I learned 2 very interesting things recently worth sharing:
1. Having one’s eyebrows threaded hurts like a MOTHER!
2. Today is the anniversary of the isolation of radium.The interesting part is that Marie Currie was of course the person that did that.
What I learned is that Madame Currie won the Nobel Prize in science TWICE and is the ONLY PERSON to have ever won it in two different sciences – physics and chemistry. What an incredible accomplishment! (oh yeah, I learned this from my 11 year old son!)
My random thoughts for the day.
Every week I will compile some of the more interesting news items from around the world on games, technology and entertainment.
Global Gaming News: Nov 1 – Nov 6
North America
Activision Blizzard
Activision posted revenue of $703 million for the third quarter, compared to $711 million last year. While revenue was down from 2008 quarter figures, the company had net earnings of $15 million compared to a loss of $108 million for the same quarter.
In separate news, Activision announced that World of Warcraft has started support of microtransactions, selling pets for $10 each. Initial reaction has had customers up in arms about the additional costs.
ngmoco
ngmoco made its first acquisition acquiring Miraphonic, developer of the mobile MMO game Epic Pet Wars. This follows the company’s news at GDC China that they were going to be expanding into social gaming.
Asia
Korea
NCSoft reported an operating profit of $48 million for Q3, a seven times increase from 2008. Overall company sales more than doubled from for the same period. International sales outpaced NCSoft’s domestic sales for the first time, accounting for 52% of total quarterly revenue.
Having only launched a year ago in Korea and not until September in North America and Europe,
Aion’s total sales were impressive reaching $67 million for the third quarter alone.
China
On Monday NetEase was ordered by the Chinese General Administration of Press and Publication to shut down its World of Warcraft servers. Then by Wednesday the Ministry of Culture announced that the General Administration of Press and Publication had clearly overstepped its authority. The fight over
Shanda’s CEO Diana Li stated that the Chinese online game industry surged 76.6% in 2008, reaching $2.7 billion. 2009 figures are expected to grow up to 50%, reaching $3.9 billion. While the company’s international revenue this year will only be $20m – $30m, Li is planning to focus on expanding the company’s business overseas.
Europe
According to data released from an integrated report from The NPD Group, GfK Chart and Enterbrain, the UK had the biggest drop in video game sales in Q3. In Q3 sales dropped 19%, while sales declined 12% in Q1 and Q1. Portable game sales plummeted 34% for the quarter and console sales declined 12%. The US had a 9% decline for the period while Japan actually had a 15% increase.
Latin/South America
Venezuela
The Venezuelan government approved a law that bans the import, production and sale of videogames and toy guns of any kind. The ban which is scheduled to go into effect in 3 months, imposes strict penalties and imprisonment of 3 – 5 years for each offence. I’m sure there will be much more news on this over the coming months.
Mexico
Zeebo starts selling in Mexico to over 2000 retail outlets. Priced at about $189 it comes with a game controller, keyboard, and a number of games pre-installed. Some of the partners supporting the platform include Activision, THQ, Gameloft, Capcom and EA Mobile. Zeebo has been shipping in Brazil since June.
Tools and Technology
Umbra Software
Umbra licenses their Umbra occlusion culling technology to BioWare. BioWare will be using Umbra’s technology for Mass Effect, Dragon Age and still-to-be-announced titles.
Epic’s Unreal Development Kit
Epic has announced the launch of the Unreal Development Kit – UDK, a free edition of their Unreal Engine 3. The open access will enable anyone to use UE3 for no cost. There is increasing pressure to compete with free game engines and Epic’s move, while good, might be a little too late.
Upcoming Conferences and Events
• IDGA Leadership Forum – San Francisco, November 12 – 13
• Montreal International Games – Montreal, Canada, November 16 – 17
Epic just announced it is making its development kit available for free for noncommercial and educational use. This comes just a few weeks after Unity landed $5.5 million in VC funding. I’m not inferring that Epic’s move is a reaction to Unity’s news, rather I think it highlights that tool and middleware vendors are still jockeying to meet a growing range of game development needs.
From the AAA titles down to the indie and iPhone games, the range of games and platforms middleware tool providers need to support seems to be growing exponentially. There is also a new breed of tool and service providers looking to support smaller game developers. Companies like Wild Pockets and Mixamo.
Wild Pockets has a complete 3D browser-based game engine and development toolkit they make available for free. Part of their toolset includes microtransaction components built directly into the API. They have had impressive success within the indie game community and have caught the attention of a number of supporters.
Mixamo raised $4 million in VC funding earlier this year. The company has a 3D character animation service where users can log onto their website and buy animation sequences very inexpensively. They have announced a list of tool partners that includes Trinigy’s Vision Engine, Autodesk’s 3ds Max Bipeds, xaitment’s AI tools, and Emergent’s Gamebryo LightSpeed.
The road to development nirvana is long and fraught with unforeseen issues, setbacks and costs. It is those companies that understand the parameters of their projects that ultimately succeed. It doesn’t matter if the game is cross-platform, multiplayer, or mobile.
Not to state the obvious, but 2009 has been bad for business. Of course the video game industry has been impacted, but the woes of the game industry have more to do with growing pains from within. Many of the traditional models were breaking down independently of the economy. The retail model is too expensive and development costs are too high to support the added retail cost burden. Up until last year the industry was in a state of paradigm paralysis – or the inability to see beyond the current models. Defined as the greatest barrier to a paradigm shift, paradigm paralysis has overshadowed growth opportunities for many companies.
As a result, publishers have slashed upcoming games, halted new development and closed studios. M2 Research estimates 12% of the game development workforce has been laid off in the past year. Add to that a freeze on investment funding and traditional game models don’t seem to look too attractive.
The future of interactive gaming is in new distribution models, more streamlined development and the use of creative revenue models. In fact, the industry is entering a new period of expansion, something well beyond the traditional concept of gaming. The democratization of games has arrived.
Diversity of an Industry
Consumers who play games are not one-dimensional. Today’s gaming consumers represent a wide-reaching swath of the mass market. Not only does the demographic profile of gamers now extend to every age, but the growth and impact of females playing games is undeniable. Add to this that more people are playing games on multiple platforms. They are playing games on consoles, PCs, portables and mobile devices. Games have become mass consumable products. Take a look at some statistics:
Mass Market: Games now encompass a much wider demographic than just males ages 18 to 25. Nintendo estimates 300 million people play consoles and portable devices, reaching 450 million by 2015. Female players constitute one of the fastest growing market segments.
Multi-platform: People are playing games on multiple console platforms. There are 2200+ titles on the market, 70% are multiplatform and growing. That does not include the 1500+ titles for portable devices.
PC Power: With its open platform, the PC has become the central hub for online and social gaming, virtual goods, and microtransactions. Jon Peddie Research estimates the installed base of gaming PCs is 420 million, growing to over 500 million by 2012. M2 Research estimates 270 million of these PCs have broadband – that is 65% of today’s PC gamers.
