A Tree Falling in the Forest

Zynga Gets No Respect: Welcome to the Club Edition

noreply@blogger.com (Keith) — Fri, 06 Nov 2009 01:48:00 +0000

The great American hero is the entrepreneur who can grow a big business from nothing. The great American pass time is tearing down the great American heroes. We should all feel sorry for the hero who builds a game company. The most painful truism of being in the game business is how easily and often we are attacked. No one admits to playing games and the mainstream perception is of a bunch of geeks, sitting in our mother's basements, playing with ourselves in front of a bunch of glowing screens. While the growing audience and mainstream migration belies the stereotype, the attacks continue. It is just too easy to look at games as a vice and tar the entire industry, or in this case, a segment, as bad, because no one really cares. But really, "If you prick us do we not bleed? If you tickle us do we not laugh? If you poison us do we not die? And if you wrong us, shall we not revenge?"

Most recently, Michael Arrington of Tech Crunch decided to take a very common fraud and frame it as a core component of one of the most successful game companies in recent memory. He cutely referred to the games as "Scamville" and called the category a bubble. It is one thing for him to write this type of thing for his techy audience on Tech Crunch, but it is another thing entirely when it gets picked up in the mainstream on the Washington Post. The Post readers believe him. They think he speaks with authority and knows what he is talking about. I feel for them - and us.

In reality Arrington discovered there are bad people in the world who will take advantage of others for their own benefit. These people will trick people into providing a method of payment and continue to bill the shill until the affirmatively cancelled. The scam is not new, and depending on the size of the fine print, it is not even a scam. It's called a continuity program and it is employed by everyone from Girls Gone Wild to Proactive Skin Care. When the programs take the form of a subscription they range from difficult to terminate - try finding how to end your World of Warcraft account - to nearly impossible - try terminating an AOL account. Mr. Arrington points to some unscrupulous lead gen companies who feed the continuity programs by hiding the continuing commitment. Yes they are unscrupulous and certainly insidious, but they are no more enabled by Zynga than they are by email. Nor does their relationship with Zynga constitute an ecosystem. They are merely parasites.

Arrington's argument is pretty simple. The press is lauding companies like Zynga for building a very profitable company very quickly but Zynga deserves no praise. A portion of Zynga's revenue is generated from abuse of lead gen clients by bad lead gen companies and the money paid by these companies goes into more lead gen opportunities to further defraud consumers. Therefore the social game industry is built on a bubble and should go away. But the argument is flawed on many levels. The first, is the implied significance of lead gen revenue. Zynga has repeatedly broken down their revenue as one third virtual goods, one third traditional advertising, and one third lead gen. With annual revenue estimated between 150 million USD and 250 million USD, complete removal of lead gen revenue would still leave a company with 100 to 170 million USD in revenue - still quite impressive and not really bubbly. He doesn't stop there though. The major flaw is ascribing culpability to Zynga for actions of its sponsors or clients. Granted, the combination of the lead gen and continuity markets is an ugly marriage, but counter to Arrington's argument, Zynga is not the bastard child of the union. It is merely the parasite's host. The logical extension of this argument is magazines should be shut down for running continuity program advertising, network television should be shut down for selling infomercial time, ISP's should be shut down for allowing all those viagra and ringtone emails and of course, don't forget Google who gets paid to entice you to click on sponsored links.

Just look at it in his words:

The reason why I call this an ecosystem is that it's a self-reinforcing downward cycle. Users are tricked into these lead gen scams. The games get paid, and they plow that money back into Facebook and MySpace in advertising, getting more users. Who are then monetized via lead gen scams. That money is then plowed back into Facebook and MySpace in advertising to get more users.

Here's the really insidious part: game developers who monetize the best (and that's Zynga) make the most money and can spend the most on advertising. Those that won't touch this stuff (Slide and others) fall further and further behind. Other game developers have to either get in on the monetization or fall behind as well. Companies like Playdom and Playfish seem to be struggling with their conscience and are constantly shifting their policies on lead gen.

The games that scam the most, win.

He is blending the lead gen revenue with the ability to spend dollars on marketing. This is simply not the case. As I said, lead gen is only a portion of the revenue, but more significantly, the viral nature of the games means the bigger games get bigger more quickly than the smaller games. Like every other industry, the number one player is bigger than the rest of the top 10. Remember Lycos and Excite? Moreover, Mr. Arrington is only describing what we in the real world like to call "marketing" not an "ecosystem." The only ecosystem is the lead gen company and the shill. Nothing about the relationship is unique to Zynga. I challenge Mr. Arrington to spend a day without being approached by a similar lead gen opportunity - even if he turns off the computer. Check your mailbox on the way out the door. There is most likely a credit card offer in the form of a check or balance transfer opportunity. Endorse the check and you now have a credit card. Transfer the balance at 0 interest and you will be looking at increased fees down the pike. Put that one down and the next piece of mail is a refinance offer. Sign this agreement and we will lower your interest rate - the fine print tells you it is only for a few months. Now go to a store to pick up some clothes. At checkout the kind sales person asks "Would you care to sign up for the GAP, Neiman Marcus, J Crew or wherever credit card today and save 10% on your purchase?" Sure. You just signed up for a high interest rate credit card which will at least temporarily impact your credit score and possibly carry an annual fee. My guess is Mr. Arrington doesn't fall for these things because he is not a dipshit - just like the majority of the people playing the Zynga games.

The people playing the games are sophisticated enough to sign up for facebook and have an email account, which pretty much means, they've seen their share of fraudulent viagra offers. Sure some Zynga players may still be trying to collect the money on behalf of the dead African leader, but if those people fall for it, they deserve it. For the most part, these offers burn themselves out. You can't cheat an honest man. Mr. Arrington acknowledges as much:

And some users aren't dumb, either. For every user who gets tricked into some fake mobile subscription, there's another who can beat the system. That's where the legitimate advertisers, like Netflix and Blockbuster, get hit. Users sign up for a free trial with a credit card, get their game currency, then cancel the membership and start over. Netflix has a policy of only paying for a user once. But game developers use a complex set of partner chains to launder these leads and try to get them through for payment. Netflix sees an overall lowering of quality and pays less for leads. Game developers, desperate to monetize, then search for ever more questionable offers to make up the difference. In the end, the decent advertisers are out, and only the worst of the worst remain.

This is exactly the point. The perfect flow of information on line allows the Web 2.0 companies to self right very quickly. If Netflix and Blockbuster find they are getting gamed - pun not entirely unintentional - they will stop paying Zynga bounties. Therefore, being complicit in the alleged scam is against Zynga's interest. If the offers migrate to the less desirable scam type offers he suggests, the consumers will no longer participate. The value of the object gained is less than cost of the commitment to the continuity program. It is just that simple.

Arrington waits until the end of his post to address the real issue. He points to his public attack of a company he characterizes as unscrupulous. Sadly, he did not put their name in the title, he did not write most of the article about them, and he only mentions them as the actors with mal intent in a single paragraph. Why? Probably because Mr. Arrington generates revenue through attention. A headline snappy enough to draw a reader to his page, or the Washington Post to reprint it. I guess that makes it a lead gen device designed to capture folks so he can generate revenue through traffic, which he will invest in more content, advertising and events, which generate more hyperbolic headlines, which generate more readers going to his site. . . . . .

Our Governor at Work: Schwarzenegger Speaks his Mind Edition

noreply@blogger.com (Keith) — Thu, 29 Oct 2009 01:33:00 +0000

They say it was an accident, but when Arnold Schwarzenegger gave legislators his response, he also told them what he really thought in the first letter of each sentence in the body of his cover letter.

Here it is:

It kind of makes me like him again

Yeah! Developers Can Sell Into iPhone Apps: Apple's Unbiased Indifference Edition

noreply@blogger.com (Keith) — Wed, 28 Oct 2009 20:15:00 +0000

I was on my way to the airport for another business trip in a month where I spent more days on the road then at home, and I saw another of the ubiquitous billboards for the PSP Go. My first thought was “I have to get one.” I mean come on, it is not just gadget porn. They are dangling a slick new drug in front of a junkie. It is small and electronic and it lights up and makes noises. It even has a slidy thing with buttons. It doesn’t do anything the old one doesn’t do and in fact, with is smaller screen and inability to use my UMD games, it does less. But Sony’s blatant pandering to my addiction didn’t bother me. I am used to it and accept it, as well as my inevitable succumbing to temptation followed by the post purchase depression as a fact of life. It was the next thought that bothered me. After I looked at it I thought I would not buy one because I could just get games for less money on my iPhone. The abuser is not Sony, it’s Apple, and not just because they are bumming my high.

I wrote about Apple’s attempt to reinvent the game business. They saw consumers spending more than they ever did before for content, just not to the content owners. The money was going to a disparate group of companies making PCs, storage devices, MP3 players and broadband and consolidated all of those dollars under one roof. By doing so, they are able to commoditize the content. As I said a couple weeks ago, they did it to music, and now they have their sights set on games. The point hit home when my sleep deprived mind wandered to the bad place and I realized my support for the game device would be out of loyalty to the business model that paid for my house, and not basic logic. Sure the games on the PSP may be better, but better doesn’t always win - especially in the face of a great price disparity.

Apple is different from Gamestop or Gamefly who simply need interventions, because Apple is indifferent. Where Gamestop and Gamefly are only harming themselves by capturing revenue from the companies who feed them, in the long run, they know their survival is inexorably tied to content. Apple, on the other bears the same indifference toward developers as Godzilla to Tokyo. They don’t really want to hurt us, but they also don’t really care if they do. We are simply collateral damage resulting from the attack on the market or killer kaiju, as the case may be. Apple is attacking the game industry stalwarts by regressively taxing the disenfranchised developers by offering the false hope of lottery riches. In the beginning, I thought it was a good idea, but that was when I thought the platform would be protected and people wouldn't just be collecting free apps. Developers can see the big gooey pile of apps, but every one of them is confident they are creating the next tetris. No filmmaker sets out to make Howard the Duck and no game maker sets out to make E.T. – the game that is.

Developers are investing their own money because Apple told them they have an outlet. Sure, Apple is not telling the developers to do this, but no one is telling the poorest segment of society to buy the lion's share of lottery tickets either. The campaigns are tailored to the most susceptible. Apple tells developers they have an opportunity to reach the market and their return is only limited by the scope of their imagination and the quality of the offering. What Apple doesn't say is Apple will continue to make money on the hardware while the app store will continue to be managed for volume. Sure you can make the really cool app to tell the temperature on the moon and we’ll let you charge USD 5.99, but nothing is stopping us from approving the other guy’s moon temperature app for free. Even worse, while Apple zealously guards the ceiling price on media, it certainly won’t protect the floor. Apple would love for you to charge USD 9.99 or 29.99 for a game, but it really doesn’t care. So long as developers provide content, Apple is happy. So far it’s working – for Apple and with a recent change it may be working for developers.

On October 15 Apple changed the rules for in-app sales. It not only allows developers to quickly convert a free demo to a paid version – rather than the current Lite and Full versions – but it allows developers to join the social gaming revolution and start selling objects into games, additional content and subscriptions. The concept is a much closer alignment of interests between Apple and the developers at no additional cost to Apple. Developers are incented to keep prices of apps low, driving more downloads and more appeal for Apple. If trends from freemium content on other platforms prevail, consumers will pay more money over time for in game purchases than they would have paid for the game. So Apple gets more free content and developers, in theory get more money. This is crucial to the future of the platform. I won’t say it is a threat to Nintendo and Sony because their dedicated consoles have allowed for this content all along. A lot of DSi owners have yet to purchase a single game, continuing to play only downloaded content. However, I will say it is a huge benefit the community of iPhone developers and shows us Apple doesn’t really hate developers, they just remain indifferent.

Zynga's Doing it Old School: Showing Us How It's Done Edition

noreply@blogger.com (Keith) — Tue, 27 Oct 2009 16:25:00 +0000

So remember when making games was fun. Schedules were measured on single year's calendar, budgets had fewer than US phone numbers and revenue had more? Zynga does and they are bringing those days back - with a vengeance. There is certainly no formula for finding success in ultra low budget games, it is even more amazing to hear of a game company which is churning out low budget cash cow games like jelly beans down a conveyor belt. Sure, it is "only a game company," but this game company, which is rumored to be preparing for an IPO, went from zero to well into the 9 figures in revenue - rumors place revenue between 150 and 250 million dollars - in two years and operates on margins - rumored to be 60% EBITDA - that would make any media executive cry.

If you have a Facebook account, you probably played, or received a post from a friend who plays Mafia Wars, Farmville or Zynga Poker. If you are not on Facebook, you probably never heard of the company. Which is odd, considering there are over 125 million people registered in the Zynga community. This is not just one of those dot com "ooh, look at all the eyeballs" companies with no revenue. They started cashing on on three revenue streams right from the beginning. Like a television show, Zynga makes money from advertising - about two thirds of its revenue. Unlike a television show, the other third of its money from selling digital objects through a direct relationship with its consumers. Ad dollars are earned through advertiser sponsored offers in which users can get virtual currency to buy virtual goods as well as traditional advertising. Digital objects on the other hand are pretty out there. People pay real money to buy objects that don't really exist. They vary from game to game, but purchases can be anything from poker chips, to carrot seeds, to cash, to tractors. Speaking at the Web 2.0 Summit last week, CEO Mark Pincus jokingly pointed to larger tractor sales than John Deere. As you may guess, it does not cost Zynga a lot to make more digital objects and there are no inventory or fulfillment issues. 99.99999999% margins on incremental units is nice. While the concept is old hat in Asia, and common in the world of massively multiplayer games, Zynga is the first company to really bring the "free to pay microtransaction," or "freemium" model to the United States in scale. Looking at one game provides an idea of the scale.

