take a few short weeks, and expenditure is measured in thousands, not millions, of dollars. Another bonus of these new platforms is their ability to generate sustained revenue streams as users buy upgrades within the game (an example is Zynga’s Mob Wars, wherein players pay real currency for items that only exist within the world of their game. Zynga reportedly earns over $22,000 daily on Mob Wars alone). This move to mobile and social gaming is driving faster, almost continuous, design cycles. While this model ensures a constant stream of games to appease consumers, recent reports have highlighted the strain the pressure of constant delivery puts on the development staff. Gaming companies have seen decreased morale and heightened attrition as a negative consequence of the shifts the industry is facing.

Another side effect of the shift to mobile gaming is that the profile of a typical gamer is dramatically changing. Traditionally, the biggest market segment was comprised of males, aged 18-35, looking for games rich in graphics, sound, and with a solid storyline. These types of consumers are willing to pay between $40 and $60 for a game and upwards of $200 for the console on which to play it. Focused on this customer profile, the gaming companies poured money into development with a high margin, low volume revenue model. Enter social media and mobile games. The customer base shifts to a mix of males and females, aged 5-55. They’re looking for easy-to-use games – the type that will help kill time while they wait for the bus or stand in line – a level of enjoyment that they value at no more than $10 per game. With their low demands for quality, these games cost mere thousands to develop and make up for their low margins with high sales.

Due to the increased competition and changing atmosphere of the industry, many of the largest gaming companies are growing through acquisition – snatching up developing studios for their intellectual capital. This helps offset some of the pricing pressures from the value chain – from console makers to internet service providers – all of whom are looking to control the distribution of games to customers, especially in this new “age of the cloud”.

About Cloud ComputingUntil a few years ago, consumers needed to buy hardware, software, and sometimes data in order to use certain products. Recently, however, research and innovation has led to a significant breakthrough in the way technology is delivered. In the past few years, companies have been leveraging the Internet as a common infrastructure that can be used to deliver products.

Cloud computing is a nebulous term that has many different meanings. Gartner Research refers to the term as “a style of computing where scalable and elastic IT-enabled capabilities are delivered as a service to external customers using Internet technologies.”

In order to fully understand cloud computing, let’s look at several examples of some of the most successful products:


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- Netflix uses Amazon Web Services (IaaS) to encode and deliver high-quality video streams on devices such as PCs, game consoles, and smartphones. Cloud computing has helped Netflix move from physical DVD rental to on-demand video streaming and become the biggest online distributor of streaming videos

- OnLive, a cloud-based gaming company, allows on-demand and instant game play on Internet-connected computers by using remote servers to host video games. Cloud-based gaming will solve the device-content compatibility* issue and increase the user base for interactive games

- Workday offers a Software-as-a-Service (SaaS) solution to provide cost and resource savings to major companies that need an HR and Finance management tool

In other words, it is no longer necessary to buy and install a suite of software for each and every customer. Instead, one application can be loaded that would allow multiple customers to log into a web based service that hosts the program. Workload shifts from the computers of local customers to the servers of network computers that make up the cloud.

Cloud computing functionality has exploded in the last few years, and the use of cloud technologies has had a significant impact in the gaming industry. Cloud computing has produced new revenue streams and has opened markets that were previously unreachable. Customers are no longer required to buy a console and individual games. Instead, games can be streamed directly from the web in order to provide significantly more data to customers, allowing for a better user experience. Because of this, traditional video game companies must change the way they develop games in order to tap a market with significant potential for growth.

About the Client

Pinnacle Games, Inc. is a publicly traded American developer and distributer of video games for gaming consoles. With over 7,000 employees, Pinnacle is the second largest gaming company in the world and considers its strongest competition to be companies such as Activision and Electronic Arts. In 2011, Pinnacle recorded a 30% decline in revenue from the previous year, seeing a substantially higher decline than the 20% decrease that the overall industry faced. To address their disappointing performance Pinnacle just rolled out a new set of five year strategic goals aimed at improving performance across several key measures (see Exhibit 4 for more details). The key client contacts who have voiced concerns over cloud technology are:

Julia Stern – Chief Executive OfficerJulia Stern has been Chief Executive Officer of Pinnacle since June 2007. Previously, Ms. Stern served as the Chief Operating Officer of Pinnacle for 3 years. Prior to joining Pinnacle, Ms. Stern served as the Chief Talent Officer for the Windows Operating System Division of Microsoft. Ms. Stern has held executive management positions at several companies including Dove, Panasonic, Coca Cola, and Kraft. Ms. Stern holds an MBA from Harvard Business School and a B.A. in Mathematics from Emory University.