MMOs and Casual Games: There are hundreds of MMOs, and the list is growing. Some casual game developers, like Big Fish Games, put out a new game everyday.
Growing Trends: New game boxes like OnLive, Gaikai and Zeebo, and mobile gaming driven by the iPhone’s success, have the potential to exponentially expand gaming.
Gaming Renaissance
So what does this all mean for game developers and publishers? If anything it highlights the immense diversity of content, platforms, distribution and most importantly consumer preferences that exists today.
The current gaming renaissance movement does not solely rest with the independent developer, trying to publish their first game. Renaissance, in the true meaning, is about a re-birth or an awakening of the arts, the ability to explore new frontiers in expression and emotional attachments. To that end, this period of gaming renaissance needs to also encompass publishers looking for new ways to engage this growing diversity of consumers on a more visceral level.
Key Driving Forces for Success
Developers and publishers need to find more effective methods for delivering a reasonable ROI on their projects. There are a number of key driving forces that will impact a company’s success as this new wave of gaming takes hold, some of which include:
- Expansion of gaming platforms
- Importance of a social community
- Flexibility of developers to move quickly
- Quality of content and user interface
- Better management of costs and ROI
- Broader support of middleware technology
Whether it is the smaller development teams or the larger publishers, there is a very real need for studios to address these driving forces. How successful companies are at covering these factors will greatly impact their growth over the coming years.
For the renascent teams, one way to meet the constraints on time and money is to incorporate middleware solutions into their production pipeline. In order to develop these new and varied game segments there is a requirement for tools that are flexible and open.
Importance of Middleware
The point of middleware tools is to help alleviate some of the production burden by creating a framework for certain components within the production pipeline. For traditional console and PC games, middleware has been a part of the development discussion since the days of Criterion. From a development standpoint, middleware makes sense especially for many studios looking to diversify their product mix.
Some may argue that the use of middleware does not necessarily lower the overall production costs of a game. Perhaps not. In most cases diverted funds tend to get embedded into other parts of the development cycle. But what middleware does provide is a baseline of tools that support the growing complexities of diverse development.
For example, MMOs take 3 to 4 years to develop and Asian game companies have had to rapidly grow their technology base. They simply have not had the luxury of Western developers to build some of their technology from scratch. Japan on the other hand, with its “build internally” approach to development has not been nearly as successful in some of the newer gaming trends. Western companies clearly have an opportunity to lead the space, but they need to rein-in in their costs.
The Future
Middleware is one area that can help studios support some of those key driving forces such as supporting multiple platforms, providing flexible development, while focusing resources on content quality and better cost management.
There is now a greater opportunity to incorporate middleware as the shift to digital distribution, massively multiplayer experiences, casual and social games start to make up a larger portion of the market.
The video game industry has reached critical mass. It is no longer a market for an elite few. It is accessible and engaging to a wide demographic. Market demand is there, with saturation not predicted for several years at least.
The companies that will be successful going forward will be those that are able to move beyond the paradigm paralysis of the past and quickly support gaming’s new growth opportunities.
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This second part of my E3 coverage takes a deeper look at some of the technology working behind the scenes that make these games so remarkable. There is so much attention given to covering the games at E3 and giving detailed features of the new games on the horizon. But what about the tools and technology used to create these cutting edge games? Where are we at with the development?
Round up the Game Engines
With all fantastic new games at the show, I thought I would do a roundup of top engines used in some of these titles. I picked a handful of games that stood out or where nominated in “Best of” categories to see what game engines were being used.
Here is a list of some of the games highlighted at the show:
| Game | Developer | Publisher | Game Engine |
| INTERNAL ENGINES | |||
| Modern Warfare 2 | Infinity Ward | Activision | MW Engine |
| Alan Wake | Remedy Entertainment | Microsoft | Alan Wake Game Engine |
| Assassin’s Creed 2 | Ubisoft Montreal | Ubisoft Ent. | Anvil (internal) |
| Final Fantasy XIII | Square Enix | Square Enix | Crystal Tools (internal- was called White Engine) |
| Dragon Age | Bioware | Electronic Arts | Eclipse (internal) |
| Halo 3: ODST | Bungie Studios | Microsoft Game Studio | Halo 3 (internal) |
| Super Mario Galaxy 2 | Nintendo | Nintendo | Internal |
| The Last Guardian | Team ICO | Sony Japan | Internal |
| Avatar | Ubisoft | Ubisoft Ent. | Internal |
| Uncharted 2: Among Thieves | Naughty Dog | SCEA | Naughty Dog Game Engine 2.0 (internal) |
| Metal Gear Solid 4 | Kojima Productions | Konami | New (internal) |
| God of War III | SCEA | SCEA | New Engine (internal) |
| Fight Night Round 4 | EA Canada | EA | New Physics-based Engine (internal) |
| The Conduit | High Voltage | Sega | Quantum 3 Engine (internal) |
| Left for Dead 2 | Valve | TBD | Source Engine (internal) |
| THIRD PARTY ENGINES | |||
| Batman: Arkham Asylum | Rocksteady Studios | Eidos | Unreal 3 |
| Bioshock 2 | 2K Marin | 2K Games | Unreal 3 |
| Mass Effect 2 | Bioware | Electronic Arts | Unreal 3 |
| Shadow Complex | Chair Entertainment Group (Epic owned) | Microsoft | Unreal 3 |
| Splinter Cell: Conviction | Ubisoft Montreal | Ubisoft Ent. | Unreal 3 |
| The Last Remnant | Square Enix | Square Enix | Unreal 3 |
| Natal Paint Party | Spawnpoint Studios –Microsoft Game Studio | Microsoft | Unreal 3 |
| Natal Ricochet | Spawnpoint Studios –Microsoft Game Studio | Microsoft | Unreal 3 |
| Star Wars: Old Republic | Bioware | Electronic Arts | HeroEngine |
| Source: M2 Research | |||
What is apparent is that internal game engines are still predominantly used in the most highly anticipated games. Of the 23 games covered here 15 used internal engines, while 8 used third party solutions = 35%. Of course this is a very small sampling, but these games do provide a good representation of the top games listed in many Best of Show rakings for E3 this year.
So what does that mean? That some of the most graphically complex games are still dominated by internal engines. But I think a look outside this top echelon would show the adoption rate of third-party middleware is increasing. For example, Epic believes there were over 20 games on the show floor using Unreal Engine 3, and does not include games that were shown behind closed-doors.
One of the hit games at the show was Shadow Complex, developed by Chair Entertainment, an Epic subsidiary. What makes this game interesting is it is a side-scrolling game that combines 2D and 3D. Exclusively available on Xbox Live Arcade, Shadow Complex as a downloadable game, it also has an embedded system for tracking statics. Microsoft hopes games like Shadow Complex will augment more high-quality games through its fully-downloadable model.
Unreal’s Shadow Complex is an Xbox Live Arcade exclusive in both 2D/3D.