One of the Zynga's most popular games, Farmville, grew from 354 users on June 20 of this year to 56 million users today, 20 million of whom are daily active users. Each of the 20 million daily users logs on for an average of three minutes a day. While 3 minutes may not seem like a lot in a world where 20 million viewers watch American Idol on any given night, we have to realize it is kind of like Zynga broadcasts only the three interesting minutes of the show, every day. This is the part when American Idol makes money on the voting. It's a little better than that because there are no capacity issues, so everyone who wants to participate can, and pays money, and even better still because all the ad inventory for the show is compressed into three minutes. Sure it costs less to run an ad in Farmville, but it also costs orders of magnitude less to reach the consumer. In case that's not enough, the production cost of a game is purported to be low to mid six figures and the incremental cost of creating and releasing a new game object is close to zero. Players don't even have to wait for water cooler talk the next morning. As soon as your or one of your friends achieves a new level of success in the game - which is often - a message is sent to all connections telling how much fun you are having. Finally, we can't forget, Zynga makes advertising very attractive as they know the identity, demographic and regional information of every person who plays every day. Unlike American Idol or any form of broadcast entertainment, if the company wanted to, it could send an email to everyone who plays the game. Unlike Blair Witch, Paranormal or American Idol, this is not a one off. They pop out game after game and the growth curves are getting steeper. The community is so connected, and so rabid, it took only one week, for one of the newest games, Cafe World, to reach 10 million users.

Zynga is also joining the growing list of companies working to do well while doing good. The company ran a small test in Farmville to see if users could be encouraged to donate to important causes. In their "Sweet Seeds for Haiti" program, users purchased special sweet potato seeds, with 50 percent of the purchase going to Fatem.org and Fonkoze.org. Within three weeks the campaign generated a contribution of $487,500 to the organizations. The net cost to Zynga, was not even measurable and the profit and contribution were significant enough to feed over 500 families for a year.

Gamers look at what they are doing, and say they are not games or if they are, they suck. In reality, they are not games. They are social lubricants that give you a means and a mechanism to stay in touch with your the deepest of your contacts. And as games, they will certainly not generate the same type of "wow" as Uncharted 2, but, if they really do suck, I would like to be involved with something that sucks even only a portion as much as they do.

The company's ability to make money is obviously significant, the ability to clone success from game to game is enviable and the size of the audience generated without any type of license or boost from outside media is downright scary. They are the first company to really show us how to provide lucrative, entertaining content within a social network - and that they can do so very well without anything from traditional media.

Talking About a Revolution: Bizzaro EA Edition

noreply@blogger.com (Keith) — Fri, 16 Oct 2009 18:06:00 +0000

I don't think this idea rises quite to the level of heresy of this one, but it could definitely fall into the category of "Wow, that is nuts . . . hmmm now that I think of it, it may not be so crazy." You see, I got this email from Gamestop with an amazing offer on a great game:

As a Tim Schaefer fan since Full Throttle, I was already counting the days to release, but Gamestop nows sweetens the deal by offering the game for one ATM unit, or as some of us might say the right price for a game? Sure, it would be tremendously hypocritical for me to cash in games to Gamestop, but if I put on just a bit of a disguise and went somewhere other than my regular Gamestop. . . . Inspired by Pete Townshend's one man crusade, and like him, solely in the interest of research, I looked at the list of games:

I wouldn't give back Arkham, still hours to go in The Beatles - and it is one of the only games my wife will play with my son and I - do they really want G.I. Joe or G-Force? Fallout 3 will create shelf fulls of a great free alternative to the new GOTY version Bethesda is trying to sell creating the question - is it better for the publishers to squeeze more dollars out of their hard core consumers or have Gamestop sell a very similar thing to new consumers without paying Bethesda? FIFA 09 for those newbies who don't realize games are dated like magazines. WET to guaranty a reduction in re orders and all the rest of the games necessary to make sure the stores are well stocked for 40% margin product for the holidays. Sure, a lot of these are gathering dust on my shelf, and even if I intended to buy DLC, I could just repurchase the game when the DLC comes out. My console will still have my game saves. A very cluttered closet is a clear testament to my never turning in an old game, but when they spell it out this clearly, grabbing the third rail is oddly attractive.

Then I started to wonder why Gamestop had to have all the fun. Why are they the only ones who get to sell product over and over again? We should be able to get us some of that too. I thought about how much money I pay EA every year. In the past year, I purchased Dead Space, Mirror's Edge, Need for Speed:Shift and Brutal Legend. That's probably about average for a core gamer. Sports oriented players probably bought Madden and either a FIFA or NBA title and PC gamers bought whatever it is people do on a PC. Regardless, it is pretty safe to say that if their core buyer purchases between four and six games a year, they are very happy. Even though we pay USD 59.95 on average for a game, by the time it filters through the intermediaries and manufacturers, EA will receive about half of that money. Add in marketing, and you are probably between USD 25 and 30 per unit sold. So guesstimating on the high side, I paid EA USD 120 last year. But what would happen, if EA decided it was tired of my "renting" games from everyone else (isn't a Gamestop purchase with an intent to turn it on just a rental by another name) and chose to capture the revenue? It really would not have to reinvent the wheel. Disruptive models requiring changes to human behavior are expensive, but EA wouldn't have to do that. The model has already been created. EA need only act a bit more like gamefly, or better yet, with the combination of physical media and instant viewing, Netflix.

While the rest of the world is looking to advertising subsidies, or swallowing Chris Anderson's (the bald Wired editing one, not the saving world TED one with the full head of hair who used to publish game magazines) "look at me I discovered the free sample" manifesto, companies from Blizzard to HBO understand subscription is a good model. Sure it's hard. You have to offer compelling content and listen to your consumer, but if you do, they keep paying you money every month. In fact, they will do it until you do something really, really bad. And curiously, the customers subsidize themselves. Your costs increase with consumer base growth, but so does your revenue. What would happen if EA switched to a subscription model?

Gamefly charges USD 16.95 a month and seems to be growing its base. For this price, a subscriber can hold on to one game at a time and if they choose, exercise a purchase option on the game they have. If EA charged me the same thing, rather than USD 120 last year, I would have paid them at least 203.40 - assuming I did not choose to keep any of the games they sent. If I chose to keep them or wanted more games at once, they would have received more - and so would I. Exclusive catalogue titles available only on line to subscribers would allow me to introduce my son to some of the things I used to play. Even though EA can't justify putting the Road Rash series in a box, it would cost nothing to stick it on a server and give me access. Interest may even revitalize the title ala Ghostbusters. I would also tick the order box for titles I may not choose to buy at full retail and become a convert. Even if I don't EA captured the consumer rather than Blockbuster or Gamestop.

You are going to jump in and say "but EA does not have all the games on the market and I want to purchase from other publishers." I had a law professor who used to answer questions like this with "true, but trivial." Does Blizzard offer anything other and WOW to the 12 million folks who pay USD 14.95 a month? Does your membership in the Girls Gone Wild continuity program stop you from buying other porn? Subscriptions are a funny beast. Once a consumers signs up and go on auto bill, the money is no longer considered part of the budget. It just happens. Subscriptions and new game purchases are not mutually exclusive. My EA subscription will just keep giving me new gaming goodness and when Borderlands or Assassins Creed hits the shelves, I'll go buy them. The difference is, EA's titles get returned to them, reducing their cost of goods and letting them capture the used game margin while ensuring a consistent, predictable revenue stream from me, while Take 2 and Ubisoft will see reorders decrease proportionately to increases in sell in.

Of course the channel will be pissed. Wal-Mart, Target, Best Buy and Gamestop - especially Gamestop because they deal with the hardest core who are most likely to subscribe - but the scene will look more like a John Woo each guy has a gun to the other's head than a blindfolded EA standing in front of a firing squad. Games will sell on discs just like CD's are still sold at retail in spite of iTunes and subscription music services and retailers want their games. It would be hard for Take 2 to make this move because retail only cares about one product every four years. But EA puts out a Madden, FIFA and NBA product they care about every year. EA will still sell games at retail and none of those stores want EA to be exclusive anywhere else, so EA has leverage. They will just sell less product at lower margins and it may even encourage retail to invest in promotion the way they have in the music sector.

I don't know, maybe I am nuts.

Apple's Attempt to Reinvent the Game Business: Selling the Razors Edition

noreply@blogger.com (Keith) — Mon, 05 Oct 2009 03:14:00 +0000

I read this article a while ago about the entire game business fearing Apple, and I thought it was kind of silly. Then the next day I saw this one proclaiming Apple's dominance over all others and started to think I was wrong when I said Steve Jobs' reality distortion field would not extend into the game business. Then I closed my macbook, took a deep breadth of fresh open air and realized, as tempting as it is to say Apple figured it out and is going to save the day, just like they did for music. But the articles are falsely equating the music business with the game business, and they are really wrong – and we should be happy.

In the New York Times article, Yoichi Wada, CEO of Square Enix was called for a new business model. “The next breakthrough in gaming is not going to be in hardware,” Yoichi Wada, president of a top Japanese game maker, Square Enix, told Game Show participants. “It’s going to be in how to create a successful business model.” The implication is Apple's golden touch is addressing the need. If Apple has its way, this statement is poetic foreshadowing of our industry’s doom. Sure, being afraid of the iPod only to see it save the day would be pretty consistent patterns established in the past. Every new media was feared by existing media and ultimately expanded the content market. Film studios feared television, videotape and DVD's. All expanded the market. Television feared videotape and DVRs, but they turned out to be a pretty useful. Now we are even seeing potential for Hulu and other on line distribution teeing up to expand the market. With Apple spamming mainstream media with game ads, it should only be a good thing. The iPod simply joins the handheld market, which has been around for years, and introduces a new point of monetization, expanding amortization opportunities of production costs and giving publishers an opportunity to make more money and larger games . . . right? Not if the plan succeeds. We only have to look to the music and video businesses to realize Apple is walking us to the precipice of a slippery slope.

Apple’s business model threatens content creators. You know, the one that allows creators and publishers to make money. For years, our business, like scores of others, has operated under the razor/razorblade model pioneered by King Gillette at the turn of the 20th century. Give away the razors, and sell the blades. We are blade makers. We in the game business benefit from the sale our games into allegedly subsidized consoles. The console manufactures make their own games and receive their vig on the manufacturer of each game, and we were all happy. Until Apple, no one ever thought to turn the model on its head. Apple knows content is very risky and wants to be free, so it avoided the content model fray in video and music by charging for the razor and commoditizing the blades.

Before Apple, hardware pioneers made sure the content was a available by creating, or subsidizing it. RCA supported television and phonographs with NBC and Victor, Sony owned record labels and studios and game console manufacturers publish first party games. In the music businss, Apple found a chaotic market loaded with pre existing popular content, and under attack by piracy. By simplifying access, securing delivery, aggregating popular content and setting the price at a break even level, Apple was able to leveraged the long tail – the phenomenon defined as creators make a little money over a long period of time and aggregators make a lot in a short time- without spending any risk capital on content creation. By creating a safe harbor in a world of rampant uncontrollable piracy arising from the failure of the gatekeeper model, Apple got the labels to jump on board before they realized the content was commoditized. As the company grew to the largest music store on the planet, the labels lost leverage over promotion, pricing, distribution and just about everything that makes them a label, except the requirement to spend risk capital for new music. When Universal said they didn’t like the pricing, Apple said “too bad, leave”. They didn't. After Apple did the same thing in the video business and NBC didn’t like the pricing, Apple said “too bad, leave,” and they did . . . only to come back. There is no profit in the content, but Apple doesn’t care, they make their money on the razors, not the blades. No single content creator has power - and none of them make as much money as Apple either. Now, Apple is setting its sights on games.

Apple is promoting games in the largest marketing campaign to ever hit the game business, but consistent with the attack on the other industries, consumers don't know which games they are. I saw the cool three way soccer thingy and the roller coaster stuff, the racing with the bumping was neat, but I don't know any of their names. If I wanted to find them, I have to dig through the app store, which someone in a meeting described as "Wal-Mart, all in a single aisle, ten miles long." This plan worked for music and made Apple the number one store, but it is not going to work in games. They just don’t get the market.

The first hint of Apple’s misunderstanding of the business comes in the uncharacteristically tone deaf advertising tag line “Next level fun.” It sounds like it should be bundled with a Brady Bunch Box set. It breaks the cardinal rule of not sounding like something your mom would think of and makes Sony’s weird baby ads and goat sacrifice look ingenious. Apple app store is doing a bang up business on the mainstream side and perhaps even attracting some of the 30 million Farmville subscribers, but they are promoting games for the hardcore and they aren't buying. Madden launched at number 1, but within a month fell to 38, while Bejewled has been in the top 20 for over a year and there are only three games in the top 100 selling for more than USD 3. The number of potential Madden buyers will always be smaller on the iPod than Nintendo or Sony devices. Every single one of the 110 million people who bought a DSi or dozen who bought a PSP - I am kidding there are about 40 million - bought it to play games. Only a subset of iPhone and iPod buyers purchased the hardware for games. Even though Apple doesn’t care about how much people pay for games game makers care deeply.

