Wednesday, July 25, 2007

Gaming Gets Connected

Summary information from Day 2: CONNECTIONS™ May 2007, hosted in Santa Clara, CA

This panel discusses new online gaming trends such as social/casual gaming, virtual worlds, game advertising, connected consoles, and their potential impact on the digital living industry.

Dr. Lars Buttler, CEO, Trion World Network, Inc.
Rick Howe, Executive VP, Sales & Marketing, Zodiac Interactive
Romain Nouzareth, Founder and CEO, Boonty
Julie Shumaker, Vice President, Worldwide Sales, Double Fusion, Inc.
John Welch, CEO, PlayFirst, Inc.
Moderator: Yuanzhe (Michael) Cai, Director, Broadband & Gaming, Parks Associates

Specific Questions to Address:

  • What are some of the key trends in the connected gaming industry? How can we unleash the real potential of broadband gaming?
  • What justifies the tremendous interest in game advertising? What are the remaining roadblocks?
  • What lessons have we learnt from the launch of this new generation of consoles? What are the impacts of connected consoles? Will consoles aggregate even more wealth, or will gaming revenue begin to shift away to other platforms?
  • Have the entry barriers to gaming industry been lowered? What are the indications to content providers, service providers, and device makers?
  • What are the promises of avatar/virtual-world types of games? Are they just a fad?
  • What’s Game 3.0? What keeps the industry excited?

Michael Cai began the panel by introducing some key industry trends and figures.

  • Many new business models have emerged on the PC platform and now are migrating to other platforms, including microtransactions, in-game advertising, multiplayer gaming, and casual games.
  • Middle-market gamers are becoming increasingly important because they will account for the near-future growth of the market.
  • Social gaming is becoming the norm, and gamers are looking for community, not just content.
  • Consoles are becoming connected consumer electronics, threatening STB and CE manufacturers.
  • There are 60 million households with set-top boxes, yet the platform has not received much attention in the mainstream gaming industry.

Panelists added their own observations of the industry.

  • Internet connectivity is empowering the gamer audience and game developers — there wouldn’t be a Diner Dash success if not for the Internet.
  • Advertising is very important as “0” is the best consumer price point
  • Dedicated consoles are going away, and this current cycle may as well be the last.
  • Innovations first happen on the PC because the PC platform is an open garden.
  • Gaming needs to fit in with the consumer lifestyle. Wii is teaching the industry an important lesson.
  • Although game advertising is promising, there are several hurdles.

In terms of STB gaming, Zodiac believes the industry will become stronger as the platforms become more robust and industry standards such as OCAP takes shape. STBs can support games like Wii Sports, and unique and currently popular add-ons like guitars and dance mats are possible. Zodiac is also introducing free ad-supported games to the STB platform.

Game advertising, although promising, still faces a few challenges, according to Julie Shumaker from Double Fusion.

  • Advertising needs an open economy to thrive. The current state of industry is unhealthy. Platforms are fragmented and advertisers are forced to negotiate with multiple ad-serving companies for the same game. The process of buying ads is not simple enough.
  • There’s a lack of standards in ad formats and impression accounting.
  • There’s also a lack of games that allow the advertisers to not intrude the gaming experience that gamers already paid $50 for.

Advertising with casual games is a different story. For instance, Zodiac has games with natural break points for advertisers. Double Fusion believes casual games are important for advertising, but advertisers can get those eyeballs elsewhere, such as Reader’s Digest and Oprah. Video games reach the hard-to-get 18-34 male audience and are where big CPMs come from.

Casual gaming is big business according to the panelists. Playfirst has sold more than 1.5 million units of Diner Dash online, with 70% of sales to female adult gamers and another 1.2 million units on mobile phones. QQ from Tencent in China has more than 28 million peak simultaneous users.

For the future, gaming will be a combination of pre-programmed content and always-on, on-demand, and live events. There are already live events in virtual worlds such as Second Life, and as the audience grows, it could be viable advertising platform. Madden NFL already set the record with more than 1 million guys playing online together, and that’s bigger than some cable TV networks.

Many new companies are coming to the gaming industry, such as service providers, PC companies, and media companies. TV companies are coming to Trion World to check out their technologies. One of HP’s top five server customer is a big online gaming company. Service providers also want to stay competitive with gaming service offerings.

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