Bioware’s MMO Star Wars: The Old Republic was rated one of the top PC games at the show. It uses the real-time MMO game engine from Simutronics – HeroEngine. HeroEngine is finally starting to make waves as the first games are now hitting the market. Simutronics is no newcomer, the company itself has been plugging along for 20 years.
Emergent also made an announcement at the show that THQ signed a master licensing agreement to use the Gamebryo technology. The agreement enables both THQ’s internal and external developers to leverage rapid prototyping and iteration into their game development pipeline.
Trinigy is a German company that was at the show, and is the company behind the Vision Engine. Already well-established in Europe, the company has over 100 licensees including Ubisoft, Take 2, Firefly, Neowiz, Atari, Dreacatcher and Spellbound. Trinigy recently opened US offices in Austin and has been ramping up its position in the US market.
“The Vision Engine has been used in worldwide across every genre. We recently opened our sales and support operations in North America, and so far the response has been overwhelming,” said Felix Roeken, general manager of Trinigy. “The entire Vision Engine has been deliberately designed to mitigate risk, break down technical barriers and empower game developers to effortlessly push the limits of their imaginations.”
While not a game engine company, xaitment was at E3. Another German technology company, xaitment is also breaking into the US market. xaitment provides AI solutions to the games industry. Founded in 2004, a small German town on the border of France, whose university has the German Research Center for Artificial Intelligence (DFKI). Earlier this year at GDC xaitment announced Chris Taylor’ Gas Power Games was going to be using its tools for several upcoming games. xaitment is also partnered with Emergent and Trinigy to integrate into their engines.
“While artificial intelligence has been around in the game space for some time, it has mainly focused on pathfinding and navigation,” said Markus Schneider, executive vice president of sales for xaitment. “We have expanded on that functionality by offering higher level AI in affordable, modular packages – an approach that has been met with wide interest across the games market.
All of these modules can be implemented separately depending on a studios’ needs, and all of them come with graphic user interfaces to help developers quickly create, test and re-use complex artificial intelligence scenarios.”
On the animation, paint and 3D modeling front Maxon‘s Cinema4D garnered some well deserved attention. The cinematic trailer for Square Enix’s new game Front Mission Evolved received high praise. The trailer was created by Big Machine Design, who relied heavily on Cinema 4D. “Game cinematics and game promotion in general is one of the fastest growing areas for visual content creation,” notes Paul Babb, president of Maxon USA.
More on the Cloud Computing Folks
Even though OnLive made the official announcement months ago they were not attending E3, they were actually there with a very subtle presence. Trying to fend off cynics, the company set up a residential location close to the convention center where they were providing demos. The company specified that the server being used was located over 300 miles away and the streaming connection was supposedly 4 to 6 Mbps. Of course the reasoning for this was that fact that after GDC many people were skeptical of the company’s capabilities.
Also in attendance was David Perry, who was giving closed-door demos of Gaikai.com to potential investors and publishers. As the company’s co-founder, Perry commented to me, “Our demos went well at E3 and three major publishers said they would be interested in investing in our company during our live demos. We have many patents filed and our tech is in a very advanced state.”
Calling their technology “Streaming Worlds”, Gaikai supports 3D streaming.
In an interview with the BBC, Perry explained that Gaikai will host and manage the games that get streamed to the consumer using Flash. “If a hardcore gamer is playing WoW at home and wants to keep playing when they leave the house, they can. Then there is the social audience who wouldn’t want a PS3, but plays Flash games. For those people, they could play on games EVE Online and share them with their friends on things like Twitter and Facebook. Perry continues, “We are codec agnostic as different compression codecs are better at different things. One might be great for fast gameplay, one might be needed for pixel perfect streaming applications like PhotoShop.”
Stereoscopic Gaming – First Games Coming Soon
The idea of 3D games in stereo is still on the outer fringes of the market. With films just starting to make an impact with consumers it will be some time for the mindset of the consumer to move that experience into their living room. But the boom of 3D in films has exploded in just the last two years, more than doubling each year. In 2010 it is estimated that there will be more than 35 3D films hitting the market.
In an announcement just made, Peter Jackson said he will only be doing 3D movies in the future and already has several movies in post production His comments reflect the growing movement by top-tier directors and producers to support the 3D option including Jeff Katzenberg and James Cameron.
So how is that translating in games? Well, this year there were at least four 3D games at the show:
| Game | Developer | Publisher | Release Date | Platform |
| G-Force | Eurocom Entertainment | Disney | 7/17/09 | PS3, Xbox 360 |
| Invincible Tiger: The Legend of Han Tao | Blitz Arcade | Namco Bandai | TBA – late 2009 | Xbox Live Arcade, PSN |
| Avatar | Ubisoft | Ubisoft Ent. | 12/09 | PS3, Xbox 360 |
| Toy Story Mania | Papaya Studios | Disney | Q3/09 | Wii |
Of course, the one getting the most attention was James Cameron’s Avatar. Development on Cameron’s Avatar started over 2 ½ years ago. And while the game was developed in parallel with the movie, it does not follow the same storyline. The game supports technology from a Montreal-based company called Sensio. Sensio has over 10 years invested in its 3D technology, and was picked as the standard for next-generation DVD players.
Luxology, the maker of modo, the modeling and animation package just released version 401 of the product which supports stereoscopy. Brad Peebler, Luxology’s CEO, “We have just introduced stereoscopic rendering in modo. There is actually quite a bit to implementing stereo – for example our implementation provides a stereoscopic convergence distance channel (objects at this distance from the camera will appear in the same position in both left and right images). We could have just used the focus distance for this, but this separate channel allows for stereoscopic rack focus shots.”
Pia Maffei, Executive Producer at Alioscopy, a manufacturer of 3D monitors, notes, “Hollywood is definitely fueling the market for 3D content. It is great there is more support for the content. It is a long-term cycle though, and the development pipeline needs to be reworked to better support the technical and creative aspects of developing in 3D.”
“Nobody talks about the development price of creating a 3D game from the ground up, because honestly, nobody knows”. Maffei continues, “But we are coming to a point where new skill sets are needed for 3D designers. CG toolsets are different than 3D toolsets, so a CG artist working on a 2D screen may not be as good when working on a 3D screen. There is a whole issue with perspective with 3D. If something pops out how will it make the rest of the screen look, and more importantly, will the consumer be able to make the distinction visually.”
Final Thought – The Importance of Critical Mass
As I’ve been saying, I believe the Gaming Renaissance Movement is in full force. There is a critical mass emerging on multiple levels. We are finally at the culmination, where the key elements are aligned for mass adoption. We now have:
- A wide range of developers and platforms.
- Accessible development tools that support the creative process rather than the programming process.
- Distribution channels that are opening up with broadband and mobile.
- Most importantly – Mass adoption by a wide range of consumers and consumer preferences.
It has taken much to get to this point. Most of the early companies that helped pioneer aspects of the technology no longer exist. For example, ten years ago Jon and I did a survey of games engines and found there were over 100 different engines. There were some great technology companies like 3dfx, ArtX, Criterion, and MathEngine – just a few that helped lay the foundation for where we are today.