Music and video do not have to be ported to the iPod. The same music file plays on your stereo in your car, in your living room and over the PA at a stadium. While a film may feel different in a theater, no design or technical adaptation is required to digitally deliver it to the iPod. So even though the owners of this other media are marginalized, they did not make any specific investments in content for the iPod. It is simply another release window. Games are a very different animal. Madden cannot just be just delivered to an iPod. The game had to be redesigned and built specifically for the device. Even if it is a port from a handheld device, it still requires investment. In fact, games are the only entertainment application tailored specifically for the device. Because content sells hardware, the investment mean something. As we saw when Bobby Kotick threatened to pull Actard off the PS3, if publishers fail to see an adequate return, they will not support a platform.

Rather than creating a new window, as it did in the music and video business, Apple created a new market in which overhead laden publishers are forced to compete on an equal footing with the garage creator of iFart. If they have not already, EA will soon realize, that the subset of app consumers who move beyond downloading the free games are downloading a ton of USD .99 games rather than USD 6.99 and USD 9.99 costly builds. Sure iFart man will make some money and a few creators will make quite a profit, but putting a roof over iFart man’s head is very different from moving the revenue needle for EA. Is it better for EA to focus on trying to figure it out and end up losing money, or waiting until a profitable winner emerges, the market rationalizes, and buy the creator at a premium? Once publishers understand they realize a better return by investing a bit more on an XBL game for delivery into a hardcore base on a platform with higher barriers of entry as well as an ability to leverage existing technology, they will relegate iPhone development to their mobile, casual, family, value or other similarly situated ancillary division of the company. In other words, the divisions only heard from at annual retreats.

The other reason, and perhaps more significantly, the game business has alternatives. When Apple extended the helping hand and offered a safe harbor, the music business was under attack. Napster turned into Gnutella and more, making it impossible to protect value let alone recoup investment in new artists and there was Apple with a way to fix it. We don’t have the same problem. While many publishers are losing money and piracy is an issue, installed base growth creates a light at the end of the tunnel. There is a profitable, protectable console business, an exciting new PC transactional business and the innuendo of direct distribution on the horizon. Other than a new console with similar economics to what we have, Apple is really offering nothing new.

While this is great news for independent developers, in the near term, it should illicit no more than a yawn from Nintendo and Sony. Maybe the next Jordan Mechner is building his Karateka for iPhone and will take the business to a new level and make him rich along they way. But it will be many years before anyone can wrap a business around it to compete with console publishers and before that happens, they will be an attractive acquisition target. The iPod is a great platform and the technology is great, but when we consider our leverage on the existing platforms relative to where the music business sits today, I think it is an offer we can refuse.

Metacritic is all WET: Just Sayin' Edition

noreply@blogger.com (Keith) — Sat, 03 Oct 2009 19:25:00 +0000

Last week I bought WET because it looked like fun and I wanted to play the game. After playing half way through the game I found it didn't only look like fun, but it delivered on its promise. It was what I wanted Stranglehold to be and what Gungrave never delivered. Lot's of mindless, shooting fun. Sometimes that's just what I want in a game. But apparently, most critics did not share my view. When I first looked on metacritic the score was in the deadly sixties, but has since moved up into the safe haven of mediocrity found in the seventies. Not quite green banded goodness, but not bearing the red mark of humiliation. I wish metacritic didn't matter, but unfortunately, developers' livelihood is based on this hopelessly useless, conflicted, arbitrary measurement system even though more and more and more people are realizing marketing and word of mouth are more significant factors in the purchasing decision than a Metacritic score. If you really want to compare apples to apples in admittedly anecdotal but still compelling example, Rock Band 2 for the 360 scored a 92 to Guitar Hero World Tour's 85 last year. But Guitar Hero, with a 40% larger marketing spend, outsold Rock Band 2, the placebo, by a wide margin. Publishers still use these numbers as gating to signing developers and not only are they useless, they are shoddily calculated numbers based on arbitrarily assembled numbers.

Out of curiosity, I decided to see who was responsible for raising the score and what they had to say about the game. They were courageously disagreeing with gaming stalwarts like IGN at 66, Gametrailers at 63 and sponsor and influence free Giant Bomb at 60. It looked like it was Armchairempire.com. I say looked like because they were noted as giving the highest score the game:

But when I clicked through to the review, I saw they didn't:

Now, I am sure this is a careless error, but how dare you be so careless when developers' livelihoods are at stake. Didn't anyone at metacritic feel the need to confirm the numbers posted on the site, or is the move from 75 to 88, part of metacritic's "weighted average" calculation, described as:

The METASCORE is considered a weighted average because we assign more significance, or weight, to some critics and publications than we do to others, based on the overall stature and quality of those critics and publications. In addition, for music and movies, we also normalize the resulting scores (akin to "grading on a curve" in college), which prevents scores from clumping together.

Metacritic does acknowledge scores are misreported and suggests a solution:

Q: Hey, I AM Manohla Dargis, and you said I gave the movie an 80, when really I gave it a 90. What gives?
A: Now, if you are indeed the critic who wrote the review, and disagree with one of our scores, please let us know and we'll change it.

This does happen from time to time, and many of the critics included on this site (such as Ms. Dargis) do indeed check their reviews (as well as those of their colleagues) on metacritic.com.

Are you serious? You can't be bothered to confirm you are accurately transcribing numbers and it is up to the critics to fact check?

But shoddy journalism is not my only concern. It is the sites' holding itself out as objective when it is really a conflict laden subjective aggregation of a limited set of already subjective market data. Now, of course the fact that CBS owns of Metacritic and Les Moonves, President and CEO of CBS Corporation is on the board of Zenimax, parent company of WET's publisher wouldn't influence metacritic to hunt for some favorable reviews and maybe fudge some of the weighting or even a number, but a purportedly objective site should not be in a position where it must explain why not. When I was in law school, they taught us to avoid impropriety, but the appearance of impropriety. Avoidance is simple. You disclose. In this regard, I renew my suggestion from an earlier post and I offer a disclaimer:

We are affiliated with a studio, record company, television networks and game companies, in fact we are better connected in entertainment than CAA and WME combined. We can probably get Les Moonves on a conference call. To give you a better idea, here is a partial list of our family members:

- CBS Television
- CBS Records
- MTV
- MTV Games
- Harmonix
- VH1
- Nickelodeon
- Paramount Pictures
- Paramount Television
- Paramount Digital Entertainment
- Dreamworks Animation
- BET
- Spike

and of course our distant cousin, Bethesda Softworks. We do our best to avoid influence from our parent and siblings, but the significant subjective component in our scores makes it kind of hard.
This has been a public service message. Thank you and goodnight.

Oh, and by the way, pick up WET. It really is a good game.

The Beatles: Jumping the Shark or a New Era Edition

noreply@blogger.com (Keith) — Thu, 17 Sep 2009 23:27:00 +0000

Everyone in the world knows The Beatles Rock Band is out. That's the point, everyone in the world knows The Beatles: Rock Band is out. You can't swing a dead cat without hitting a piece of media about the game. I believe this single game has more media hits than the aggregate hits for all the games being released in the fourth quarter. Don't believe me? Ask your mom, or if you are a bit older, your wife if she knows about The Beatles game. Now ask if she knows Splinter Cell and Bioshock 2 slipped out of the quarter. How about Assassin's Creed 2? Is she waiting for that one? Sorry to revisit old posts, but the folks behind the game did a simple little thing no game company has ever done before. They made a good –some say great, accessible game and told people it was available - and they are not even a game company. What seems so obvious to the marketers behind two of the best known brands in the world - MTV and The Beatles - is the antithesis of game industry thought and the title signals the ability to grow the industry from a relative niche industry of early adopters to one of mainstream.

Actard will certainly market its way through a lot of units of Call of Duty and perhaps penetrate 15 to 20% of the installed base, and Madden may have huge awareness and suffers no lack of love in the advertising department, but the inaccessibility of the game will prevent it from hitting the heights of The Beatles. We are not the first industry to go through these changes. It is actually a hallmark of industry maturation. We may be seeing the end of the US auto industry today, but one hundred years ago, it did not look much different from the game business. Cars were for early adopters. Because the industry was selling everything they could make, there was no reason to innovate. They forced the customer to adapt to the market.

Here are the controls for a Model T.

Item Description
A Transmission Neutral / Parking Brake Lever
B High Gear / Neutral / Low Gear Pedal
C Reverse Gear Pedal
D Brake Pedal
E Two Speed Rear Axle Shift Lever
F Battery / Magneto Ignition Switch
G Throttle Lever and Quadrant
H Advance – Retard Lever (opposite G behind wheel)

They are just about as intuitive as the controls for Madden 07 (I couldn't find a picture of a newer version)

Neither one is really inviting, but you had to learn the Model T controls if you wanted to get somewhere.

Ford was able to sell over 14 million Model T's and dominate the market with over 50% market share in 1919, so they never changed it. But they dominated the market when only 25% of the public owned cars. They thought they were doing great and focused on low price, rather than style, ease of use, product differentiation, or most significantly, market expansion. In 1920, the network - they call them roads - the infrastructure for fuel delivery and easier to use vehicles came on line; driving auto ownership from 25% in 1923 to 50% in 1929, with ownership over 90% in rural areas. Ford, and a host of other companies were left in GM's dust. GM dusted them with a radical concept, make a good, accessible product, and tell people you made it. GM moved the market from one driven by early adoption, to one driven by features and marketing. When consumers are done with the one they bought, have a new one ready for them. Just in case they want to keep it too long, incorporate “planned obsolescence” into your business plan. Ford was able to recover somewhat with the easier to use, more feature laden Model A, but it never recovered market share and GM grew to over 50% of the market over the next thirty years. Unfortunately, as a market leader both hands were busy at the same time. One hand was holding on to the past to maintain existing customers, while the other was trying to remain current. At some point the burden of supporting past success overcomes the ability to innovate and innovation comes from the guys with nothing to lose – in this case, MTV Games, the ones with no legacy. The funny thing is, in supporting Harmonix in making the game, Viacom didn't even have to take that big a leap. To say they took two great tastes that taste great together is overstating the risk profile. Knowing chocolate would taste great with peanut butter is less obvious than knowing the best known music in the world would fit well with the phenom music game. The innovation happened on the marketing side.

Before I rant any further, it is important to note, I am not denigrating the Model T or current games. The entire auto industry, and much of America was built on Model T's shoulders and I wouldn't even be writing this piece, let alone be able to pay for the computer it is written, on without all the games made to date. But we see MUDs, text based adventures and 8 bit games in the same entertaining, but antiquated light as the Model T and the patina found on highly desirable American muscle cars is forming on multi-button controllers. These are lasting representations of a golden age of engineering and creativity in each industry. The good news is we are finally appreciating our game heritage and creating a library value in games, rather than throwing each generation away as a new generation of console is introduced.

The other half of the equation is marketing. For years the most innovative move in game marketing was taking the games out of ziplock bags and putting them in a package with a picture on the front. We continue to take the same approach. Market first to the hardcore, get their buy in and then grow to the mainstream. I've said it before, and Actard is doing it, but has anything changed? Not since I started in the industry and certainly not since I started to write this blog. We are so concerned about market share and market protection, we built a wall around the industry and remain the benevolent protectors of our gaming populous. "Don't let the mainstream people see, they will pollute our waters and drive our core away." While we revel in our victories - Grand Theft Auto IV, Fallout 3, Madden whatever - years of learned helplessness have deluded us into thinking it is the best we can do when in fact our volume is barely a dust mite on the flea on the tip of the tail of the dog which is mainstream media. I am beginning to believe game industry domination of world media is the same pipe dream as Soccer American sport. It is always five years away and has been as long as I can remember, until The Beatles Rock Band. Viacom invested plenty of money in advertising and PR to make sure people knew it came. It treated the game like it does all of its media events.

Gaming purists and those who wish to retain the status quo will be convinced the industry jumped the shark. This title opened the doors and let the folks who have never killed an orc and don't know a Street Fighter combo from a Mortal Kombat finishing move into our stores. They are going to come into Gamestop and worse yet, they will pollute the Live network with their presence. Worse yet, they will find Microsoft's network useful and pull it into the mainstream. How will we be cool when the best we can do is say "I knew it before you did?" Others will say gaming finally came into its own. A mainstream media company got a hold of the secret sauce to make a credible game, marketed it like it was a form of entertainment and blew up the market at the same time the network infrastructure matured.

Viacom and Harmonix will benefit a lot from the product, but it is certainly not a one way street. The Beatles are pulling fans into the game, but they understand the game will pull fans into The Beatles.