Because of Ms. Stern’s more traditional career path, she has not had much


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experience in cloud computing and is resistant to changing the corporate strategy to focus on an area where Pinnacle has little experience. She also is very concerned about talent attrition and the happiness of Pinnacle employees. Ms. Stern will not support such a large change without analytical evidence of the potential for growth.

Young Lee – Vice President of Strategic DevelopmentMr. Lee has been Vice President of Strategic Development for Pinnacle since March 2011. Prior to joining Pinnacle, he was a Senior Associate of Corporate Strategy at Google for 3 years. From June 2006 to March 2008, Mr. Lee served as an Equity Research Associate at Goldman Sachs. Mr. Lee received a B.A. in Economics from Northwestern University and an MBA from University of Chicago Booth School of Business.

Mr. Lee is not afraid of large scale change, and coming from Google, sees the huge potential for growth in cloud gaming. He would like to see additional research in the future of the industry in order to make a sound investment decision.

Maria Morgan – Chief Information OfficerMrs. Morgan was recently hired as the Chief Information Officer at Pinnacle. She was previously the Global IT lead for Disney’s gaming division and has a computer science background, receiving her undergraduate degree from the University of Texas at Austin and her MBA from the MIT Sloan School of Management.

Mrs. Morgan is an avid supporter of technological advancement and a strong proponent of moving Pinnacle towards cloud technology. She comes from an analytical background and expects any proper solution to rely heavily on solid quantitative reasoning.

Dave Cunningham – Vice President of Corporate FinanceMr. Cunningham has steadily advanced at Pinnacle since he began as a financial analyst with the company in 1992. A University of California, Los Angeles alumni with a degree in finance, he worked his way up to his current position as the global head of corporate finance faster than any person in the history of the company.

Mr. Cunningham is wary of sweeping technological changes, especially when they require significant financial investment. He expects requests for funding to be very persuasive before he gives them the stamp of approval to go to the board.

* Note: Pinnacle and its employees are fictional and intended for illustrative purposes only.

Case Scenario

After a rough final quarter of 2011, Pinnacle’s VP of Strategic Development, Young Lee, considers the need to invest in technology that will allow the company to respond to the changes in their market. From e-mail correspondence, he knows that the newly hired CIO, Maria Morgan, is a strong proponent of embracing cloud technologies for improved business processes and customer delivery. He contemplates suggesting an investment


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in cloud at the board meeting in two weeks, but he knows that he needs a well-formulated plan, especially given that it would be such a large investment during turbulent economic times. Because of the complex nature of the problem, Young Lee decides to call upon Deloitte Consulting to assist with his presentation to the board.

Knowing that this is a multi-faceted problem, Mr. Lee asks Deloitte to bring a team comprised of Human Capital, Technology, and Strategy & Operations practitioners. At his team briefing he outlines the questions that he is looking to answer in the formulation of this presentation:

1. What are some options for how Pinnacle can integrate cloud into their business in order to achieve their five year goals?

a. Specifically, Mr. Lee has requested that Deloitte provide an analytical evaluation of the current cloud options, along with the team’s suggestion as to which makes the most sense for Pinnacle to pursue

2. How does this cloud strategy fit into Pinnacle’s five year growth plan and strategic vision?

a. Specifically, Mr. Lee has requested an implementation roadmap to demonstrate how the strategy should be enacted

3. If Pinnacle implements cloud technology, it will be a dramatic shift to their current overall structure (i.e., change the process of game development)

a. What factors regarding the operating model should be considered when implementing a new technology?

b. How can Pinnacle manage the change that their employees will experience with a dramatic shift to their operating model? How should the company focus their talent strategy to ensure that they don’t lose valuable employees in the transition, while also ensuring that they have the necessary capabilities for a cloud based business model?

4. Mr. Lee is concerned that the investment in cloud will put Pinnacle in an undesirable financial position just as the worst of the economic crisis hits. On the other hand, he knows that technological innovation is necessary to compete with companies “born in the cloud”. What are some other concerns he should be aware of and how can Pinnacle mitigate against those risks?

5. Mr. Lee mentions that some members of the board are resistant to an overall strategic investment to the cloud. How should Mr. Lee present Deloitte’s assessment to leadership to minimize resistance?

Following the team briefing Mr. Lee hands the Deloitte team a template on which to make the presentation. He is heading on a business trip to Asia and will be “out of pocket” for one week, after which he will meet with the team to be briefed on their findings. He strongly encourages the team to perform external research prior to completing the analysis and tells Deloitte to get creative in thinking of their solution, making sensible assumptions when necessary.