What E3 2009 has shown us is there is still so much more on the horizon. These growth opportunities will extend the framework of creativity, technology and consumer interaction.
-WM
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In the last two days there have been several announcement of new funding rounds for a couple of game technology companies. Yesterday Unity Technologies, the browser-based game engine company, announced a $5.5 million Series A round with Sequoia Capital. Then today Organic Motion, specializing in trackerless motion capture technology, announced a Series B round of $7.4 million led by Foundry Group.
This is good news for tool companies. The tool and middleware companies always seem to be last on the funding list. A big reason is VCs tend to view them as having small growth potential with limited opportunities because they do not target the consumer market. Yet without the technology and the tools, the gaming market itself would not be able to grow.
There are a lot of good companies out there with some really great technology. And we’re going to start highlighting more of them in our newsletters and reports.
Many of these companies have been around for several years and diligently continue to pound the pavement that is the VC circut. Many have a growing customer base and stable solutions, they are just trying to expand their sales force and establish stronger strategic parnterships.
I hope this trend starts leading to more investment support for gaming tools and technology.
Sony’s new tagline suggests imagination-driven creativity and design. It’s a clean, powerful statement of unlimitted possibilities and ingenuity. However, one can’t help but think of the other connotation of “make-believe” as a pretender, imaginary or unreal. A lot of time and energy is spent creating taglines, and they can be enormously expensive to promote. Frequent changes to corporate positioning statements make it that much more difficult to maintain in the consumer’s mind.
http://kotaku.com/5351419/sony-no-longer-the-one-and-only-gets-a-new-corporate-tagline
How important is a tagline? See if you can guess the owners of these past messages from the Video Games industry, and if you have, the tagline has done it’s job! (or rather, the ad agency has done it’s job)
- Now you’re playing with power.
- What’s your game?
- Life is short. Play more.
- Touching is Good
- Genesis does what Nintendon’t
- Finish the Fight.
- Wii Would like to Play.
- It’s in the game.
- Welcome to the Next Level
- Live in your world, play in ours.
Answers at this jump:
http://www.edge-online.com/features/top-10-games-industry-taglines?page=0,0
My personal favorite was “Live in your world, play in ours”.
On Monday, Disney announced it was acquiring Marvel Entertianment for 4 Billion:
http://www.marketwatch.com/story/disney-to-acquire-marvel-entertainment-2009-08-31-9050
Ethan Smith and Lauren Schuker posted some interesting figures in their WSJ article:
http://online.wsj.com/article/SB125172509349072393.html
Marvel’s revenue last year was $676 Million:
– $255 Million was from movies
– $290 Million from licensing (43% of revenue)
And we can assume the bulk of the remainder comes from comic book publishing.
So assuming they purchased Marvel for it’s 5,000 characters…at 4 Billion, that’s about $800,000 per character!
CCP announced it’s first console based FPS named Dust 514. Set within the EVE universe, Dust 514 promises rich graphics and fast action game play.
What sets it apart from all the other FPS’s? Dust 514 players will be plugged into the PC EVE MMO universe! What players do within the console-only FPS affects the EVE Online universe, and vice versa. The industry was noticeably impressed and this mechanic is sure to change the way we view console-to-PC MMO dynamics. Use the hardware platform’s strengths and offer diverse gameplay for your community. 
The catalyst for the online revolution is speed of communication to various communities. Its about being able to quickly share content (in whatever medium) to your community and getting immediate feedback.
This is a fantastic video sharing statistics on social networking use, growth and industry impact, and a lot of these messages can be related to MMO’s and virtual worlds. An MMO’s community has a culture and lexicon of it’s own, and members feel a sense of ownership to the games which can be both dangerous and powerful for the games developer. The most important message in this video is to listen to your community. And one of the most vital roles in your company is your community manager.
Welcome to MMO Matters where I’ll share exciting news, thoughts and trends in the video games and MMO industry.
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A Wordle Business Card
THE BRIEF - E3 Part I: The Big Three Take Their Positions
This year’s revamped, revitalized E3 could not have come at a better time for the industry. With the global economic meltdown it was serendipity that E3 organizers decided to go back to a bigger, more open show format. The excitement was certainly there this year and the 40,000 attendees seemed to welcome a return to some of E3’s glory days.
This Part I of The Brief will highlight an overview of the big three console companies because they were the epicenter of all things E3 this year. More specifically they each seem to be succinctly rounding out their product offerings into complete gaming ecosystems. Yet each company has a very different vision and strategy for attracting and retaining customers to their individual gaming experience.
Specifically, the press conferences this year seemed to clinch the entire essence of how the big three are strategically positioning themselves. Each company is working to differentiate itself through its living room connection, its content, or its staying power as a family entertainment experience.
Microsoft
Microsoft was the first out of the gate with their press conference, and it was spectacular. They had quick appearances from Paul McCartney, Ringo Star, Yoko Ono, Steven Spielberg, and Peter Molyneax – all there to promote the Microsoft “experience”.
After seeing all three press events it is apparent that Microsoft’s strategy is crystallizing differently from Nintendo and Sony. Microsoft is obviously heavily focused on the game space, but even more importantly for them is capturing the consumer’s imagination of what a complete living room entertainment experience will be in the future. From games in the living room, online gaming, the social media connectivity, to an on-demand media solution for music, movies and TV, Microsoft is working to bridge the media and entertainment space with solutions that works in the living room as well as on the go. This would mean there is only one other company in their path – Apple.
Microsoft started by making a point of showcasing a strong line-up of games. They lead off with the Beatles Rock Band, with five people able to play simultaneously.
Other high-profile games included a live demo of Modern Warfare 2, Final Fantasy XIII, and Tom Clancy’s Splinter Cell: Conviction which had a lot of buzz during the show. Of course an Xbox 360 exclusive was the new Halo 3: ODST due out in September. A surprise announcement from Halo creator Bungie is the announcement of another game Halo Reach, the multiplayer option for Xbox Live that is due out in 2010.
In the racing genre Forza Motorsport 3 was described as the “definitive racing game”. The game looked gorgeous with the photo-realistic quality of the cars being comparable to what you would see from high-end automotive designers. There was the surprise announcement that the once exclusive PlayStation game, Metal Gear Solid was coming to Xbox.
Moving to Xbox Live, Microsoft announced fast.fm would be delivering music, reminding us they already a library of over 18,000 movies available and direct video access to Netflix. There is also the new Zune Video Channel, an HD library of full 1080P movies that can be accessed instantly. In addition, they’ve also started a supporting live TV broadcasting in the UK, so does that make the Xbox an Apple TV or HULU competitor?
And for a connected living room social experience, Microsoft announced new channels dedicated to Facebook and Twitter. What is brilliant about this move is that with Facebook people will be able to sit on their sofas, sharing photos with their friends right on their TVs. In one swoop, it opens up Xbox Live to an entire group of secondary consumers who are tech savvy, but have not yet committed to the connected game console. Xbox Live extends the user experience well beyond just gaming, giving consumer a robust selection of options.