Kids like The Beatles, but they don't always know it. They also look at the music in Rock Band differently than we do. Where we see the Rush, Cheap Trick or Who song from high school, they see a level. I'll never forget walking into a room full of ten year olds and having one look up at me and say "Keith, I unlocked Freebird for you" - don't get me started on kids calling me by my first name. After the quick set of flashback mental vignettes to stadiums with lighters, smokey rooms with bongs and people yelling "Dude, play Freebird," I realized this kid had no clue what he was talking about. Freebird isn’t a song, it’s an achievement, or at least it starts that way. After this could who would not be satisfied listening to song with no visuals plays it enough, he would hear the song. Then he may hear it on the radio and have a connection to the song because hearing for the first time marked an accomplishment. If The Beatles were not part of this, they would be missing out on an entire generation.
Finally, it will bring families together. Sure, a lot of people will be playing the game with their friends, and a lot of kids will play on their own. But one of the least discussed, largest benefits of a video games is the way it can bring families together. Parents interact with kids on a level playing field. While there are parents who are willing to have their asses handed to them in a sports or driving game the activity resides closer to the “chore” side than the “fun” side of life’s continuum. In some cases, it sits right along side root canal. Of course they played Wii sports for a while, but the lack of engagement is evidenced by the failure to purchase any other games. Even though the kids are playing levels and parents are playing the songs they love, Rock Band - especially The Beatles version - brings everyone together. Isn't that what games are supposed to do?

I am not saying this is the end of games as we know it, because the potential is there for great expansion. A rush of new consumers will feed the box on the top of the tv with their own game for the first time. The big question is what will we do with them. When they came for the Wii, we really didn't give them any compelling reason to buy more games. Now, when they come for The Beatles, will they find other compelling entertainment options? Natal on the Motion Controller are coming and could represent great opportunities but they are not here now.

iPod Touch Games: Reality Distortion Field Edition

noreply@blogger.com (Keith) — Sat, 12 Sep 2009 00:05:00 +0000

Someone is giving Uncle Steve bad game industry advice and we have to wake him up. He has the chance to do something to pull our industry forward with the same impact he had on the music industry - and perhaps dominate our future - but instead, he is choosing to run down the same rat hole as the rest of the industry - and by extension use his reality distortion field to pull us along with him. At at time when we so desperately need to pull the mainstream iPod buyers into games, he is chasing after the same limited number of gamers we so jealously covet and cater to. He started out so perfectly, mainstream device, mainstream applications, reviewed and approved all the applications, pick up and play games, cheap to make, easy to earn out, and all of sudden, he decided to spin into the already crowded game industry hell last Wednesday. The iPod/iPhone is a unique device with the opportunity to magically create an economic opportunity for never before seen games, catering to unique attributes and leveraging unique distribution. Instead, he chose to apply his reality distortion field - believe me, it works - to have us believe there is a consumer mandate to make the iPod touch a game platform and support it by highlighting relatively expensive, crippled versions of games from other platforms.

In his post announcement interview with the New York Times:

Mr. Jobs reiterated what Phil Schiller, the marketing vice president, had said earlier in the onstage presentation: that Apple is really pitching the iPod Touch as a game machine these days. And to do that, you have to make it as inexpensive as possible.

“Originally, we weren’t exactly sure how to market the Touch. Was it an iPhone without the phone? Was it a pocket computer? What happened was, what customers told us was, they started to see it as a game machine,” he said. “We started to market it that way, and it just took off. And now what we really see is it’s the lowest-cost way to the App Store, and that’s the big draw. So what we were focused on is just reducing the price to $199. We don’t need to add new stuff. We need to get the price down where everyone can afford it.”

So he would have us believe he just threw this thing out there with no idea why people would want it. Forget iTunes number one position in music sales and mobile video distribution. Also forget that only 10 of the 100 games are anything other than extreme casual and less than half of the top 100 applications are games at all. Also, set aside the 50 some million people who bought the device, most of whom would never touch a DS no matter how many Beyonce ads Nintendo makes. Forget that the tie ratios for DS suck for anyone other than Nintendo because the owners really don't buy a lot of games. Finally, forget the 110 million people who purchased DS's and both people who bought PSP's bought them only for games while the people who purchased iPod/iPhones purchased them primarily for consuming media or talking on the phone with only a subset even caring about a game. If we don't forget all this stuff I would have to stop writing now, and if you are reading this post you know how much I enjoy writing long posts. Moreover, I am going to humor Uncle Steve - he really is right much more often than I am, I found this out sitting in a conference room with my Newton in front of me and him on the other side of the table when he told me people would by the Bondi Blue iMac, six months later I learned which was the better side of the table- and take a look at the event.

I understand where he is coming from, he's done it before, hell, we've all done it before. Conventional game wisdom says new platforms need exclusive killer apps to launch. When he launched the iTunes store he pulled in the best music and featured U2, delivered in a manner which catered to the unique attributes of the iPod - all the music in one place. When we launch consoles, we try to lock down the key developers and games. There is a must have list of games required to get the console to critical mass, the point at which publishers can make money and keep supporting the console. However, in the case of iPod/iPhone event, he did not show killer apps. He showed stuff very few people care about. He also ignored the acquisition of critical mass months ago. He's got 50 million units installed and a game can be built in the single digit thousands. He's already there.

At the event he chose to feature representatives from EA, Ubisoft, gameloft - which for those of you in the back row is pretty much Ubisoft - and a lone iPod game developer, Tapulous. They showed crippled Madden, crippled Assassins' Creed, an FPS called Nova which is kind of like flying a plane with a paper and pencil, and Tapulous which gives us gameplay like we haven't seen since Amplitude. I am sure these games are wonderful, but with the exception of Tapulous, each of these can, and are delivered better on other platforms. I remember before Halo when people used to say FPSs can't be played on consoles, and then they were proven wrong. But you know what? The iPhone really sucks for FPSs. Of the apps shown on stage, Tapulous is the closest to illustrating the potential of the platform, but even this one is not quite there.

If he really wanted to highlight the strength of the opportunity on the platform, he could point to the games people are actually buying for the device. Perusing the current top games, the are games like Mr. AahH!, Geared, Sheep Launcher Plus, Trism, Radgoll Blaster, Stick Wars and others that for budget, distribution and game play reasons could not find a home on any other platform and have one - sometimes lucrative - on the iPod/iPhone - and these are just the ones people pay for. There are a ton more free downloads. Don't kid yourselves, Apple doesn't care whether the apps are free or paid for, they make money on the hardware. Paid apps are only there to encourage others to develop for the platform. Uncle Steve has shown us over and over he is not a dumb guy and is always a dozen chess moves ahead of the rest of us, so why is he ignoring his unique position in favor of what could be perceived as a weak one. Well, I can only make a random, speculative guess, and again, if you have read any other posts on this blog, you know I will.

The simple answer is new technology adoption is driven by sports, gambling, porn and games - not always in that order. But this is not a new technology and I don't believe the answer is quite so simple. Games are a blue water opportunity for Apple. The iPod already dominates the music world and there is not much room for growth. He has to find new markets. With the touchscreen and openGL, he set his sights on the 150 million unit strong market of DS and PSP owners. The app store is a success when it comes to numbers of downloads, but the majority of the apps downloaded come from the free side, not the paid side. The unwillingness to pay for apps is evidence of the type of consumer purchasing the device. They are not gamers. A mainstreamer will purchase a mobile navigator and download a solitaire demo. They may download the bubble wrap and purchase a Tetris, but they are not checking the store daily to see what came out. If Gamers believe there are cheap, easy to acquire games that are as good or better than those on the DS and PSP coming out regularly, they will buy the iPod touch . . . or so he thinks. In reality, as a matter of simple economics, the iPod/iTunes games are doomed to being worse.

Phil Schiller touted the price disparity between the DS and PSP games and the iPod/iPhone games as a benefit. It is to the consumer, but not to the producer. The platform is great way to release inexpensive games which do not justify packaging and distribution as a physical sku. You just can't sell a 1 USD game at Wal-Mart. However, the platform is also not supporting a 15 or 20 USD price points needed for a return to justify development investment on a par with other platforms. With an installed base of one half the DS and only a subset of that base inclined to buy a game, let alone an expensive game - Madden lasted in the number one position on the charts for less than a week, only to be displaced by Appbox Pro - the hope of making up the difference on volume is years away. The only way to justify the model is reduced development budget, meaning reduced game.

The question of how long they will be worse is up to the guy who already has a DS, PSP or both and whether he cares enough about the iPod version to want to purchase the iPod touch. Moreover, will he want to buy it instead of a PSP Go with similar functionality, more buttons and deeper hard core games. While Madden quickly moved into the number one spot on the Apple store, I have to wonder how many of those sales went to new iPod owners. I am certainly not Steve Jobs by any stretch of the imagination, but if it were me, I would have kept swimming in the undisturbed clear water of the new game market I created with the app store, rather than frothy mess in which we tread.

Why Joseph Stiglitz Agrees with Steve Jobs: How the Game Business Taught Apple to Run iTunes Edition

noreply@blogger.com (Keith) — Tue, 01 Sep 2009 23:30:00 +0000

"We do not see the world as it is. We see the world as we are."
— Talmud

The time between posts seems to be increasing and as you may notice, if you make it through this one, I’m a bit of practice when it comes to brevity. I started this about two weeks ago and have been thinking about it a lot. It kinds of goes off on a tangent that has very little to do with games, so in the spirit of this blog, I’ll let you know, I am playing Arkham Asylum right now and loving it. I think it’s not just because I am huge Batman fan and have been waiting for a good Batman game either. It really is great.

And now for something completely different.

The blogosphere is alight with stories of Apple’s anti competitive behavior. We’ve gone down the typical path of Apple is great, to Apple isn’t nice, to Apple is anti competitive, to Apple is Satan incarnate to your mother sleeps with goats. All of the discussion arises from Apple’s continued to decision to control the content distributed through it’s iTunes store – dare I say, a model cribbed from games. The very model which, when employed, allowed our business to rise like a phoenix from the ashes of unsold ET carts to 15% annual growth since 1988 – or as I like to think a locomotive. Those of us in the game business look at iTunes and the app store and say “OK” and start building and submitting. I suppose they may look at us as suffering from some sort of Stockholm Syndrome, and if we are, we really wouldn’t know.The rest of the world sees the trappings of an evil empire bent on world domination and control through a software application used by less than one sixth of the market. In reality Apple, as a platform operator, is highlighting the value of a shift from Adam Smith’s “invisible hand” to a Keynesian monitoring of the market. They are showing they were not wrong when the kept the platform closed, just too early, and today we are seeing a fundamental philosophical change. Technology companies have traditionally believed open is better and point to Wintel v. Apple in the 90’s as the classic example. But when mainstream consumers are thrown into the mix, Apple is showing us closed – or should is say semi permeable – is the way to go.

It’s kind of weird to think of Apple in a position to leverage market share. Especially when even their product with the largest market share cannot control artists. For those of you who feel Apple has the power to make or break content, or exert control of speech, you need look no further than rock legend, partner in the private equity firm with a large stake in Palm, owner of the only of eponymous iPod and current Blackberry shill:

U2 was able to use Apple to sell its music and when a higher bidder came along they went elsewhere. I am sure Steve Jobs is not happy about it, but so far, U2 is not sitting hungry in the street - and this all occurred in a market where Apple does have a majority share – of a market segment. While Apple has 69% of the digital music market sales, this percentage represents only 25% of the overall market http://www.businessinsider.com/itunes-now-25-of-all-music-sold-2009-8. Sure it’s a large number, but is less than a third of the CD market which continues to hold 65% of overall sales, and not enough to “control” significant player.

But the most recent arguments don’t stem from a dominant position in the music market, they come from a place where Apple is a growing, hip device, but still merely a bit flashy bit player. Anticompetitive behavior is actionable when a company has significant market power and Apple just doesn’t have it. People may think it does, because the company’s ability to secure press belies their market share. Their 13.3% share of the smartphone market is growing but still significantly smaller than to Nokia's 45% and smaller than RIM at 18%. It is really tough to leverage 13% market share all contained on a single carrier in each territory against all others in an anticompetitive manner. This is probably why the blogs did not start with anticompetitive accusations. It only got there after all the facts were stripped from the story.

The torch was lit when Apple rejected the Google Voice app. Michael Arrington posted why the lack of google voice caused him to drop the iphone. Arrington's meticulously researched blog is a fantastic resource for anyone interested in tech startups or businesses in general, so his posts often pique readers' interest. Some accused him of shilling for google based on their unique provision of voice portability, but Arrington disclosed his access in the first post. He described the feature set and really had nothing else to say about Apple than he chose a competitive product more suited to his needs. The coverage should have stopped there. Arrington didn’t like the product, he had other options, and he took one. But the coverage didn't stop there. Popular gadget blog Gizmodo (when do so many professional journalists work on a blog that it is no longer a blog?) used the post to plant the meme that Apple's App review process is "inexcusable, and. . . not going to work in the long term." In non-sequitur worthy of Fox News, they leveraged "this product does not offer the applications I need, so it loses my support and I am choosing another," into "this single application highlights the shortcomings of a closed ecosystem." This turn in the discussion led to debate over the long-term viability of Apple’s closed system and how the closed system is, by its nature, evil.

