Posted tagged ‘mindtrek’

WOW epic mounts vs. Friends for sale

October 12, 2008

The game industry used to be packaged goods industry. We spent anything between six months to several years in product development mode trying to guess what the customers would want to buy, what we could do better than our competitors do, building technology, tools and content. When all was done, the ready game was shipped to the manufacturing plant and out would pour truckloads of shrink wrapped boxes ready to be hoisted on the shelves of GameStop, EBGames or at Amazon’s virtual shelfs.

For all its technological and media breakthrus, the games industry in the 1990s was following a business model borrowed from cereal manufacturers. We even didn’t have the long tail of movies , which have first box office sales, then pay-per-view TV, then premium channels, hotel channels, DVD sales, network TV, soundtracks… Well, you get the picture. All we had was a a couple of months to get the game sold at brick’n’mortar stores, and if we were lucky, the store would restock our title. The luckiest titles could see a release as a Bestseller title a year or two later at a discounted price.

Not terribly exciting is it.

Luckily broadband entered into the picture in late 1990s, and became prevalent in the early 2000s. Games could be delivered electronically as downloads, but a lot more importantly, games could be online services. MMOs like Lineage, Everquest and finally World of Warcraft (11 million users at last count) came to the market and attracted millions. Virtual worlds like Habbo Hotel (108 million registered, 9,5 million monthly users), casual MMOs like Maple Story and social playing sites like Stardoll (20 million registered users) appealed to audiences outside of the traditional gamer market.

But there’s no hiding the trouble.

PC single player market is dying

Max Payne, multi-million seller in early 2000s. Best known as a PC game, but sold vastly more on PS2.

Max Payne, multi-million seller in 2001 & 2003. Best known as a PC game, but already five years ago sold vastly more on consoles, especially on PS2.

As a mainstream market the PC single player market is dying. The main culprits are rampant piracy and the success of video game consoles. The situation is so bad, that releasing a PC version simultaneously to a console version of a game, you are pretty much guaranteed to loose out on a lot of sales. The PC version will be pirated typically before the game is available at retail, and many console gamers will get the pirated PC version and forgo buying the console version. We can argue the reasons, but the proof is indisputable. Game publishers are increasingly postponing the PC versions or cutting them completely, even if the added cost of developing a PC version can be relatively low.

You can still succeed with PC single player titles targeted at niche audiences (e.g. hard core strategy games). Downloadable PC casual games (see e.g. Big Fish Games) are doing quite well and The Sims are also doing quite well. The reason is simple: their demographic is less likely to pirate the game and increasingly these titles use some kind of online persistence to add fun to the game and prevent piracy.

PC online market is thriving

The solution to this PC problem is clearly evident. All PC titles need some type of online persistence and preferably online multiplayer support. It doesn’t have to be a full fledged MMO. You can start with relatively simple things like

  • Leaderboards, cups, challenges
  • Shared content
  • Shared actions (something I do has some effect on your gameplay)

Full-on, persistent world, massively multiplayer environments naturally are most resistant to piracy as well provide highly compelling reasons to play. WoW having 11 million great reasons (=users) going for it.

Core vs. social & casual markets

The core gaming market (PC single player, MMO, console games) is huge market. Its revenues from the vast majority of the $37 billion global games software sales (year 2007). This market is predicted to grow steadily at around 10% compounded average growth rate. The revenues are huge, but the audience size isn’t nearly as impressive when compared to what the social and casual gaming segments have been able to attract is just a few years.

Casual games, to which I include also casual console games like Guitar Hero, Singstar, Wii Sports, Brain Training and the like, sell in overall in the billions of dollars, and are the industry’s primary growth driver. It’s been two years since the launch of Nintendo Wii, and it still selling out. Guitar Hero launched a huge music game segment, that almost single handedly raised Activision as the world’s second largest games publisher (after merging with Vivendi’s game unit, the combined Activision-Blizzard is now neck and neck with Electronic Arts). These titles have expanded the definition of games, made the much more socially acceptable, and attracted millions after millions of new players. They’ve converted diehard opponents of digital games into fun-loving players. I can overstate how amazing this has been.

At the same time social games on social networks like Facebook and MySpace are the second largest category after “just for fun” apps like Funwall and Superpoke. These simple, addictive and often outrageously viral games attract at best over million monthly average users. The monetization has been primarily advertisement based, but new Cost Per Action (CPA) methods (Offerpal, Super rewards) as well as the sales of virtual goods are starting to make a difference. It has been claimed that Mob Wars is the best monetizing game application on Facebook and allegedly makes over $20 000 a day, which would mean well over a one million US dollars in yearly revenues.