Now comes a look at the future vision from a Microsoft experience – a motion controller where “you are the control”, called Project Natal. Microsoft demoed game called Ricochet that had a girl kicking and hitting balls at a target that were flying at her from all directions.
Most notably, Project Natal is unlike Nintendo and Sony offering. Instead Microsoft has chosen to go with a controller-free experience. In theory, Project Natal is evolutionary in terms of how consumers will play games in the future. Microsoft has been working on their technology for some time and of course recently acquired Israeli company 3DV Systems.
While clearly on cutting-edge of game peripherals, there are several large questions that remain to be answered regarding the more basic implementation of Project Natal. First off is the question that Leigh Alexander, a writer at Gamasutra highlighted, which was how viable is a motion control devise that reads your whole body but does not have a specific shooter (hand-held) function? Secondly, since this is not based on tried-and-try technology there still remain many basic questions like – how stable is it, what additional development and costs will need to be included from a development stand point and finally what the final cost to the consumer would eventually be.
Also on the cutting edge was a demo from Peter Molyneux of Lionhead Studios that showcased an interactive experience with Milo, a boy with true intelligence that a consumer can interact with, communicate with and collaborate with.
Nintendo
Nintendo’s presence was completely opposite to Microsoft’s. There were no showy light effects or celebrities. They focused on core areas of their product line with company representatives providing the overview of the Nintendo gaming experience. Cammie Duncan, Executive VP Sales & Marketing, Reggie Fils-Aime president and CEO, Nintendo of America, and Satoru Iwata global president of Nintendo Co were the primary presenters.
For Nintendo, their press conference reaffirmed their position in the market as the family entertainment solution. Nintendo reminds us all their successes – from their long-lived hit successes of key characters, to breakout new categories like the Wii Fit, and the success of their portable products, and the expanded vision of the Wii itself. Nintendo has something for all members of the family including the hard core gamer.
Nintendo does seem aware they need to add a broader range of products to their library and plan on coming out with edgier games that satisfy advanced and new players. Team Ninja and Nintendo are working on Metroid Other M.
Of course they had the next iteration of their controller, the Wii Motion Plus. Again, the difference is that unlike Microsoft or Sony, the Wii remote IS available and successfully working in games. That by itself is a huge factor, especially when showcasing new games like Wii Sports Resort. The Wii Sport Resort has players landing on a resort island by parasailing and from there they are do activities like paddle down river with their arms, do archery challenges, and shoot baskets. On the exhibition floor the lines of grown men and women in suits flapping their arms furiously and in complete concentration was impressive. What was more impressive where the laughs and smiles from everyone – it was sheer enjoyment.
Nintendo CEO, Satoru Iwata explained the company’s view of the market saying there are three types of people – those already actively playing video games, those who say the might play some day, and those who say they will never play video games. Nintendo wants to go after those people who “might some day play” video games.
The company estimates that world wide there are 295 million people already playing video games on consoles and portable game systems and 149 million people who might be interested in playing games. He noted that for every 2 people now playing there is another person who might want to play, those are the ones Nintendo is looking to address. Iwata rounded out his vision by saying that to be successful you need to find the right balance, “If you are always raising the bar more people will not enter the market, but if you lower the bar too significantly you will loose players”.
Finally, in a tech demo Nintendo showcased the Wii Vitality Sensor. “Visualize something that is normally invisible”. Of course the biggest criticism of the Vitality Sensor was that there where no applications to showcase the technology, leaving little idea of how it will be used other than for maintaining “greater relaxation”.
Sony
Going into the E3 and the press conferences, Sony had the most to make up for and really needed to make up some ground. Many doubted that they would be able to pull it off, yet they did.
Jack Tretton, president and CEO of Sony Computer Entertainment of America was the main presenter. He reminded people of Sony’s vast library of games and its superior position as the content developer. Sony has over 364 games available on the PlayStation platforms this year, including an impressive line-up of AAA games.
Games like inFAMOUS, Batman: Arkham Asylum, MAG the new MMOG that lets 256 people play at once, God of War III, and Naughty Dog’s Uncharted 2: Among Thieves as a stand along game and multiplayer option available. Add on a beautiful new fantasy game The Last Guardian, gorgeous Assassin’s Creed II set in renaissance Venice, and Final Fantasy XIV and it is apparent that Sony still has the clout to impress any prior skeptics.
On the portable side, Sony highlighted the strong sales of the PSP, with 15 million units sold in 2008 alone. This brings the PSP total worldwide installed base to 50 million. That, along with the more than 400 PSP titles available in North America, including Rock Band Unplugged highlights the broad portable gaming experience on the PSP.
Of course came the announcement of the PSP Go! that as Kaz Hirai called it, “the worst kept secret of E3”. With 16G of flash memory, integrated Bluetooth and build in WiFi, the PSP Go! is for the digital consumer. Priced high at $249, the PSP Go! Sony is looking to lure more third party developers to create content by lowering the price of the PSP toolkit by 80%.
On the PlayStation Network side, there are now over 24 million people, in 55 countries using the service, with 150% growth rate in the installed base last year. On top of that, Sony estimates over 475 million pieces of content have been downloaded from the service to date.
Hirai noting that, “Sony has something for everyone, where ever they want to go”.
He highlighting Sony’s strong genre titles were Grand Turismo on the PSP, running at 60 frames per second. There is also a new Metal Gear Solid: Peace Walker for the PSP, with other big titles like: Little Big Planet, Jak and Daxter, Final Fantasy, SOCOM, Monster Hunters, and Tiger Woods.
Of course everyone was waiting to see what Sony was going to present on the motion controller front, and they did not disappoint. They provided a tech demo of a “yet to be named” motion controller. The technology was developed by Richard Marks, the same guy who created the Sony’s EyeToy. By all accounts the motion controller was impressive. With1-to-1 tracking, the precision was accurate enough to use as a stylized pen that switched on the fly to a racket, flash light, Nerf gun, glow whip, and light saber. With 3D pointing technology the player was actually able to be in the game with their peripheral, moving around in a VR-like environment.
2010 and Beyond
Obviously, 2009 is about maintaining, and where possible growing revenue positions. Companies are bringing out planned games that show little risk of failure – the home runs only. Next year, 2010 we’ll see things get a little more interesting when the new motion controllers hit the market. There were no specific games highlighted this year, so developers will have to get creative, breaking more molds on what is game play.
The big three have shown us where they stand and have all firmly planted their stakes in the ground on all fronts: consoles, portable, controllers, and market positioning. Sony is positioning itself as the “ultimate” gaming experience. While they have the hard core gamers and high-end price they need to reach more casual/family users and still keep their balance on the high-end. Nintendo on the other hand is clearly working the family entertainment angle but also trying to move up with more serious games. Microsoft seems more and more positioned as a connected-living room entertainment platform. This makes one company stand out as a long-term competitor and that is the dark horse – Apple. With the iPhone and all the new game graphic hires Apple has made, they could surprise everyone.