Arrington's sometimes partner, gadfly and founder of Mahalo (the human edited search engine populated by content hand selected by its employees, or “closed system”) went the "your mother's a whore route." Stories like this circulate around Jobs and show up in books all the time, but the sucker for Apple that I am, I clicked through to find a link to a post by Jason Calacanis. Calacanis is a master
attention getter and he certainly did it with this poorly crafted argument, but he is smart enough to write intelligently - and should have. Shockingly, or not, he was surprised to find "the 10 percent [of respondents] who are 'fan boys' are attacking me personally in a vicious fashion. Luckily their mothers won't let them leave the basement to come to my house to egg my Tesla" when he initiated personal attacks when he said "Steve Jobs is on the cusp of devolving from the visionary radical we all love to a sad, old hypocrite and control freak–a sellout of epic proportions" and "Steve Jobs gets a pass because we are all enabling him to be a jerk. We buy the products and we say nothing when our rights are stripped away." What Calacanis does to his Tesla in the privacy of his own home is not really my concern, but if he wants Mac addicts to leave him alone, he should not swing the ball on the Newton's Cradle.

Even stripping away the personal attacks and vitriol, Calacanis' arguments fall flat. He took Arrington’s argument and expanded from “I am no longer going to use this product and the company’s closed system will cause it to lose customers” to “the company’s closed system is anticompetitive.” His talk of anticompetitive behavior and monopolistic practices have the credibility of Hilary Clinton's citation of right wing conspiracies targeting Bill Clinton when confronted with the Lewinsky allegations. Unfortunately, Calacanis’ equation of closed and anticompetitive received wide coverage, when in fact, the two concepts are, in this case, not at all related. If he really wants to understand anticompetitive behavior, he should take a look at Google, the company he is supporting.

At the beginning of the year Google had a 76% market share of on line ads. If you were not on adsense, you did not make money and could not sell ads. According to Google:

All publishers are reviewed for policy compliance when they submit their application. Also, we actively monitor sites in Google AdSense to check for continued compliance with our policies. If we find sites that do not comply with our policies or Terms and Conditions, we will suspend or terminate the accounts. In some cases, payment for clicks may be refused.

One of these policies provides:

Competitive Ads and Services
In order to prevent user confusion, publishers may not display Google ads or search boxes on websites that also contain other ads or services formatted to use the same layout and colours as the Google ads or search boxes on that site. Although you may sell ads directly on your site, it is your responsibility to ensure that these ads cannot be confused with Google ads.

Another provides:

Content Guidelines Publishers may not place AdSense code on pages with content that violates any of our content guidelines. Some examples include content that is adult, violent or advocating racial intolerance.

In other words, Google has significant market power in its core market, and they are using to make no one else gets a foothold. Where you have a choice among Apple products and alternatives, Google cuts off anyone who supports a competitor.

But the “big bad Apple” argument didn’t stop there. Calacanis' piece was validated by Douglas Rushkoff, a guy whose opinion I've respected since he wrote Media Virus which is every bit as relevant today as it was at its release 13 years ago. The Rushkoff piece springboards from the Calacanis article into a world of irony housed in a room of fun house mirrors. Rushkoff uses the anticompetitive argument for a solid "I told you so." "Not only are they anticompetitive today, but they've always been anticompetitive. You guys just were not smart enough to see it."

Jason Calacanis, Web entrepreneur and a longtime Macintosh devotee, this week joined a virtual posse of prominent Internet leaders who now believe Steve Jobs has turned his back on the original promise of Apple to promote creativity and sharing over conformity and restriction.

Jobs never said this. He certainly supports creativity and created environments at both Apple and Pixar which celebrate the creatives over the suits, but Jobs never said anything about being sharing. His greatest skill is identifying talent and getting the best out of them. Not sharing. Apple only looked kind and gentle when Microsoft was its foil.

The funny thing about the argument from Rushkoff, the proponent of free bits and opponent of online abuse is, again, the use of Google Voice as support. An app which gives Google more access than the US Government to your personal data which when combined with your searches, gmail, google desktop and igoogle accounts gives google a better profile of you than the one enjoyed by your spouse. Sure, transcribing your email is nice for you, but don't kid yourself, it is better for Google. Transcribed email can be indexed and becomes searchable and may be cross referenced against the other data, all of which is subject to disclosure. When this kind of access was held by the US Government, the ACLU, and others, went nuts. http://www.pcworld.com/article/17818/does_carnivore_eat_privacy_rights.html

"Carnivore gives the FBI access to all traffic over the ISP's network, not just the communications to or from a particular target," said Barry Steinhardt, associate director of the ACLU. "Carnivore, which is capable of analyzing millions of messages per second, purportedly retains only the messages of the specified target, although this process takes place without scrutiny of either the ISP or a court."

But don’t worry Google says they will do no evil, so there is nothing to be concerned about. Besides, they are completely separate from the government, unless of course this bill goes through:

Probably the most controversial language begins in Section 201, which permits the president to "direct the national response to the cyber threat" if necessary for "the national defense and security." The White House is supposed to engage in "periodic mapping" of private networks deemed to be critical, and those companies "shall share" requested information with the federal government. ("Cyber" is defined as anything having to do with the Internet, telecommunications, computers, or computer networks.)

Getting back to the point. . . . .

Rushkoff hammers the closed argument home.

Still, a walled garden is hardly the image that a technology company wants to have in an age characterized by networking and collaboration. And the products that emerge from a walled garden are more luxury goods than they are suitable for the participation in open platforms. As the Net becomes more about cloud computing, customization, and sharing, the Apple-only solutions will start to become more limiting in ways that people can feel.

If Apple is going to fall victim to its own closed market, why do all these people care? Let it wither and die. But they are writing, because it won’t. Apple’s continued success defies their understanding and upsets the certainties established over the last generation of technology expansion. It makes them uncomfortable, they know AOL died because it was closed and the Web is alive because it was open, but the audience is changing. The world is not so black and white and AOL closed is not the same flavor as Apple’s semi permeable closed. AOL closed meant only content paid for by AOL appeared. Apple closed means the world creates, Apple chooses, and pays for nothing.

We are hearing voices from the generation who watched Apple go from 90 percent market share to 2 at the hands of Microsoft’s “open” system. But this market developed in a very well defined universe of educated business application consumers and computer enthusiasts. The percentage of consumers who would crack open their PC and add hardware was much higher during this period, than it is today. People who owned computers knew what they were doing and they knew what they were buying and installing. When I purchased my first computer in 1978, expandability, compatibility, chip speed and a host of other things were very important in making the decision. The computer was a hobbyist device. People who
bought them opened them up, noodled around and replaced things. Most people wrote at least a bit of code as well. Today, web enabled devices are mainstream products. The consumer does not care about any of those things I did. They want to know what they can do, and whether it will work. That’s all. If I am an expert user, I’ll go to Linux. I can expand it, I can see source, I can talk to a whole community of developers. But if I am a simple consumer, the risks of the open system cause it to pale in comparison to the supervised, walled garden approach of Apple. When we see the mass move into a market, they do not care about things like market expansion they just want something that works. Unfortunately, in a completely open market, that is not what they get. People who know more take advantage of people who know less.

Everyone you ask will tell you they tried a facebook app and accidentally spammed their whole friends list – open platform. Have you ever heard this from someone with an iPhone? Anyone who tries to install a game on a PC will tell you nightmarish tales of driver conflicts and application errors – open system. In the game business, we saw the entire industry collapse around our ankles under the weight of crap games sold to consumers who felt abused – open system - and then rebuilt when Nintendo built its walled garden.

The phenomenon is not unique to technology, Joseph Stiglitz has been trying to get people to understand the impact on the economy for years:

Stiglitz is perhaps best known for his unrelenting assault on an idea that has dominated the global landscape since Ronald Reagan: that markets work well on their own and governments should stay out of the way. Since the days of Adam Smith, classical economic theory has held that free markets are always efficient, with rare exceptions. Stiglitz is the leader of a school of economics that, for the past 30 years, has developed complex mathematical models to disprove that idea. The subprime-mortgage disaster was almost tailor-made evidence that financial markets often fail without rigorous government supervision, Stiglitz and his allies say. The work that won Stiglitz the Nobel in 2001 showed how "imperfect" information that is unequally shared by participants in a transaction can make markets go haywire, giving unfair advantage to one party. The subprime scandal was all about people who knew a lot—like mortgage lenders and Wall Street derivatives traders—exploiting people who had less information, like global investors who bought up subprime- mortgage-backed securities. As Stiglitz puts it: "Globalization opened up opportunities to find new people to exploit their ignorance. And we found them. . . . .

Stiglitz has warned for years that pro-market zeal would cause a global financial meltdown very much like the one that gripped the world last year. In the early '90s, as a member of Clinton's Council of Economic Advisers, Stiglitz argued (unsuccessfully) against opening up capital flows too rapidly to developing countries, saying those markets weren't ready to handle "hot money" from Wall Street. Later in the decade, he spoke out (without results) against repealing the Glass-Steagall Act, which regulated financial institutions and separated commercial from investment banking. Since at least 1990, Stiglitz has talked about the risks of securitizing mortgages, questioning whether markets and authorities would grow careless "about the importance of screening loan applicants." Malaysian economist Andrew Sheng says, "I think Stiglitz is the nearest thing there is to Keynes in this crisis."

The networked world Rushkoff describes is a complex, interrelated ecosystem, much like the economy as a whole. Like the economy, it is a collection of safe and not so safe subsystems interlocking into a worldwide network. Like the world economy, advantage is gained by exploiting inefficiencies. In the financial world, exploiting inefficiencies in information or timing – arbitrage – leads to great wealth. The same can be said in technology. Ev Williams hit it big twice by making it easier first to blog, then to send a short message. But as the systems grow, so does the opportunity for exploitation in a bad way and consumers end up with applications that don’t do what they purport to do. You can watch the migration of applications from useful innovation, to market glut to crap. The uncertainty leads consumers to look for security. Safe, predictable havens are imperative, and prove to be more important than feature set and functionality. Based on the perceived stability of the government and sustained growth of its economy, the US Dollar has been the world currency for many years. As uncertainty arises from key lenders like China, the role as world currency is coming into question. In our smaller much more easily defined world of technology safe havens will prevail over scary wide open spaces.

Jobs drives Apple as a consumer products company - remember when he changed the name to remove "computer" - and he sees the need to guaranty the experience. We turn on a television, toaster and microwave. We don’t boot them up. While the world may accept an occasional – or not so occasional - blue screen and even apologize for shortcomings of their beloved Apple products, they would not accept it from their toaster. Closed is the only way to ensure your computer or phone is as stable as your toaster.

Once stability is ensured, they can enable it do things. Apple sells consumers the ability to do things, not devices. The phrase “There’s an app for that” has become a mainstream joke, but that is exactly the point. When was the last time Dell or Microsoft coined a catch phrase? Just look at the iPhone ads relative to the ads for the Palm Pre. The Pre may in fact be a better device with a more advanced operating system. But if my viewing of Real Housewives of New Jersey is interrupted to look at a new phone what do you think I crave? "You can find a restaurant in your neighborhood, get directions and your friend can still call" or "The Pre has a unique web based operating system that allows you to perform multiple tasks simultaneously." Or worse yet, you show me this one:

that looks a bit too much like this one:

Huh? Please stop. Just give me the one that tells me where to go to dinner and lets me play the driving game with the caveman. If a company builds its brand on the ability to do things, the consumers who buy their products must be able to do them. They have to make sure the applications do what they purport to do and do not threaten other applications and for g-d’s sake, don’t open the hardware.

Like many things undertaken by Apple, the strategy is not for everyone. The beauty of the garden is in the eyes of the beholder. If like Mr. Arrington, the beholder finds no beauty, they will go elsewhere. To a certain extent, we rely on Uncle Steve to give us what we want, even when we don’t know we want it:

The nature of the personal computer is simply not fully understood by companies like Apple (or anyone else for that matter). Apple makes the arrogant assumption of thinking that it knows what you want and need. It, unfortunately, leaves the “why” out of the equation — as in “why would I want this?” The Macintosh uses an experimental pointing device called a ‘mouse’. There is no evidence that people want to use these things. I dont want one of these new fangled devices.

John C. Dvorak, San Francisco Examiner, 19 Feb. 1984

Contrary to Mr. Calacanis’ opinion, Jobs is not a dictator. We elected him with our dollars and put him up for confidence votes regularly. If he doesn’t listen, we can vote him. We’ve done it before. Throughout the nineties, with no Uncle Steve and no network of developers, Apple suffered. And even though Uncle Steve is not always right – the Cube launch – at least Uncle Steve 2.0 reacts quickly – the Cube death. He reacts to the market. When it comes to the iTunes and the app store, Uncle Steve is more Frederick Law Olmstead to New York’s Central Park, than Michelangelo to the Sistine Chapel. He built a garden and invited the world to plant seeds. Like Central Park the form is established but the content will change. Also like Central Park, some content just doesn’t fit and has to be rejected or pruned. So far, it seems Jobs is the guy to do it.
Jobs 2.0’s decisions are driven by long-term concerns over viability and stability of the platform. Do you think it was easy for him to allow an investment from Microsoft when he got back to the company http://www.youtube.com/watch?v=WxOp5mBY9IY? It was an important decision that supported the continued relevance of the platform. Do you really need more proof?