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Judge Packet | Judging Criteria & Presentation Requirements

3. CASE COMPETITION EXHIBITS

Exhibit 1: E-mail Correspondence

From: Morgan, Maria Sent: Sunday, January 29, 2012 2:57 PMTo: Lee, Young; Cunningham, DaveSubject: Investment in the Cloud

Hi Young and Dave,

I trust you’ve both been well since I last saw you at the board meeting in December. I wanted to take a moment to write you regarding something that has been weighing heavily on my mind these past few months. As you may know, I am a strong proponent of moving the company toward a cloud solution, based on recent changes in the marketplace and Pinnacle’s internal data transmission needs. I know it’s a big investment, but now more than ever we need to take action.

Internally, delays in data transmission during the development cycle are coming back to affect our bottom line. As one of numerous examples, during the crucial final development period of Call to Battle IV, we lost 10 days of development time physically shipping the disks to our global testers. Developers were working on materials that hadn’t had the bugs identified and ultimately it showed in the quality of our final products, the amount of overtime we had to pay to both developers and testers, and the sales of the game. With EA’s Battlefield 3 and Activision’s Call of Duty coming out on our heels, we simply can’t afford these kinds of delays.

On top of that, I know you have both been following the explosive growth of our mobile and social gaming competition (Zynga’s new platform innovations have been repeatedly in the news – if you haven’t read the New York Times Article from October, “Zynga Releases New Games and a New Platform”, I would highly recommend it). We have to make a move, for our stock price and in order to maintain our position as one of the market leaders in the global gaming industry.

Let me know your opinions and what I can do to help prepare for our next board meeting. I cannot stress how strongly I feel that immediate action is necessary.

Best,

Maria

Maria Morgan, CIOPinnacle Gaming, IncPhone: (919) 212-9999 | Fax: (919) [email protected]


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mailto:[email protected]


From: Cunningham, Dave Sent: Monday, January 30, 2012 3:19 PMTo: Lee, Young; Morgan, MariaSubject: RE: Investment in the Cloud

Hi Maria,

Thank you for your e-mail. It’s great to see that you’re hitting the ground running in your position as CIO. While I appreciate the need for Pinnacle to move toward a cloud solution, I’m apprehensive about being so aggressive in our board request. As you acknowledged in your e-mail, moving to cloud technology would require a significant capital investment. We are still in the beginning stages of our capital budgeting process, but Global IT would have to make a very persuasive case in order to obtain that level of funding.

Keep in mind that Pinnacle has some other significant projects in the works that would limit the availability of funds for a project in the cloud, namely:

Ongoing implementation of our Oracle ERP system Development costs for our new action and adventure game (set to be launched in

2013, this is expected to be our new Call to Battle-type blockbuster franchise) Potential acquisition of one or multiple social and mobile gaming studios

If you are set upon presenting a cloud solution to the board, please think about bringing in a third party source to validate the costs and benefits of such a solution. In the past, Pinnacle has worked with Deloitte Consulting to excellent results. Perhaps you should consider bringing them in for a short feasibility study.

Thanks,

Dave

Dave CunninghamVP of Corporate FinancePinnacle Gaming, IncPhone: (919) 212-8888 | Fax: (919) [email protected]


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From: Lee, Young Sent: Monday, January 29, 2012 7:23 PMTo: Morgan, Maria; Cunningham, DaveSubject: RE: Investment in the Cloud

Hi Maria and Dave,

I can see both sides of the argument here – we need to invest in cloud but must make sure that doing so does not adversely affect our financial position. Employees have e-mailed me arguing for both sides of the discussion. I agree that we should bring in a third party consulting firm to do an in-depth analysis prior to the next board meeting. I have begun negotiations with Deloitte Consulting and have asked for a team that incorporates practitioners across their Technology, Human Capital, and Strategy practices. Hopefully we get a well-rounded, analytical, and creative result that we can bring to the board. Deloitte has proven itself over and over again, and I expect this project to be no exception.

Please feel free to come to the final presentation a few days prior to the board meeting to see what the Deloitte team has produced. I will send you the Outlook invite under separate cover. I’m sure there will be information that each of us finds relevant.