Regardless, analysts estimate the next generation of consoles won’t hit the market until at least 2013. That means we have at least four more years in this current generation, ample time to build deeper content – both developer based and user-generated, extend the level of interaction with controllers, broaden the multiplayer capabilities, expand on digital distribution, and connect it all with multiple platforms.
- WM
The Brief
The Gaming Renaissance Movement
Making games differently – from production, to financing and distribution.
Many have noted that the gaming industry seems to be recession-proof. Monthly sales figures continue to show growth in the market. Even though NPD’s figures for March are off 17% from the same period last year, NPD themselves noted that Easter generally provides a spike in sales, which fell in April this year and March last year. If you look at overall Q1 08 figures there was 0% change from Q1 09, while software was down just slightly at 2% for the quarter, hardware and accessories were up 1% and 3% respectively.
So even though the industry seems to be maintaining its position at retail, established publishers and studios are crumbling under the weight of swollen overhead and development costs. Development costs for current generation consoles have ballooned to $15-$25 million for two platform SKUs and $25-$30 million for all SKUs. That is twice as much as the last generation of consoles, with much of the cost increases attributable to the graphics complexity of consoles themselves.
When companies are faced with mounting market pressure the short-term strategy is to announce layoffs, which is precisely what many game companies have done. EA estimates they will save $120 million with their layoffs. From July 2008 until now there have been over 60 companies that have publicly announced layoffs, with the majority of these layoffs coming just in the past four months.
I have tallied up these figures and a staggering 8450 game industry professionals have been laid off since July. Of these, roughly 6300 or 75% are from North America, with the remainder coming from the UK and Asia. Game Developer Research’s latest Game Developer Census 2008 Report published November 2008 estimated the North American gaming workforce to be 53,900. That puts the current game industry layoffs in the North American at 12% of the total workforce.
On top of the layoffs at least 13 studios including Microsoft’s ACES Studio and Ensemble Studio have announced they were closing. A handful of others are on life support, operating with a skeletal workforce and actively looking for buyers. Yesterday’s news that 3D Realms closed its doors make it just another causality.
There is a silver lining here. These layoffs have provided a shift in the industry. Most notably it has motivated change. People are looking “outside the box”, contemplating new business models, production models, and distribution models.
The Talent
The real story here is there are 6300 industry professionals in North America alone looking for something new. Many people are looking at the current market dynamics and starting their own small development studios. With this desire to branch out on their own, they are part of what I am calling the Gaming Renaissance Movement.
What these new studios lack in financing and slick marketing, they are making up for in creativity, vision and sheer grit. Many of these startups are self-funded by groups combining their severance packages. However they get going, these talented individuals are making up a next wave of independent studios and are the future of renaissance gaming.
The talent is there. Companies like Oceanhouse Media, already a successful new iPhone game studio was started by Michel Kripalani, previously of Autodesk and Presto Studios. Earlier in 2008 the creative directors from Naughty Dog started Big Red Button Entertainment to make console games.
There is also Appy Entertainment, started by a group of executives from High Moon Studios who are building games and software toys for the iPhone and iPod Touch. Appy’s CEO Chris Ulm says, “Despite the economic meltdown, this is an incredibly exciting time to be creating new projects. It’s the Wild West right now – no one can say with certainty exactly what will catch on with this rapidly growing market. Apple’s App Store is a total game changer that demands fast development times, frequent updates and extremely focused experiences that tie into an understandable brand identity.”
“We’ve really had to radically rethink every aspect of development,” Ulm continues. “We can’t afford to be just game developers – as a micro-publisher, we have to be constantly thinking about marketing, sales, public relations and – God help us – even merchandising! The best and worst thing about this new model is the freedom to do projects that would never be considered in larger organizations. The flip side is the marketplace is highly volatile and extremely crowded (there are now over 40,000 apps on Apples App store). But the install base is growing very fast: well over 30 million today and almost certainly double that by the end of 2009, so if you can stand the chaos, it’s a once-in-a-lifetime opportunity.”
Obviously these new companies have some hurdles. Mostly they are entering the market at a financially volatile time. Some would say it is during these downturns when new opportunities emerge. There are certainly several components that are playing a deeper role.
The Tools
Up until a few years ago middleware was still viewed as taking the easy way out. Today, middleware usage is becoming an accepted practice for many development teams. It was the launch of this last generation of consoles that really made middleware a more accepted part of the production pipeline.
Back in 2002 I estimated only 8% of all games were using middleware and projected middleware use would be at 65% by 2007. In a recent Engine Survey done by Mark DeLoura, 55% of survey respondents stated they are currently using some form of middleware. I was a little aggressive in the adoption rate of middleware. It obviously has taken longer to get middleware integrated into production pipelines. But there are so many more middleware tools available now than were even imaginable back in 2002. There are now categories of middleware – the engines: game, MMO, mobile; the A.I.; the physics, the audio.
Emergent Game Technologies is one company that stands out for its developer support. The company has established a “Game Technology Initiative” to enable more independent developers’ access to their tools. Kick Start was launched in November to directly support these early stage developers. Geoffrey Selzer, Emergent’s CEO notes, “The game industry is in a crisis. It is too hard to make games and too hard to maintain an IP franchise. The liquidity of game development is stifling growth.” Emergent estimates developers and publishers spend $400 to $500 million annually on redundant core technology development. I actually think the figure is higher than that.
Selzer explains, “There is a new face emerging for AAA game development. The next generation of gaming is inspiring new types of content. The medium of gaming is changing with more storytelling and game playing being introduced through episodic games, MMOGs.”
Emergent launched LightSpeed at GDC last month in an effort to address some of these key issues. Scott Johnson, the company’s president continues, “Rapid iteration and prototyping are key ingredients. LightSpeed changes the way developers will present to publishers. Gamebryo was created for an engineering–driven development. Now with LightSpeed we are working to address the requirements of artists and creative teams.”
The Funding
Everyone agrees the financing model is broken, with traditional funding routes for startups all but gone given the economic crisis. The National Venture Capital Association came out with the 1st quarter 2009 figures – for Media & Entertainment VC investment was down 45% from the previous quarter, with only $217 million invested. Not only are VC’s investing significantly less, they are investing in much smaller amounts. And the number of first-time deals plummeted from 324 in Q1 2008 to 132 for the same period this year. Investment numbers haven’t been this low since Q1 1998 – that is 11 years!
With VC funding not a viable alternative at the moment for many startups, the only alternative is to get creative. As previously mentioned, many of these renaissance companies are being funded from severance packages. If you look around there are additional options out there.
One model emerging for game funding has been used in the film industry for years using completion bonds. In the film industry an insurance bond is issued to cover the cost of production should something happen and the film is not produced, giving the lender a guarantee of payment.