So, here is the dirty little secret. It’s not Rushkoff’s disclosure that Apple is really evil, it is Apple is out to make a profit. At the present time, a walled garden is the best thing for the company. It will continue to operate in the best interest of its consumers, and its long-term viability. If there is conflict between the two, it will favor the company. Some of these decisions may include keeping competitive products off the platform for purely competitive or strategic reasons, but right now and fortunately, consumers have alternatives. If Apple goes too far, it could be 1992 all over again. I won't wait for the thank you card to the game industry for telling them what to do.

Greatest Game Marketing Piece EVER: And it Wasn't Us Edition

noreply@blogger.com (Keith) — Wed, 19 Aug 2009 00:52:00 +0000

The New York Times is the official newspaper of record of the United States. If I knew how to make an underline in blogger you would see this by the underline under the name The New York Times. In the second grade I learned it is the only newspaper title I am supposed to underline in a sentence. This past Sunday the Magazine's cover story was about The Beatles: Rock Band, and it was the greatest game coverage I have ever seen. For the first time, not a single one of the thousand words disparaged gamers, the game's creator was given credit and people like Paul McCartney explained to about 2 million mainstream readers, and a bunch more on line, why they would really like the game.

The article also explained how the game is actually contributing to the music business and consumers were willing to pay twice as much for the twice as many copies of Motley Crue's latest release - "twice" is of course relative and not absolute. All in all, a game with mainstream appeal, was promoted by a mainstream publication, to the mainstream. What a concept.

This is so obviously powerful, it may cause a collective head scratch with us all wondering why EA and/or Activision didn't do this before. Well, they didn't do it now. The closest the article comes to even mentioning the name of either company is:

The first Guitar Hero game came out in 2005. Two years later, Harmonix, now owned by MTV, introduced Rock Band. Together, Guitar Hero and Rock Band (now rival franchises owned by competing companies) have altered the way fans relate to music.

While I am confident MTV is not too happy with the erroneous reference regarding ownership, I am sure they are quite happy with the coverage, as they should be. They jumped into our business through acquisition of Harmonix and are now teaching us how to sell our product. We may be able to hold on to the core, but they are quickly and not quietly about to grab the rest of the world.

Games Sales Are Down: Pointing Out the Elephant in the Room Edition

noreply@blogger.com (Keith) — Tue, 18 Aug 2009 23:48:00 +0000

In America we have a great tradition of putting things on a high enough pedestal to cause serious damage when we knock them off. We build everyone from politicians to athletes into heroes and then celebrate the inevitable indiscretion with excessive coverage in our 24 hour news cycle. Celebrities are followed and pestered until they slip and the media highlights box office failure more readily than the hits. As an industry, we enjoyed the ride to the top, so I guess we must hold on for the ride back down.

For the past year the media trumpeted the video game business as the only thriving business during the world wide recession. We were the lucky ones, people still wanted to play games and we were the beneficiaries. No one seemed to mention the publishers were all still suffering losses associated with the console shift and games were late, the focused on aggregate numbers. Lucky us. But then, last week, we learned misery loves company. The coverage shifted to the fall of the industry and the decline in year to year sales. Analysts lamented the decline was worse than anticipated and the main stream media started to talk about the fall of the sole survivor of the recession. I got calls from friends outside the business asking me if I was alright. Fortunately, I've never been better. If we take a quick look at the real reason for the decline, we may find a bit of comfort, but we should not get too complacent.

The bulk of the sales for most games occurs in the quarter of release, so to get a handle on what was sold we have to look beyond the numbers. Q2 last year was riddled with blockbusters, this year - nothing. Imagine if next year Hollywood decides the summer in Oscar season and the pundits decide to compare the summer films to this year's. How do you think The Reader and Slumdog Millionaire will compare to Transformers and Harry Potter? Not so good.

Q2 2008's releases included:

Metal Gear 4
Ninja Gaidan II
Grand Theft IV
Mario Kart
Guitar Hero On Tour
Battlefield Bad Company
Rock Band Wii

These are some of the most highly anticipated games of the console cycle, let alone the year. Now, let's take a look at this year:

2009

EA Sports Active
UFC 2009 Undisputed
Red Faction: Guerilla
Prototype
Tiger Woods PGA Tour 10
Infamous
Ghostbusters: The Video Game
Punch Out
Fuel
Virtua Tennis

Other than Tiger Woods, do you see anything you care about? Anything you ever heard of? Anything worth mentioning in the same breadth as the prior year? Sure there are some good games in there, but is there anything that would get a gamer off his ass and into the store? It may look like publishers just don't care, but they do - about the fourth quarter - and that's unfortunate.

This year, we will see:

Guitar Hero 5
The Beatles: Rock Band
Halo 3: ODST
Need for Speed Shift
Ninja Gaidan Sigma 2
Battlefield 1943
Star Wars Clone Wars
Uncharted 2
DJ Hero
SOCOM
Call of Duty Modern Warfare 2
Assassins Creed 2
Left 4 Dead 2
Tekken 6

The list is only limited by the titles like Bioshock 2, which slipped and my getting tired of looking for more. The point is, the publishers are sandbagging. They are holding back the best titles for the fourth quarter so they may dive full force into the blood bath. The decision comes either from the confidence of believing their title is better than everyone else's, or the stupidity of believing their title will sell better than everyone else's. With the exception of the Beatles which will find a large segment of its audience in the mainstream, every one of these titles will do better if released at some other point in the year, but it really doesn't matter. That part probably won't change, but what could change, what should change, is the lack of any titles at all throughout the year.

This quarter is the first time we really felt the impact of the cost increases associated with shift to 360 and PS3. The pain incurred two years ago led to the wide open spaces we see today between releases. They focused their releases on the quarter where the money is made, not realizing the money is made in the quarter with the best games. No good games means no revenue. Rather than spreading out releases to create more revenue and more even cash flow, the issue is being exacerbated by continuing to focus on the fourth quarter where the market is simply too crowded for most titles to find the requisite success. How do you think Badlands is going to do next to the next installment of Battlefield, Tekken or Left 4 Dead? Is it really OK to release a new franchise in the fourth quarter against every sequel known to man?

Moreover, many publishers are looking at empty years in 2010 and 2011 and scrambling to fill them - - - with Wii product. This would be an appropriate reaction if we were building our 2008 slate. Unfortunately, this year we are building for 2010, 11 and 12. At that time, the console prices will have fallen further, the market will be larger and the mainstream will be buying titles. If we don't acknowledge this reality today, it will be us instead of the mainstream media talking about the decline of the game business.

Metacritic: But There Really is a Difference Edition

noreply@blogger.com (Keith) — Thu, 30 Jul 2009 23:06:00 +0000

I saw an article about Funny People, the Adam Sandler, Seth Rogan film opening this weekend and this line caught my eye (I added the emphasis)

The film, which has a respectable 62 score on Metacritic.com, arrives a week after another R-rated comedy, Sony’s poorly reviewed “The Ugly Truth,” opened to a surprising $27 million.

Do you think we would hear "respectable," "metacritic" and "62" the same sentence from a publisher or journalist? Then again why would we? The quote comes from Hollywood, Hollywood guys only care about money.

Comic Con: Careful What You Wish For Edition

noreply@blogger.com (Keith) — Wed, 22 Jul 2009 16:35:00 +0000

Every year I start to get calls around this time asking whether I am going to attend comic con. As you may have read in last year's post about the rise and fall of the con, I've been going for over twenty five years and have seen some change. This year I am noticing the change in the people who are calling and I am starting to wonder whether it is a good thing. I used to get calls from artists or comic fans who could not afford to pay the fee. Then I got calls from writers and directors who did not know where to look to get a badge. Now I get calls from game folks, agents, executives, all thinking I can get them a badge to the sold out show. Sure, hold on a second, I'll just lift Shakespeare's head, push the button, and pull one out of my ass, just give me a second to clean it up for you. Let's just stop right here for a second. Sold Out. For years, Pre-Hollywood Takeover, tickets were always unspokenly voluntary. By that I mean you never really had to buy them. We would buy tickets because it supported the Con, but if you didn't and just kept walking, the security guards never stopped you. Because in the PHT days, the Con was inclusive. The concept of fans being turned away from a convention where sales in the tens of thousands of units are celebrated is somewhat wacky.

The more I thought about where the Con is today, the more confused I got. I started to over analyze and tried to reconcile my bitching about opening the game business and E3 to the mainstream with derision of Comic Con for successfully allowing itself to be embraced by the mainstream and leveraging it into the pre eminent pop culture show in the world. It could be I am a geek and feel a need to scream "sell out" if too many people like the thing I like. It could be jealousy for a brilliant expansion of the show into an internationally relevant venue. Or, it could be that the Con, has pimped out its constituency to Hollywood like a bunch of runaway teens on Hollywood Boulevard. When I see James Cameron sitting where Jeff Smith used to be, in front of a full house, I kind of think it is the latter. If you know who Jeff Smith is, you probably agree with me. Hollywood sucked the soul out of the Con and the Con let it happen. I am afraid of what will happen when Hollywood realizes the people who drew them to the Con are no longer there. The new Con attendee has not become a part of the Con, they are simply encapsulating it and sucking out its soul. Any mixing is more like oil and water than milk and ovaltiner We don't have to look any further than the relative coverage to prove my point.

The Hollywood sites, like Nikki Finke's
highlight Robert Zemeckis, James Cameron, Terry Gilliam and a few comic guys. The official Con site highlights Sergio Arogones, Stan Freberg, Jim Lee and Mike Allred.

These Hollywood panels are first come first serve, for attendees who do their best impression of an open seating Springsteen concert at Asbury Park for every panel that promises a film clip or a Mythbuster. But this type of stampeded and multi-hour wait in the San Diego sun would not be appropriate for a very busy agent/producer/entertainment attorney/headphone wearing publicist type who doesn't really know what happens on the first floor of the con, so they are escorted into the front of the room just prior to the panel.

The Con started as a place where comic vendors got together to exchange books with each and collectors. It was a bunch of tables around a room. The smarter artists and publishers started to attend so they could talk about their craft and promote their books. The only movie star in attendance was Leonardo Dicaprio - he was not a star yet, his dad was a vendor. As the Con grew it turned into a place where creators shared their craft and advanced the medium, new talent could meet editors and creators with hopes of breaking in, and fans could listen to their favorite authors and artists talk about their craft. They also had the chance to dress in costumes, attend midnight showings of cult movies and debate the merits of various incarnations of The Green Lantern. Exactly ten years ago, PHT, I was consulting to Universal for the film Mystery Men. When, I suggested they promote the film at the Con they looked at me like I had three heads and two of them were speaking Chinese - and not even common dialects. They told me the Con's attendance was small and the people who were there were just a bunch of smelly, costumed, geeks. Yeah, so? Silly me, why would I think the Con was a place to promote a film based on an obscure cult COMIC BOOK? In the end, with a bunch of prodding from Lloyd Levin, they producer, they parked the Herkemer in the corner of the show. The fans loved it. These were the pre-blog and pre Spiderman days and the voice of geeks did not really permeate mainstream culture. When Spiderman hit, all the Hollywoodies had to get them some of those comic thingees. At the same time, the blogs started to promote the things the Hollywoodies looked at and talked about beyond the four walls of the con. It appears that in the eyes of the Con, standing in the corner wearing their "I heart chess club" t shirts, the captain of the cheerleading squad not only asked them on a date, but took them for special time under the bleachers. In the blink of an eye, the organizers forgot the witty, smart, simple girl who supported them the best she could for the first 20 years.

The new chick doesn't like the old chick, or the Con's old friends, and so long as the cheerleader pays attention, the Con will listen. The exhibitors can't get the prime rooms for panels anymore, they can't get the badges they used to be able to get for their friends and the fans can't even get tickets. Adding insult to injury, the exhibitors can't even get into the panels to see the people speaking in the rooms they used to fill - and still could. Sure, you may come back and say it is good for the industry, but it isn't. These people are carpet baggers and will care no more about the Con they leave behind than the cheerleader feels about the hollow shell of the geek left behind at some point in every high school around the world. Their presence increases the number of bodies at the show, but it does not advance the industry or promote sales. PHT, at the launch of Image, comics were selling in the millions. Books were cancelled if they sold less than half a million. Today, publishers are happy with sales in the tens of thousands. The Hollywood infiltration has not changed the unit sales or profile of comics. They are simply there to get the fans to promote their films on line. Cameron's speech to four thousand attendees will have a bigger impact on the core audience for Avatar than the marketing campaign. All those bloggers and twitterers will tell their friends, providing strong referrals and first hand accounts of how cool the film is. Cameron's appearance will vest the attendees in the film's success because he took the time to be there.

I may be a bit of an alarmist, but it only comes from love. I remember the late nineties when the Con almost died, so I understand the value of the additional bodies and revenue - this year's sponsorship is Google, Fox, Showtime, Sony Pictures, Warner Brothers, Starz, EA and THQ, no comic companies - in a way, they allowed the Con to survive. But as fans look at a sold out sign and those who attend do not have access to half the show I have to wonder about the expense of survival. Is this really where we wanted to be? They are not our friends, they are only being nice to us because our parents are out of town. Our friends are the people who were there when the Con was down. The ones who bought tickets when you could walk in for free. The guy in the Klingon costume, standing in the hot sun rolling milk crate full of comic books waiting to be signed by his favorite artist. If the rumored move to Los Angeles happens in 2012 , I wonder if they will take us with them.