Cheers,

Young

Young LeeVP of Strategic DevelopmentPinnacle Gaming, IncPhone: (919) 212-9889 | Fax: (919) [email protected]


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Exhibit 2: Financial Report – Income Statement

In Millions of USD (except for per share items)13 weeks ending

2011-09-3013 weeks ending




2010-09-30Revenue 590 804 834 865 520

Other Revenue, Total

Total Revenue 590 804 834 865 520

Cost of Revenue, Total 330 185 260 425 275

Gross Profit 260 619 574 440 245

Selling/General/Admin. Expenses, Total 250 171 215 255 200

Research & Development 220 210 240 198 205

Depreciation/Amortization 10 10 10 11 12

Interest Expense(Income) - Net Operating

Unusual Expense (Income)

Other Operating Expenses, Total

Total Operating Expense 810 576 725 889 692

Operating Income (220) 228 109 (24) (172)

Interest Income(Expense), Net Non-Operating (4) 3 3 3 5

Gain (Loss) on Sale of Assets

Other, Net

Income Before Tax (224) 231 112 (21) (167)

Income After Tax (212) 215 98 (20) (160)

Minority Interest

Equity In Affiliates

Net Income Before Extra. Items (212) 215 98 (20) (160)

Accounting Change

Discontinued Operations

Extraordinary Item

Net Income (212) 215 98 (20) (160)

Preferred Dividends

Income Available to Common Excl. Extra Items (212) 215 98 (20) (160)

Income Available to Common Incl. Extra Items (212) 215 98 (20) (160)

Basic Weighted Average Shares

Basic EPS Excluding Extraordinary Items

Basic EPS Including Extraordinary Items

Dilution Adjustment 0 0 0 0

Diluted Weighted Average Shares 264 270 268 265 263

Diluted EPS Excluding Extraordinary Items (0.80) 0.80 0.37 (0.08) (0.61)

Diluted EPS Including Extraordinary Items

Dividends per Share - Common Stock Primary Issue 0 0 0 0 0

Pinnacle Games, Inc


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Exhibit 3: Deloitte Point of View (POV)

How can Deloitte’s Cloud computing services address Media & Entertainment market challenges?


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Exhibit 4: Pinnacle’s Five Year Goals

Grow top line revenues at least 20% by the end of December 2017 Enhance the customer experience by producing high-quality, timely, and

engaging game content Strengthen Pinnacle’s internal culture in order to reduce attrition by 10%

and foster a positive and productive workplace Acquire key intellectual property in order to widen footprint in rapidly

growing gaming segments Improve the business processes in order to facilitate the internal

development of games Expand into innovative technologies in order to stay at the forefront of the

worldwide gaming market

Exhibit 5: Pinnacle’s General Organizational Structure Excerpt

Exhibit 6: Deloitte Service Area Comparison


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Exhibit 7: News Articles of Note

Potential Risks of Cloud


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New Cloud Gaming Platform Exhibits at CES 2012

Posted 01/21/2012 01:24 AM ET

BEIJING, Jan. 21, 2012 /PRNewswire via COMTEX/ -- Cloud Union, currently operating the single largest cloud gaming platform in China, attended CES 2012 in Las Vegas.

Cloud gaming platform provides a new form of "download-free" and "install-free" game services via cloud computing technologies, which enables users to easily play high-end 3D video games, such as Crysis 2 or Need for Speed 14, on any of their personal electronic devices. Because all a game's graphics are computed on cloud, cloud game service can go beyond a player's hardware limits for a better and more enjoyable gaming experience.

Cloud Union exhibited cloud gaming products running on note-PC, set-box, flash webpage version and iPhone app as game controller. "Most of the electronic devices, as long as they can connect to a network and decode video stream, will be able to enjoy cloud game services. In theory, any game can be streamed to any device using CU's technology, such as a notebook, TV, normal set-box, etc. We even connected PS3 with our cloud, so if Sony agrees, you can play PS3 on any smartphone and smart TV in China," said Danny Deng, the CEO of Cloud Union.

Unlike its competitors in the US, CU is dealing with a totally different market: huge, high potential, but also very challenging. The box game market has been ruined by piracy issues for a long period. MMO is the most dominated player in China's game market. Players download top level PC games for free and never think about paying for them. "Free" MMO games are easy too. "But there are also optimistic parts," Danny says. "The population which is born between 1975-1985 are grown up, they were playing games since their childhood. When they have the ability to decide the family's outcome, they are looking for more creative entertainment ways." Another good piece of news is, since China's government is calling for a new round of broadband bandwidth upgrading and cost reduction, China's network operators need to find new killer applications to attract users to upgrade bandwidth and pay more money on their service.

As currently the single largest cloud gaming platform in China, Cloud Union has launched their services not only on PC, but also on TV platform. "We have made great progress with WASU Digital, which is one of the biggest IPTV operators in China, to enable every user to play cloud games in WASU's network," Danny said. "Compared to the US, China is very different when it comes to the internet as well as TV industry. We are already standing at a competitive position in the Chinese market, which the potential competitors, such as Onlive and Gaikai, may not rival easily."