In the film industry films are produced and upon completion the project is closed and production teams disperse to find new projects to work on. This of course has not lent itself to the games industry because production teams can not disband as easily. But what if there was a way to use the completion bond concept of the film industry on a game project basis, whereby a publisher could make an investment in a game from a developer that is backed by a guaranteed insurance policy.
This is precisely the approach Seahorn Capital Group is working on. Seahorn is an executive production and management consulting firm working with a number of development teams using this approach. The first publicly announced partnership is with Big Red Button Entertainment.
Marc Jackson, Founder and Managing Director of Seahorn Capital Group explains, “Completion-guaranteed deals have been used successfully on a small scale in games, and we are starting to see greater interest from both the development and publishing communities. The movie, TV and construction industries have been using such guaranteed structures for decades. They realize the risk management benefits and access to alternative sources of finance far outweigh the incremental cost of such arrangements. Our industry stands to benefit enormously from adoption of proven project finance techniques, especially independent game makers and producers who can now offer end-to-end solutions and mitigate risk for publishing partners.”
There is also industry veteran Dave Perry, who will be showing his website www.gameinvestors.com at E3 this year. “I had so many people contact me looking for money I decided to create an open-forum website to try to solve this problem for the industry”, says Perry.
The goal of the site is to get projects in front of the publishers and investors, so all developers get a fair chance. Perry continues, “We will be inviting publishers, global distributors and hundreds of media and entertainment investors to look at the opportunities the developers present. If they can’t get funding in that environment, then it’s time to go back to the drawing board.”
Perry adds that a developer needs to consider a few things when starting out:
(1) They need to understand the pressure the publishers are under and pitch accordingly. It doesn’t mean they can’t be creative; they just need to be sensible. Publishers are trying to protect themselves from risk. There are many ways to reduce risk, but probably the number one way is to find great team members that share a vision, and show “something” working, as the investors call it “put some skin in the game”.
(2) Publishers are investors too. They look at the risk and invest money into projects they believe in. So just how far can you get in an idea, to show the risk is under control? That’s one reason why you see so many iPhone / Facebook / Flash games, as it’s a great way to test ideas at a very low cost.
(3) Opportunities are key. In reality you might have walked past a guy this week that would have funded your new company, but you’d never know. Our business misses out on countless opportunities simply due to the talent having a small set of contacts to raise money with. Just image you know 5 people and all 5 say no. Is it over? Should it be?
The Partners
Another equally important step is fostering strategic partnerships. Partnerships can provide viable growth options particularly during an economic downturn. There are many opportunities out there for developers who have products and looking for partners.
In the casual games there is one company in particular that has made supporting third party developers part of it’s own growth strategy – Big Fish Games. Big Fish has close to 600 independent developers from all over the world creating games for its portal. As a result Big Fish is able to highlight a new game everyday. As the largest distributor of casual games Big Fish openly solicits games from independent developers, providing revenue sharing on game sales, marketing support and free localization.
“At Big Fish Games our developers are like customers, each of whom has distinct needs and success criteria. As such, we adapt the structure of our partnerships with developers around the world in a variety of ways,” explains Nate Webb, Director of Developer Relations at Big Fish Games. “We work as advisors, starting basic guidance and gameplay feedback to help developers tailor their games for maximum conversion from trail to sale. To further enhance sales we offer developers free localization services to ensure that their IP is distributed broadly across the world through Big Fish Games’ branded portals.” Webb continues, “Big Fish Games started as a small independent developer so we understand and are sensitive to the challenges developers face when bringing their IP to market. From contract to launch to support to royalty our approach is frictionless. At Big Fish Games we allow developers to focus on what they do best, create great games. By partnering with us we give them access to the widest audience for casual interactive entertainment.”
OnLive is another company worth watching as they expand their support to include smaller developers. “OnLive is working with developers of all sizes because we fundamentally believe that great games come in many forms”, says John Spinale, VP of Games and Media at OnLive “At GDC 2009, we announced partnerships with major publishers like EA, Ubisoft, and Take Two. At the same time, we announced that we’re working with smaller developers, like 2D Boy, the guys who created the ‘indie’ hit, “World of Goo.”
Spinale further explains, “Because the OnLive platform is so easy to develop for, we think that a lot of smaller developers will embrace us. And, because we offer a wholly online platform, we think the smaller independents—who have more flexibility to be creative—will do a lot of experimenting with new types of gameplay and new models for delivering games. That’s something I’m very excited about, personally. Basically, OnLive offers developers an incredibly powerful, very flexible platform that allows them to do what they do best – be creative and focus on making great games, big or small.”
In the mobile space there is Gamepot USA who, last month, quietly announced they opened a US office. With head offices in Japan and revenues of $38 million, Gamepot USA is looking to expand its global partnerships with online game companies and developers.
Be sure that this gaming renaissance movement is going to greatly impact the types of games that are made and the way they are made. It will be important to foster that growth, and look for creative alternatives. Yes, there will be hurdles but the swell is there already. People are resilient and they will continue to innovate in new and different ways.
- Wanda Meloni
The Brief
GDC 09: The Changing Face of Game Development and Market Trends
New Development Trends for Game Developers
This was perhaps the most exciting, invigorating Game Developer Conference I have attended, and I’ve been attending GDC since1995. There is a growing shift in the way we think about games and develop them – from new technology and tools, to new distribution models. We are in a state of re-invention where development, business and finance models are completely giving way to a renaissance movement that will challenge the current composition of gaming (more on this Gaming Renaissance Movement in next issue of The Brief).
Of course the big news at GDC was the unveiling of OnLive, and much of the company details have already been written about. What is most impressive is that Steve Perlman has been stewarded the company for seven years, working in stealth mode on its on-demand digital distribution concept.
Unbeknownst to anyone outside the company, they arrived at GDC with over 100 patents filed and 100 employees – a complete, fully functioning company. They currently have 16 titles and 10 publishers lined up including EA, WB Games, THQ, Ubisoft, Epic Games, and Eidos.
What I find most interesting are the listed investors: Warner Bros., Maverick Capital, and Autodesk. Now, the Autodesk connection is intriguing because it clearly positions them in the center of cloud computing for game design. With OnLive’s eventual support of Indie developers it might just be a good place to be. OnLive is also partnering with Nvidia to take advantage of some graphics capabilities on the server optimization.
Of course there was also Zeebo and David Perry’s newly announced company that have slightly similar solutions to OnLive. No matter what the scenario here, it has added a new twist in digital distribution that has broad-reaching implications for the industry.
On the tool side there was Emergent, flush with cash and a new product Lightspeed, its game development technology. The company is working to creatively meet the needs of a new breed of developers with their tools and outreach support. At the show Emergent was showcasing some of these new developers who, with small development teams have been able to create graphically-rich level designs in incredibly short time frames: Killswitch created their demo in 10 days, Game Mechanic Studios created theirs in 3 weeks and WhiteMoon Dreams had theirs completed in 4 weeks.
