Gaming, Entertainment, and the Internet

June 18, 2013, Entertainment Technology in the Internet Age, SPMTE and SCIEN conference, Stanford, CA—A panel took on the topic of gaming and entertainment over the Web. Charlie Jablonski from OnLive chaired the panel whose members were Bill Gardner from Digital Entertainment Insights, Alex Caccia from Marmalade, and Brett Durrett from IMVU.

Gardner provided background information. Electronic games started with arcades, then moved to consoles and PCs, and lately to handheld devices including dedicated handhelds, phones, and tablets. The consoles have gone through 8 or 9 generations of designs.
The game industry is hard, just like any other big business. The arcade business model had to change from “get another $0.25” to a full purchase when the consoles appeared. The monetization changed when the next increment was a unit value much higher than that available from a arcade.
In the next generation of gaming, we are coming full circle and getting back to micro-payments. The mobile games are mostly simple, and short play. Monetization is changing again, as most of the games are free or have a very low price. The incorporation of social functions into the games changes the game structure. Purchase access is through on-line application portals.
The existing console makers, Sony, Nintendo, and Microsoft are all struggling to address the issue of $60 hard media purchases versus freemium with integrated in-app purchases. Microsoft is acknowledging that they are trying to take over the living room via the console in hopes of displacing the set top box and any other access mechanism.
Even thought he platforms are changing, the big MMOGs are not on smart phones. The cloud-based content is now being developed for cross-platform delivery and have the social aspects included. The new leaders for game delivery are Zynga, Gree, etc., and not the AAA companies like EA.
Chip manufacturers like AMD and Nvidia are supporting some flavors of gaming as the dedicated console players move across platforms while they wait for the next blockbuster release. Now the profits are in the tools and distribution networks, even thought the costs for distribution rise.

Jablonski noted that cloud gaming issues are that the technology is hard, and the business is even harder. Online gaming is now like movies, with increasing levels of technology and increasing needs for investment. Now, the cost of a console is irrelevant compared to the costs for the games. Instant play video games could be cloud based if the underlying network architecture minimizes latency. High resolution graphics are possible through video compression that is integrated into the TVs and consoles. Cross-platform direct launch allows games to be delivered to the console, TV, PC or any other platform in the visual computing market.
Caccia commented that the current situation is the intersection of gaming, Web, and social media. The business focus has to consider dress up and chat when something looks like a game. The inclusion of user-generated content provides entertainment through relationships.
Gamification—rewards and role playing—as well as integrated mini-games have to be considered as value beyond play. When the customers value an app’s features, they will help to monetize the app. This monetization includes the customer contributions to the game community.
Freemium games lead to increased micro-payments in the whole system. Social games are not the same thing as other social media, because customers invest in their game identities and their in-game connections. The immersiveness of games will increase with the addition of sensors for emotion.
Durrett mentioned that ARM identified in their ’04 roadmap that there was huge potential for hardware improvements and processing power. This situation differed from PCs where there is lots of hardware and operating systems with only increasing fragmentation to come. ARM is the de facto standard for small, low-power CPUs, and one hardware feature allows for direct write to the CPU.
Fragmentation is also happening in the TV and other platforms, but mostly the providers just add CPUs to their boxes. The availability of SDKs and other community assets for development enable fast software development for the ARM processors. This development ecosystem provides production values to the developers and allows them to sidestep the not-quite-ready HTML5 structures. Due to the focus on ARM and the development ecosystem, there are now many high quality titles available for ARM-based platforms that can run the Marmalade engine.
Games predate culture and humans. Play is instinctive in all the higher animals as a part of the educational process and as a way to get exercise. The concept of a game as fun, however, is very hard. There is only a small window to get discovered, and only the top 30 games in an app portal will make any realistic money.
The changing demographics is allowing greater game diversity, as half of gamers are now women. Of those women, half are under 18. As a result, the nature and platforms for games has to address the new populations. GPUs make the tablet almost equal to the consoles in performance, so many people are moving to mobile devices for much of their gaming. The advent of freemium games now accounts for two thirds of all game sales and the integration of other sensors makes the mobile platforms very inviting.

Standards?
Gardner declared that none really exist for games. those that do exist have evolved over time from the proprietary systems. In the PC, Microsoft and Windows have become a common platform.

Picking winners?
Durrett will sell tools to anyone. They also work with finance, defense, and educational companies.

Number of people providing stuff versus the number making money?
Caccia stated that most people just consume. There are over 16M people in various developments, but the top 100 get less than 1 percent of all sales. Some make over $100k, but most people in the mobile game business make less than $100 per person.

Educational games are a large business with high efforts and expectations for quality and efficacy. There are questions about sufficient infrastructure?
Durrett responded that there are some educational companies, but the area is still weak as a game.
Jablonski added that gamification is not enough. Nevertheless, it is a good time to be a consumer, because one can get 95 percent of a game before needing to upgrade.

Alternatives to consoles? Steam is bulky to download but might be viable against the PC.
Gardner noted that Sony and Microsoft just released new consoles this year. These boxes may be going fine in the short term. Sony is back compatible with older versions of the games and will allow users to trade-in and download the games to their on-line accounts. Microsoft has to clear up their business model, some tweaking is needed.
Jablonski commented that 80-90 percent of all gaming revenues go to the console games. the old consoles are still around and versions are still being sold. The social networking aspects of the games provide more value than the PCs for sharing.

Economic issues?
Caccia claimed that most products have some type of virtual currency. Bitcoin is being stopped because it is an untraceable currency that can be converted to cash. National banks are concerned that untraceable currencies are being used for money laundering. The only viable currencies are in-game.

Use the virtual currencies to monetize the user experience?
Durrett responded that virtual currencies are integrated into lots of systems. In some games, the virtual currencies are good, but the game design has to differentiate between gaming the gamer and providing a good game.
Caccia added that Microsoft is quitting the use of virtual coins.

Gaming and movies getting together?
Jablonski illustrated the links between movies and games. “Street fighter” failed as a movie. There is a lot of ego involved in game and movie creation and the meanings change when they are forced to integrate. To be successful, the two groups need to blend and form a marriage. Studios want to exploit their assets.
Caccia observed that movies are more concerned with the story, while games are about character development and control. These are different experiences that are hard to mix together. Successful joinings work at the emotional level. The “Walking Dead” game followed the storyline.