Bragging Again: Achievement Point Edition

noreply@blogger.com (Keith) — Fri, 10 Jul 2009 14:39:00 +0000

This morning my trusted iPod and its little Nike + friend let me know I passed the 5,000 mile mark. If I ran in a straight line, I would be in South America, The Arctic or very wet.

American Independence Day: Redux Edition

noreply@blogger.com (Keith) — Fri, 03 Jul 2009 00:18:00 +0000

As we move into the Independence Day weekend here in America, I felt it was worthwhile to point back to last year's post about a small corner of what our fore fathers fought for.

Hollywood in Games 2.0: They're Baaaaack Edition

noreply@blogger.com (Keith) — Thu, 02 Jul 2009 18:27:00 +0000

It's been a while since my last game related post. Every time I sat down to write something it felt like groundhog day. Another developer shut down, take a look at these. Governor Schwarzennegger is trying to get the Supreme Court to review his video game bill even though his movies are worse than the game he is trying to block, look here. It just felt like I had written all the way through the news cycle and I would just be re writing myself in a new flavor. Then I saw this article in the LA Times http://www.latimes.com/business/la-fi-ct-games-moguls1-2009jun01,0,4429125,full.story around E3 and it led me to like it was 1993 all over again:

THE HOT TICKET two weeks ago was to Francis Ford Coppola's hacienda in Napa. Fred Fuchs, head of Coppola's American Zoetrope, pulled 50 people to the 1,600 -acre estate for a weekend summit on multimedia, complete with five meals and a tour of the vineyard.

After Saturday morning intros, the afternoon was taken up with demos from companies like Virgin Games and Spectrum HoloByte.

"We're interested in getting into this in a big way," Fuchs said. "We met a lot of fantastic people."

The future isn't in licensing and adapting feature films, it's creating new characters and stories for the interactive marketplace. That's what we're interested in. The time has come." — Variety, May 13, 1993.

I remember when this ran the first time ("I've actually used it a lot more too"). It was shortly after the launch of The Journeyman Project, the first photo realistic CD ROM game and a few months before Myst. The handful of people involved in building the games were able to create photo realistic cg on home computers and stitch it together into an interactive story. The increased memory capacity and graphic capabilities open the door for story to carry enhanced significance in games. Since stories are what Hollywood does, I was sure entry into the game business was going to put my clients out of business. Especially when I saw things like Strauss Zelnick leaving Fox to run Crystal Dynamics, a game publisher, and Time Warner, Fox and Viacom all launching game divisions. I called Michel Kripalani, founder of Presto Studios, creator of Journeyman, and asked how he was going to survive. He told me not to worry, they didn't know what they were doing. He was right. Presto outlasted all of them.

Fast forward to 2009 and we are enjoying the same flurry of announcements. Once again the financial model and significant advance in technology are getting Hollywood excited. Paramount and Universal announced re entry into the business, Warner is well into a re launch of interactive and Fox is making rumblings suggesting a move beyond simple licensing. The parallels do not end there. While it is not Francis Ford Coppola this time, new announcements are being made by Gore Verbinski, Jerry Bruckheimer and Legendary Pictures, among others, regarding their involvement in development and production. My suggestion of a parallel is not to say these efforts are doomed to failure. Quite the contrary. I am hoping lessons learned from the past, advances in technology and a new breed of Hollywoody take the industry to new heights.

Part of the failure last time was attributable to their conviction to ignore everything we were doing as an industry. They jammed Hollywood budgets and sensibility into the traditional game business. I've been told Time Warner Interactive spent over two million dollars on their mildly intriguing puzzler, Endorfun , an amount which probably would have covered the aggregate budgets of the top 10 games which included classics like Twisted Metal, Earthworm Jim and Full Throttle – an noticeably not 9: The Last Resort, produced by Robert De Niro’s Tribeca Interactive and starring Jim Belushi.

But they were not alone. Game publishers were just as much to blame. Virgin reached for the brass ring with Toonstruck, starring Christopher Lloyd, and I don’t even want to mention the equity and salary numbers circulating about Activision’s payments to Bruce Willis on Armageddon. Until this console generation, games were limited to single hooks and there was just not much room for story. The original GTA, released just after this wave was an isometric driving and car stealing kind of thing. The GTA we know today would have been at least four games at the time. Even Halo would have been a shooter and a driver in separate games. Storage and hardware advances not only allowed, but called for consolidation of genres. Publishers soon realized the stories were time consuming, expensive and the public just didn’t care. They were right, but the “public” was included enough consumers to generate a profit on PS2 budgets. It doesn't anymore. Moreover, we don't have the "we can't do that" excuse anymore.

I was confident we are headed for a wall again. Silly Hollywood, don’t you guys ever learn? But since I started writing this post a few weeks ago, I reconsidered an fundamental belief. I always argued games were not bigger than film, we just cheat when we talk about the numbers. We sell fewer units at 5 times the price. Well, I thought about it and did the math, and we really don’t charge more. Anyone who has recently taken a family to the movies knows, you can’t get through the experience for less than the USD 60 cost of a game. If you don’t take the kids and you add up baby sitter, gas, popcorn, etc, you are looking at more. I started thinking about and realized, Paramount and Michael Bay just got twenty million people to leave their homes, pay 50 to 100 USD and walk away with nothing more than an experience. We, on the other hand, will do cartwheels if we get 2 million people to spend 60 USD over the life of a game. What are they doing that we are not and how can we grab some of it?

The film business approach to launching a franchise is not exactly rocket science. They make the product and then they make sure everyone on the planet knows the product is out. Sure there is increased focus on a target demographic, but it doesn’t come at the expense of a network television ad, or talk show appearance. The point is, unlike the game business they don’t expect the audience to find it and tell their friends.

Let's take a quick look at the product part. We don’t make products 40 million people will really care about. People like Raph Koster explain it better, but I just want to hit on it for a second. When compared to film, games just are not accessible to masses. Admittedly, film has had 100 years to develop the language it shares with the audience. As I’ve heard Ed del Castillo say a hundred times, game makers completely ignore the common language of story telling and ask the audience to learn a new language. When was the last time you went to a film with a 45 minute tutorial level? In case this is not enough of a barrier, we put a foreign object in their hands and expect them to play the kind of pretend they did when they were a kid –“Ok, the joystick is a gun, now it’s a steering wheel, now it’s a fishing rod, yeah, the buttons do different things on every level and sometimes you move the whole thing, but not always” - figure out how to establish a connection to pixels on screen, and move it through an unfamiliar environment. It is kind of liking going to a movie theater and being handed a blue book so you can do a bit of non-Euclidian geometry to see a bit of story. If your answer is wrong, you have to go back to the beginning of the film. Oh yeah, and once you the story plays, it is in Esparanto with Klingon subtitles. The rabid Klingon speaking fans will love it and tell all their friends, but how many of them out there.

Accessibility can be addressed through technology, but so far, we largely ignored it. Rather than incorporating more intuitive controls or compelling characters, most games use technological advances for better graphics and explosions. Like the transition from VCRs to TiVos, the Wii mote showed us how audiences expand when technology becomes transparent. Nintendo took the first step by replacing he foreign thing with a remote control pointer -door open – but with the significant exception of Wii Sports, no one took the second step and made intuitive games – the room is still dark. Should we be surprised the tie ratio sucks and the only mass games people are playing are Wii Sports and Wii Fit? There is hope with looming introductions of Sony’s motion controller and Microsoft’s Natal, but the hope must be met with supporting software.

I am confident game designers will use their experience to create compelling designs for the new controllers. I am not so confident about the story side. A game hook is great for a few hours, but how long is a cover button going to hold on to the mainstream if they don’t care about the guy ducking or where he is going? We even see this in the core. The games with the most longevity, Halo, Gears of War and Call of Duty, are kept alive through multiplayer, which is really just a fancy way of saying people make up new stories for each other. I am not going all Wii Fit only on you, but I am also saying deep combos on a fungible burly guy who swears while he blows shit up is not going to hold a consumers attention. Broken down analytically, those games are really not a lot different than playing GI Joes in your backyard. Rather than a tool, game hooks developed into a crutch to get the core gamer to stick with the game. If we want to get the other ninety percent of the Dark Knight audience to buy a game, we need to tell them a story. They’ve been doing it successfully in Hollywood for years.

The good news about the new entrants is they played games long enough to know they can’t make them. This comes across in the Verbinski sidebar interview, but also in the staffing of the new entities. Rather than getting the guy who did web shit, mobile, or plays a lot of games, the companies are staffing themselves with pedigreed game builders. It sounds kind of obvious, but it is not what happened the first time around {brain surgeon cite]. At the same time, game technology advanced to a point where there really is something they can do. Sure, facial motion capture still has not gotten to the point where characters can convey emotion – thank Polar Express and Beowulf for teaching us that in film before it got to games – but there is a ton of stuff we can learn about story development, blocking, on screen composition, camera placement and even dialogue. Give us a character we care about and have him or her do something we understand. I wrote a lot more about the role of writers, here.

You may think this is an unfair characterization and obscures reality in light of multimillion selling games, but multi million is not mass. Talk to me when we hit Daredevil numbers, not even Dark Knight. Sure we have a loyal audience, but so do the single camera black and white shaky camera one legged pregnant lesbian with cancer films. Our budgets must be commensurate with our appeal. Twenty million people went to see Transformers 2 over the first five days of its release, and tens of millions more will see the film over its life. Seventy thousand people went to see Whatever It Takes, the new Woody Allen film starring Larry David. Both will generate profit, but their budgets were dramatically different. We can and should keep making games for the core gamer, but we must also be children of reality and accept the limitations of the audience size. Hit games are selling in the three to five million unit range and top selling games are selling in the 12 to 15 million unit range, these are pretty consistent numbers. We can continue to fight to be the few titles selling in this range, or we can do something to push more titles into this range and a handful into the rarified air. Wouldn’t it be great if we kept making these, but also doubled or tripled the sales volume of the breakouts? We can get a long way down the road just by doing a better job of telling people what it is we do. This is where marketing comes in.

I've addressed marketing before, and this post actually stands on it's own, but I didn't want to make you look somewhere else, and there are some new thoughts.

Games are luxury goods but we pretend our consumers can’t live without them. We are the most expensive piece of media consumed by a family. We expect them to research them in game magazines and find them on store shelves. No one really needs one and when the economy gets tight, consumers cut back on their entertainment spending. We are priced near the top of the category, but we compete head to head for consumer time and dollars with film, television, amusement parks, music and a ton of other stuff, but you would never know it from our marketing. With the significant exception of Actard, we just don’t tell people our product is on the shelf and when someone tells us how to do it, we don’t care. Robin Kaminsky stood up at in front of industry leaders and told us in painstaking detail, how and why they were successful with the launch of Call of Duty Modern Warfare. She displayed their research results as well as the plan. She also talked about what didn’t work. In case enough people didn’t see it, she let the DICE folks post it online. Then, to make sure everyone noticed, they implemented the strategy to launch Guitar Hero: World Tour and outsold Rock Band by a wide margin. But even Actard fails to apply its strategy across the board. While Actard, is spending coop with Wal-Mart to tag network television spots, the rest of the business is fighting the cold war in Gamestop to get one more standee or games displayed behind the counter.

Greg Furman, the founder and head of the Luxury Council says:

[Consumers are] More value driven. Meaning they have to better understand the equation of price and value. More interested in experience. More interested in telling a story about what constitutes the best of the best or a great or unique experience.

The statement can easily explain why Monsters and Aliens was one of the best performing films of the year, was also one of the worst performing games. The Wal-Mart/Target/Best Buy buyer understood what they were getting for the 60 USD expenditure for the family to go to they film, but with Actard saving their marketing mojo for their company owned titles, consumers did not know what was in the game box. Most of my peers in the business will passionately argue the richness of a game experience, the immersion, the focus required, the addictive nature and the imprinting of brands in the game, but no one hears about it when the game is sitting, locked behind glass in a cabinet at the back of Wal-Mart. Even if I look at a comparably priced box containing season 1 of Bewitched, I know what it is. Consumers are forced to investigate on their own and convince themselves the experience is worth their dollars. Coming home from lunch today I saw this billboard. If you were not enough of a gamer to read this blog, would you know what it is. I am a gamer and I barely know what it is. Put Megan Fox on a billboard and I know what I am getting for USD 10.
Put this on a billboard and unless I am a Tekken fan, I don’t even know how to get it or whether I want it. If I am a Tekken fan, you could have sent me an email and it would have been cheaper.

Studios promote the hell out of a movie to tell the world it is coming out and show you why you will like it. If a film is not tracking well and it looks like it will not open well, they market it even more. Nine out of ten people on the street can tell you the names of this summer’s blockbuster film releases as well as the the lead actor. How many can tell you Prototype or Red Faction were released last month – or even what they are. We can argue studios spend more money on marketing because more people attend the films, but maybe more people attend the films because they spend more money on marketing. What would happen if more people knew about games? Moreover, the studios don’t just spend dollars. They get a ton of marketing for free.

The Actor/Writer

Let’s dispel another core publisher belief. “’A’ list actors and writers have no value in games.” Most people agree good voice actors make a game better, but few will tell you it is worth paying the premium to put “A” list talent in a game. They are right. Brad Pitt will not make your game better or any more fun to play, and it will certainly not move units of a bad game. But, his presence will let a ton more people know the game is on the shelf than any other game has done to date. He will do nothing for you on the production side, but a hell of a lot in marketing.