Similarly, 3DVIA is another company working with developers and doing proactive outreach. Virtools is a gaming visualization tool that has been around for many years. It enables developers to create games in weeks and days, rather than months or years. At the show the company was highlighting the work of Little Chicken Game Company, Zoink Entertainment, Sarbakan and Studio Walljump.
Realistic facial animation is finally becoming a reality thanks to companies such as Image Metrics, Mova and Captive Motion. The success of Benjamin Button was a huge plug for these technology solutions. More game developers are now looking to incorporate deeper character interaction and expand game storytelling with engaging facial characterization.
Another interesting company at GDC was NeuroSky which is developing biosensory devices for a number of industries including games. The company’s MindSet product is a sensor-equipped brainwave headset that responds to a person’s brainwaves. NeuroSky’s devices read brain outputs such as sight, muscle movement, and emotion enabling a person to use these extra dimensions directly in game play.
Most notable was a company called Southpaw Technology. Their product, TACTIC, is easily set to revolutionize the 3D asset management industry – and not just asset management, but content pipelines and workflows in general. Their current client list runs the gamut of industries and includes Blizzard, Digital Domain, O Entertainment and Lockheed Martin.
There were so many great technology tool vendors making incredible leaps in production processes at the show, it’s hard to highlight them all. There is a clear trend swelling in the industry for tools that meet the diverse requirements of developers.
Changing the Stereotypes of Gamers
With the proliferation of all these new models, markets, and creative talent abounding, I still find myself having to put my arms up in defiance. In the midst of all the excitement and energy of GameBeat and GDC last week, there was something that irked me to my core.
First off, I must say what a terrific event GameBeat was. It had solid discussions and quality attendance. However, in one particular session an analyst made a comment that I still can’t seem to shake. In trying to explain the meteoric growth of the Wii Fit, the analyst said, “Who would have guessed the Wii Fit would appeal to so many fat housewives”.
There was a nervous laughter from the audience after the comment was made, yet no one responded. Then, several days later in a GDC session, the same analyst made the exact same statement.
There are several things wrong with that statement. I understand he was trying to get the audience’s attention and went for shock value, after all Wii Fit was the number one ranking game in January, selling 777,000 units. I personally don’t own a Wii Fit, but I have many friends who do and I know they enjoy interacting with their kids. I certainly wouldn’t call any of them fat or “housewives”.
That isn’t even what bothers me. As I said, he was going for shear shock value. What disturbs me more is that, as analysts, it is our job to unearth the hidden gems and anomalies that may turn into growth trends. The market indicators are there, gaming is morphing into something well beyond what it was just a few years ago.
More To Gaming than Hardcore
All you have to do is look around at some of the biggest investments made in the industry in the past 2 years: Club Penguin sold to Disney for +$600 million, Big Fish raised $83 million while already being profitable. Rock Band has surpassed $1 billion in sales in only 15 months. Jagex’s Runescape has been played by over 150 million people. Along with Runescape Jagex also have FunOrb, a mini-multiplayer game site with 35 titles, and the soon-to-launch Mechscape, a science fiction browser based game. Impressively, all of their technology is created in-house and developed completely in Java.
These brands are not targeted at the hard core gamers with the latest Nvidia graphics chip running on a dual quad core PC. None of these games even employ the use of heavy 3D graphics. That is not to say there isn’t a huge market for real-time 3D graphics, but it remains the game play, creative imagery, storyline and social components that keep consumers engaged and coming back.
The Casual Game Association (CGA) estimates the casual games market to be $2.25 billion in 2008. Jessica Tams, managing director of the CGA notes, “The consumer profile playing casual games is about 50/50 women and men, with 74% of the market over 35 years of age.
Marc Doyle, Co-Founder and Editor of Mediacritic was also one of the analysts on the GDC Metrics panel. Mediacritic has become a benchmark for publishers, in some cases using its aggregate scoring system to determine success fees in developer contracts. Marc was blasted by several people in the audience for the fact that Mediacritic only ranks AAA-type games, leaving out huge gaps in some of these growing categories. To his defense, he’s doing what he knows. However, there most definitely needs to be additional rating categories to target some of these expanding market segments.
Is Dark Knight a better movie than Slumdog Millionaire? For that matter, is Twister a better game than Monopoly? Is Barbie a better toy than Pokemon? Is Poker a better card game than UNO or Bridge? It all depends on who you ask, their individual preferences and their frame of mind. Are we still so myopic that we can’t see where this is going? Entertainment has no defining demographic, it simply is.
It is time for us as an industry to think a little more outside the box. It is not enough to be the established technology provider or the established publisher. With the current market conditions we must grow to support this dynamically expanding infrastructure.
Something caught my eye yesterday morning as I read the WSJ. I was reading about the Oscars Ceremony, which I actually enjoyed despite critic reviews, and saw the 5 pictures nominated for best picture combined only grossed $184 million domestically – that is combined sales! With all the hoopla made about the Oscars, that figure shocked me. And in 2007, the combined revenue for the best picture nominees was only $216 million domestically. The biggest year revenue-wise was 2003, when the best-picture category combined reached $636 million.
Add to that nugget Benjamin Button cost $150 million to produce and says it needs to gross $300 million worldwide to break even. Current worldwide estimates have Benjamin Button’s gross sales at $242 million. With 13 nominations, the film unfortunately walked away with only 3 Oscars. Compare that to Slumdog Millionaire which only cost $15 million to produce.
What I did love about Benjamin Button is the technology story behind the movie. Image Metrics’ CG facial animation technology was used to create the aging process for Pitt’s character. Image Metrics has an exceptional technology that will take film and video game narrative in new directions. There will be more coverage on Image Metrics in the future, in the meantime check them out: www.image-metrics.com.
But compare revenue figures of films to sales of video games and interactive entertainment –they pale in comparison. Halo 3, released in September 2007, sold $170 million in the first 24 HOURS and $300 million in its first WEEK. Even these figures have been superceded by the launch of GTA4, released in April, 2008. Within the first 24 hours the game amassed sales of $310 million and for its first week reached $500 million in sales, breaking Halo 3′s record.
Now it is only fair to point out that the majority of these films didn’t hit theaters until late in 2008, for example Benjamin Button was a Christmas release. Additionally the best movies may not typically be considered the most commercially successful movies. However that still does not remotely compare to anything in the games space.
Janco Partners estimates domestic game sales reached $10.9 billion in 2008 and is expected to grow to $12.6 billion in 2009. Entertainment retailer, GameStop just announced it’s forth quarter results for 2008 of $3.5 billion, a 22% increase over the prior years’ fourth quarter. Total year-end sales for GameStop topped $8.8 billion for the year. Of course aside from GameStop and other retailers such as Best Buy and Walmart there are also online gaming such as the MMOs, Casual Gaming and international markets not even addressed in these figures.
So what does this say about the consumer spending, especially during these economic hard times? Clearly it indicates consumers are willing to spend their hard-earned discretionary income on a repeat entertainment experience.
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