It might not be difficult to turn a profit in the casual gaming market, but Nathon Gunn is gunning for more with his new venture, Social Game Universe.

Gunn is best known as the cofounder of Toronto’s Bitcasters, which built itself up as a digital service provider for major media and entertainment companies, producing animation, music videos and games before shifting focus to its own new media properties. But Gunn has passed the Bitcasters CEO role over to cofounder Duane Wall so he can oversee spin-off SGU, which in late June released its inaugural product, the movie-biz game Hollywood Tycoon.

He sees mixed blessings in launching a company in the middle of a recession.

‘Raising money was very, very hard,’ he acknowledges. ‘We didn’t raise a ton, but we did succeed – and against the odds, I have to say, because nobody was feeling loose with their money.’

What’s most impressive are the investors who did come on board: Nelvana cofounder Clive Smith, concert promoter Michael Cohl, former Standard Broadcasting head Gary Slaight, and Zoomer Media boss Moses Znaimer. The media and entertainment titans own a significant chunk of SGU. Another investor is Bruce Hooey, former SVP/CFO at Universal Music Canada, who has also joined SGU as its COO/CFO.

In Hollywood Tycoon, which can be downloaded for US$19.99, the player inherits their uncle’s movie studio, which proceeds to fall apart. The goal is to grow it back to former glories by building production infrastructure and acquiring scripts and hiring actors, and then matching them for a potential hit film. Box office success and awards move the player up the ladder, ultimately, to the fifth and highest level of Movie Mogul.

The game is set for wide release on the web for free play – which is where Gunn sees the real money.

‘It’s this whole idea of Web 2.0 meets games,’ Gunn explains. ‘Some people are calling it Games 2.0 – the idea that games will play entirely through the browser. You don’t need to download anything; you don’t need any special installation.’

SGU would see dollars here and there from offering upgrades and optional items within the game, or possibly through a subscription fee that gives access to the company’s games ahead of the public release. The free-to-play model has done well for the likes of South Korean game manufacturer Nexon, makers of the phenomenal KartRider game. Nexon has had recent annual revenues reported around US$300 million – those $1 and $2 charges can really add up when you have a worldwide subscriber base numbering supposedly around 350 million.

‘It’s a massive business and it lends itself to an economically challenging time because you don’t have to buy anything upfront,’ Gunn says.

SGU isn’t exactly thinking KartRider at this point, though early numbers are encouraging. Hollywood Tycoon came out of the gate a top-five seller on the PlayFirst casual games chart.

Good early returns will come as a relief to the Ontario Media Development Corporation and Telefilm Canada, both of which got involved. Telefilm invested nearly $250,000 for production and nearly $150,000 for marketing, while the OMDC put up $75,000 through its Interactive Digital Media Fund, which helps producers with the final piece of their financing puzzle.

‘If it made $50,000, we’d be happy,’ says Gunn. ‘But that wouldn’t be worth it. We’ve proven we can do it, we’ve got a good game on the market, and it’s the first step towards our bigger system.’

That bigger system means taking the game into the social networking realm. In its current incarnation, players are each trying to be the mogul, but in the social-networking version, some players could be screenwriters, while others could be actors, who could then be hired for films.

Also, in the current game, when a movie goes into production, an animation appears showing it being made, but Gunn foresees that being substituted with short-film content produced by the players themselves, and then that content would show up in other players’ games. Actor-players could supply their own audition reels to the studio heads.

Monica Moore, Telefilm national new media executive, is bullish on the direction Gunn is taking.

‘Companies working within [the casual games] genre are now finding that they can achieve even greater success in terms of both audience and revenues if they incorporate social aspects to their games, or offer them via social networks such as Facebook and MySpace,’ she e-mails from the Casual Connect Seattle games conference.

Gunn, 35, a Ryerson film grad, and his colleagues are looking into licensing actual movie industry content for the game, although an entirely realistic representation of the biz is not the point, as the game is aimed at a wide audience.

Hollywood Tycoon is merely a jumping-off point for SGU, which also has plans for similar tycoon games set in the sports and fashion worlds. There is also a concert tycoon game in development, where one could see the Michael Cohl connection coming in handy.

SGU is a brand new start for Gunn, who has seen many ups and downs in the digital sector since he and Wall cofounded Bitcasters in 1996. He recalls a time – prior to the dot-com bubble burst – when there were potentially lucrative offers to sell the company, including an $8 million term sheet for a stake around 40%.

‘In some ways I’d like to go back to those days and just take one of those cheques,’ Gunn says, laughing. ‘I was a little bit overconfident in those days… I suppose I’d tell any young entrepreneur who got an offer – take it!’