I’ve tried to summarize my thinking about the core, casual and social markets in the diagram below as well as make some predictions on where the market is headed.

Please note that the diagram is a generalization and I’ve purposefully omitted all figures. You should take it is an opinion, not as a market research data.

Presentation

I did a 20 minute presentation on this topic recently at the Mindtrek conference. You can find my slides at Slideshare along with an audio track.

I blogged earlier about the excellent panel that followed the three presentations in the “Business of playing together” track.

So, what do you think? Is the PC single player market as doomed as I think it is? Are there going to be big returns on the huge investments VCs are making in the market as we speak?

Mindtrek – panel on the Business of playing together

October 9, 2008

I’m currently at Mindtrek, a 700 person conference on all things in digital and social media. The conference has been great so far. Hearing Marc Davis‘ talk about Yahoo!’s approach to web 2.0 and world 2.0 was a great and inspirational opening to the whole event!

On the way to Tampere we world’s first ever Ignite Mobile session (Ignite on a bus!) where I did a presentation about Funware. Slides and further info is now available.

At Mindtrek I did a 20 minute segment on the Business of playing together track talking about the changes in the game industry. I’ll also post that presentation along with the audio track also as soon as I can bend Slideshare to my will ;-).

The panel discussion following the three segments (me, IRC-Galleria‘s Ville Mujunen and Ironstar Helsinki‘s Joakim Achren and host Peter Vesterbacka) was excellent and lasted for more than hour. We had a great audience willing to ask hard questions ranging from policy making in virtual worlds to EULAs to the distinctions between virtual and real items and whether we can have multiple lives (one in a MMO, and then real life persona). Here are some quick’n’dirty notes from the panel

  • We live in the equivalent of feudal ages in terms of virtual world policy making and EULAs. Virtual World operators are benevolent dictators with pretty much unlimited powers. On the other hand the players have the final power, because the companies try to create revenue from the players, and the only way to do is to please the players. However, in terms of readable EULAs, player representatives in the world management and the rights of players are still highly underdeveloped. The interesting developments in this area include EVE Online’s Council of Stellar Management, The Avatar Bill of Rights, Metaplace’s simple Terms of Use.
  • Virtual vs. real. This was a great discussion on whether virtual items are as real to use as “real items”. The simple answer is: YES, virtual items are just as real. Brain scanning has been used to show our primal responses to receiving an item are “oooh, shiiny!” regardless whether it is virtual item or real. This really comes back to the values we instill in the culture/world we are in. The gift you get your friend is much more the physical gift. It is a social expression of the feelings and emotions your friend has for you. The on-going credit crunch was also used to highlight how something as real as “money” has become highly virtual. If your bank goes away taking your money with you, your money just became very “virtual”.
  • Multiple lives vs. roles. It is psychologically impossible for us to have multiple independent personas unless we are schitzophrenic. What we have are roles. I’m a dad, a business man, a colleague, a friend, a leader, a follower, a MMO player etc. I’m still one person and these roles affect each other. It seems there was confusion of the terms at the panel. Regardless of how we call it is clear that we want to have multiple roles to experience different lifestyles, to adapt to different types of social situations, for escapism, for just the fun of experimenting, …
  • Funware. I’m a big proponent of a funware (the use of game mechanics in non-game applications). I gave highly opionated comments on how funware can be used e.g. the save world thru cutting carbon emission.

Overall Mindtrek has been a blast. It has been great meeting a lot of interesting people from Finnish startups, VCs, game reseachers and academics and other cool people. Just today I sat down with a lunch with a random person only to find out that he is interaction designer, programmer and game developer. Wow, we had an amazing lunch discussion and had so many shared interests to discuss. This is the best part of Mindtrek – it is a truly cross-discipline, international event with really interesting people.

Mindtrek coming up

September 13, 2008

Mindtrek is the biggest and longest running festival and awards ceremony for the best in digital works and culture. The Mindtrek conference is held at Tampere, Finland from 8th to 9th of October and features plenty of great seminar presentations (including yours truly ;-)), parties and naturally the Mindtrek Awards.

ASSEMBLY had the honor of winning the Mindtrek Grand Prix award in 2006. I was there with Pekka to personally receive the award, and wow, what a feeling of us and the hundreds of volunteer organizers being recognized for our efforts. I’m sure the winner of this years Grand Prix will be at least as elated. The deadline to compete has just passed, so hope you entered your amazing digital production in time!

Mindtrek is going to be a great opportunity to network, so if you are coming, let’s hook up. Hope to see everybody at Tampere in a couple of weeks time!