The iPhone and iPad has ended several companies' ambitions on the smartphone and pad market. China's TV manufactures are also taking Apple TV as a strong competitor in the future. They are trying to integrate more content, cloud games seems to be a very


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suitable choice. "CU has entered this area and prepared for years, we have ported our system to many smart TV and set-box, such as TCL, Lenovo, and Haier."

About Cloud Union

Cloud Union started R&D on cloud gaming technology in 2008. It is headquartered in Beijing, China, and currently has 70 employees. Cloud Union's investors include Soft Bank, Intel Capital, and other strategic investors which may bring value to the company. CU has just announced that it has closed B Round, including which the total fund rising has reached over 10 million USD.

SOURCE Beijing Cloud Union Co., Ltd

Copyright (C) 2012 PR Newswire. All rights reserved

Zynga Releases New Games and a New Platform

NY Times, David Streitfeld

Posted 10/11/2011 09:01 PM ET

SAN FRANCISCO — “Oh, thank you for saving me!” squeals Giselle the Lovely Maiden in CastleVille, the latest effort from the game company Zynga.

Giselle the Lovely Maiden is not the only one who needs some help getting through the Gloom. Zynga itself must keep up the momentum as it prepares for an expected $20 billion public offering in a manic market. It is the unquestioned leader in casual gaming and one of the most successful Internet start-ups of any kind, but some of its most recent player statistics look rather static.

Zynga executives put on a show for the media on Tuesday at the company’s headquarters here. They introduced several games, including CastleVille, Bingo, Hidden Objects and a sequel to its early hit, Mafia Wars, as well as new ways of playing old games.

They also talked about something that might be even more significant to the company’s future stockholders: a new playground that would leave it less captive to the whims of Facebook, its crucial partner.

The larger game that is playing out is Zynga’s effort to redefine itself. Fifty-nine million people around the world played one of its games every day during the second quarter, a wildly impressive number for a company less than five years old. But the number of players is essentially unchanged from the fourth quarter of 2009.

And most of that playing is done via Facebook, which takes 30 percent of the revenue that Zynga makes on its site and wields the power in the relationship.

In opening the festivities, Mark Pincus, Zynga’s founder and chief executive, said the company was not just trying to make the next hit game. It has much bigger designs.


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What Zynga is calling Project Z will be a new platform, an environment tailored just for games. Executives described it as a Web site done in partnership with Facebook, but were murky on any financial aspects since their company was in its quiet period preceding a public offering, as mandated by the Securities and Exchange Commission. Clearly, however, Project Z shifts the balance of power back toward Zynga.

The platform might eventually do a lot more than that.

“The world belongs to platforms. Everyone wants to be a platform,” said Lou Kerner, an analyst with Wedbush Securities. “Look at Facebook: Two hundred thousand people are writing code to make it better, and none of them are on Facebook’s payroll.”

Mr. Kerner sees Zynga making that same leap. “If they can build and control a vibrant gaming ecosystem and tax it appropriately, they can create significant shareholder value,” he said.

In this outcome, Zynga would be a little like a movie studio, distributing the work of others. For the moment, however, it is living and dying by its own hits.

Cityville, its biggest game, has picked up a little steam recently with 13.5 million daily users, according to AppData. FrontierVille, however, has been sliding faster than a pioneer bitten by a varmint. Introduced in June 2010, FrontierVille peaked with nine million daily players but now has about 5 percent of that.

Meanwhile, the popularity this summer of the Sims Social, a casual game from a big rival, Electronic Arts, proved that the Zynga formula could be successfully captured by others.

Mr. Pincus stressed that Zynga was focusing on expanding the notion of play, including getting gamers to do more during brief stints on mobile devices — “a five- or 15-minute experience that feels like a meal.”

Several of the new games are variants of current games designed for mobile devices. “There are about a billion PCs out there and four billion mobile devices,” said the chief mobile officer, David Ko. “The opportunity is enormous.”

Zynga needs a wide reach because its games are free. Nearly all its revenue comes from selling virtual goods to the “whales,” the 5 percent of its players who want to get ahead quickly, say, by buying tractors or weapons. The larger the pool of casual players, the more whales.

CastleVille, which will be introduced before the end of the year, aims for mass appeal. In addition to the hapless Giselle, characters include the Sexy Pirate Sonja, George the Friendly Miner and Antonio, who in a short clip shown to the reporters dazzled a couple of medieval babes when he took off his shirt. If this is too mushy for some players, they can spend their time defending their castle from “beasties,” creatures whose bark and bite was left for the moment to the imagination.


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