Playfish sees social games as industry driver

By Matt Cowan

LONDON (Reuters) - The video games sector has yet to gain from a downturn where consumers stay home to play, but social games creator Playfish says the industry is just beginning a new growth spurt.

The company that invented Pet Society, Restaurant City and Who Has The Biggest Brain? -- games played by tens of millions on sites such as Facebook and MySpace -- believes the $50 billion industry has many more converts to win.

Two-year-old start-up Playfish makes games for people to play on ordinary computers with their family and friends, unlike traditional video games that need dedicated consoles.

The London-headquartered company is backed by Accel Partners and Index Ventures, and is already profitable -- thanks to the virtual goods such as clothes, furnishings and weapons it sells for real money within its games.

"What social gaming allows us to do is to grow the aggregate size of the industry... by getting those people who are not so interested in slaying the monsters on their 42 inch plasma screen but are really interested in playing with their friends and family involved," said Chief Executive Kristian Segerstrale.

The video games industry is facing crunch time this December holiday season, with publishers and console makers pinning their hopes on a slew of big games releases to make up for sales that have fallen 13 percent this year so far in the United States.

Price cuts in recent months for Sony's PlayStation 3, Microsoft's Xbox and the Nintendo Wii failed to have a dramatic effect on sales of games.

Nintendo, whose Wii console brought video gaming to millions of new, casual gamers, lost its leading position in the gaming market last quarter and slashed its full-year earnings forecast last week after a 52 percent drop in quarterly profit.