When I was at ICM I placed one of the most successful film writers in history on a game with a major publisher. His fee was a fraction of what he received for writing the first draft of a script and was less than the publishers’ annual window washing bill for one building. The game was a success and the writer loved the experience, but he was not invited back for the sequel. When I spoke with the publisher, they told me:

“we are trying to quantify his contribution”
“But he did interviews with Newsweek, Entertainment Weekly, Entertainment Tonight”
“I know”
“You guys never got that coverage before. It’s worth millions”
“It is, but it doesn’t come from my budget, so I don’t care.”

Studios cast actors who they believe the consumers want to see on screen as well as in the media. Actors do press junkets, talk shows and media to promote their films. Consumers know the film is in theaters because they saw the lead actor on talk shows read about them on blogs and heard it on the radio. Their friends are sending pictures on facebook and booking tickets together. None of these outlets will interview Will Wright at the launch of The Sims, Alex Rigopoulos at the launch of Rock Band or whoever it is that is in charge of Call of Duty, but dress Sasha Barron Cohen in a body suit with a knit floppy pecker, and Bruno is instantly promoted to tens of millions of people around the world. Once the consumer goes to the store because they saw Brad Pitt on TV, they will look in the glass case, see has face, and know a lot more about the game with his face on the cover than Prototype. I know we are used to promoting features to consumers, but we are not selling games in ziplock bags anymore. Features description are great in Gamestop where consumers who are going to a store to buy a game can pick up the game and read the box. Box covers are good to people who walk through Wal-Mart and Best Buy and are choosing between a game and a DVD. It is all about the box art. Publishers agree it is great promotion, because the money for the talent comes out of the production budget and is really only valuable for marketing, it does not get spent.

Finally, we have to think about price. Films got larger as downstream revenue windows developed. Games go larger because technology advanced. Films do not have to get all their dollars at a single release. Games do. There is a strong argument for lowing the price to increase sales volume, but frankly, you’ve read an awful lot to get to this point, and I’m kind of tired, so I’ll save it for another post.

Misquoted Again - Hollywood Style: Bullshit Edition

noreply@blogger.com (Keith) — Fri, 05 Jun 2009 00:16:00 +0000

I started this blog when I was grossly misquoted as announcing a game based on the film "Juno." While it is a great film, there is really not a lot of content lending itself to a game, and I have never represented a property controlled by Fox or anyone involved with the film. I figured the best way to do it was to write my own stuff.

Well, consistent with my new theme of "everything old is new again" the blog is coming full circle. I am returning to the original purpose and providing a platform for correction. If Ashton Kutcher is more powerful than CNN, I must at least be a speed bump relative to the Hollywood Reporter, the most recent proponent of the brutal marriage of free speech and truthiness. Sometimes misquotes are by ommission, some are by commission and in very special cases, like last week when I was quoted in an article of games based on film licenses, they are both. My quote said:

Keith Boesky, a principal at Boesky & Co., says that studios are creating most of their own big games now, both out of a desire to control different incarnations of their franchises and because game publishers are increasingly gunshy about film-based games that aren't proven franchises.

"The biggest problem for Hollywood right now is that publishers aren't nearly as receptive to licenses as they used to be," Boesky says, citing such recent disappointments as "The Chronicles of Riddick: Assault on Dark Athena" and "The Godfather II."

"The only thing a game publisher is really going to want is a film that has two-plus years to release, with a guaranteed release date, with a guaranteed sequel and a guaranteed film marketing budget in excess of $80 million," he adds. "And right now there aren't a lot of those." . . .

"I think the studios are thinking more smartly because they're not looking at games as lunch boxes and T-shirts anymore," Boesky says, citing the hire of such game-industry veterans as John Kavanaugh at Paramount Digital Entertainment and Bill Kispert at Universal Pictures Digital Platforms. "By having people who actually make games involved in the process, they're getting better at how they do it."

The omission happens in the third paragraph and is the more egregious liberty taken with what are presented as my words. But in a rare effort at clarity, I am starting with the first and ignoring the very clear fact the collection of words surrounding my name read like they were assembled by a young child of a far away country using English words for the first time - "more smartly" "getting better at how they do it."

The first paragraph is an act of commission as I NEVER SAID IT. What kind of asshole who makes his living at the nexus of Hollywood and games would continue to work in this market if he believed publishers and consumers do not want to buy games from films? Not this one. I sold more game into film, films into games and developers to make games based on films than anyone in the world. I planted my stake here because I believe it is a good market. When the question was asked, the subject was fresh on my mind because one week earlier I was asked to provide a written response to the claims of a May 18th LA Times Blog Post entitled, "Movies may be booming, but video games based on them are not." I was sent the post and asked for my perspective.

Here is the original post.

A big year at the box office isn't doing much for video games based on them.

As movie studios and media conglomerates get increasingly involved in the video games based on their film and TV properties, some to the point of investing hundreds of millions of their own dollars, April U.S. sales data from the NPD Group provides some sobering news. All five of the most recent video games based on movies have sold poorly or moderately:

"Wanted: Weapons of Fate" is the first video game for high end consoles such as the Xbox 360 and Playstation 3 financed by Universal (in a slightly ironic twist, it was distributed by Warner Bros.). From its March 24 debut to the end of April, "Wanted" sold only 100,000 units, generating less than $6 million in gross sales. While its performance was hurt by production delays that pushed the game nearly four months beyond "Wanted's" DVD launch in December (it never had a chance of coming out with the film's theatrical debut last June), Universal still undoubtedly had higher hopes given that top-tier titles for the 360 and PS3 typically cost more than $20 million to produce before any marketing.

"Hannah Montana: the Movie," which was published by Disney Interactive Studios, a sibling unit to the film studio within the Walt Disney Co., certainly cost less to make. But 65,000 games sold in the first three-plus weeks is a bad sales figure for any budget and evidence that inexpensive video games aimed at girls, traditionally the foundation of Disney Interactive's strategy, aren't consistently hits.

Electronic Arts' first video game based on "The Godfather," released in 2006, sold a solid 4 million units worldwide. But gamers have proved willing to refuse "The Godfather II" (pictured above). It sold a modest but not disastrous 241,000 units out of the gate, giving it gross sales of under $15 million, and received so-so reviews (in part because of how significantly it deviates from the movie's plot). That means Electronic Arts likely won't pour resources into a third "Godfather" game, a decision that would cause the rights to revert back to Paramount.

"The Chronicles of Riddick" is a dead franchise on the big screen. But the game based on Universal's 2004 film is revered by many fans and critics as the best interactive adaptation of a movie. So Atari, which bought the video game sequel after former publisher Vivendi Games merged with Activision, had every reason to be excited about "The Chronicles of Riddick: Assault on Dark Athena," which featured the digital likeness and voice of Vin Diesel in the lead role. Since its March 17 debut, however, gamers have bought only 100,000 copies.

Games based on hit kids' movies are usually as safe a bet as they come. But Activision's adaptation of DreamWorks Animations' "Monsters vs. Aliens" has sold just 161,000 units since it came out on March 27.

(Sales figures don't include the PC versions, though that rarely makes a significant difference.)

In response to the sales question, I wrote (I apologize for the poor grammar and underdeveloped thoughts):

Looking at the movie games you mentioned, Wanted, Riddick and Godfather did not come out with movies. This makes a huge difference. The film game consumer is a completely different consumer than the core gamer. They buy games based on films they like and know the games are on the shelf when the film is out. Remember, Wal Mart is the largest game retailer in the US, and the 110 million per week who walk through the store find out about those games from the movie marketing campaign. If there is no campaign, they don't look. If they happen to stumble upon it, they assume it is old. Their performance is not at all indicative of film based game performance over all. If I had to guess on Monsters vs. Aliens and Hannah Montana - which is what you are asking me to do - I would say they are victims of the economy. After taking the family to somewhere between 50 to 100 dollars worth of movie night, there was probably just not enough left over to buy a 60 dollar game.

You should also be somewhat suspect of the numbers. They are US only, and NPD does not cover all retailers. Depending on the of game, the numbers may be off significantly.

I stand by what I wrote. The three games cited in the article are not indicative of performance of film based games and, while I am not a publisher, I do not believe they are making the publishers any more gun shy of a film based game than the poor performance of the highly anticipated series, Kings, on NBC, as they bear just about as much relevance. The number of licensed games in a publishers portfolio are a percentage of the total output. Because license fees are paid out, the margins are lower than on a wholly owned franchise. In many cases, the decreased margin is made up on higher sales, so licensed properties are a vital part of a portfolio. Like the studios, for the past few years, most publishers have been operating under the "fewer, bigger, better" credo and reducing the total number of games in production. As a result even if the percentage of licensed games remains constant, the absolute number of licensed game slots is reduced, making it more difficult for studios to place anything other than sequels to blockbusters, or the most expensive, hyped films of the year. But the percentage of licensed properties is not constant at every publisher.

The reduced number of slots is further exacerbated by the increased cost of the games. In the last console cycle, games cost 1/4 what they cost to produce today. Publishers were willing to take chances on films without guaranteed sequels because they could earn out on one game. Today, publishers are more reluctant to take in film games today because game budgets are very large, and they can not always realize the return they would like on a single game. They must amortize the budget over a number of games. If there is no film release or marketing campaign, game sequels need additional publisher marketing and still may underperform relative to the initial game. If a publisher has to invest in marketing a game like an original title, they may as well build something they own, rather than something owned by someone else.

While producers, writers and directors do not often understand, the people responsible for gams at studios recognize the publishers license games for the built in marketing. Game publishers have more internal stories than they know what to do with, and if they run out of ideas, they can dig into another pile at the developer level. Except in the rarest of cases, publishers really don't care how unique or special your movie about the potential apocalypse thwarted by missile farting penguins is. If there is no big marketing campaign, fixed release date and a sequel, you will not sell it. If you do, it will be on materially different terms than those received by Marvel or Fox for Avatar or Paramount for Tin Tin. Studios spend more money around the launch of a film than many publishers spend the whole year. This effort lets the Wal-Mart shopper know what is in the box by looking at the cover. If you don't believe me, hold up Bioshock next to a Bond game.

This leads to the third paragraph. I did say the studios are smarter because they are being pro active. They realize the licensing market is shrinking and they using different methods to initiate game production. I mentioned Bill and John because I have known both for a number of years and both are very good at what they do. Bill Kispert actually made games for Universal. He built games for a number of films and in an exercise foreign to most within the studio system, he put his ass on the line and took responsibility for the production before anyone knew whether or not it would work. I know John as one of the best game production people I ever met His hiring is signal Paramount is serious about actually building games. My mention of these guys does not mean production is ramping to the exclusion of licensing, and therein lies the omission. Production is a compliment to licensing.

The complete story would mention people like Mark Caplan at Sony, who along with licensing games for blockbuster features, pulled Ghostbusters out of the archives for a frontline AAA game, introducing the property to a whole new audience; or Sandi Isaacs, who among other things, licensed The Godfather game to EA and while the May 18 blog may question the first week sales of the sequel launched in the off season, it also references sales of the first title which probably accounted for more revenue in 2006 than the aggregate of the previous 37 years since launch or the high margin revenue from the Tin Tin deal announced by Ubisoft at E3 - on a side note, revenue from sales to date actually exceed the opening box office for each of the Godfather films and when coupled with the first game's revenue exceed the total box office revenue of the theatrical franchise; and of course no licensing story would be complete without reference to Rob Sebastian's annus mirabilis, when he had the good fortune to license Harry Potter, AI and Superman in a single year, closing in on USD 100 million no risk dollars for Warner.

So please, I think it is wonderful for you to reach out to perceived experts rather than guessing about how a business works. But if you would like me to be one of them, listen to the words I say rather than hunting for the right ones to support your story.

I Ran Two Marathons Today: Idiot Edition

noreply@blogger.com (Keith) — Mon, 25 May 2009 20:31:00 +0000

I realize I have not written in a long time, and I am working on a real post. But, in the mean time, I want to create a permanent record of the pain created by a repeated act of hubris which I like to consider my second and last marathon. Last year I wrote an overly romantic recollection of my first marathon. I say overly romantic because I forgot to mention the pain. Now, as I walk about my house with the gait of my 93 year old grandmother, I remember being told human beings have no recollection of pain. I'm told it is an evolutionary thing. If women remembered the pain of child birth, they wouldn't do it again. Having seen child birth first hand, I can confidently say my pain is nothing like it and there is no part of the marathon that involved anything big coming out of a not so big place, but my calves hurt a lot. You see, marathons are like surgery, you feel great going in and like shit coming out. Had I written this last year, I could have read it and avoided this pain.

Last year I wanted to finish in less than four hours. Had I done it, I would have had a quite Memorial Day and perhaps enjoyed a barbeque with friends. Instead, I convinced myself my 4 hour 30 minute time last year was the result of my wrong adjustment of my ankle brace and I had to run again to get my time down below 4 hours. Once I did it, I would never have to do it again. This line of reasoning is how I can proudly say I am a scratch golfer. When I was in college I took some golf lessons. After a few weeks on the driving range the pro took me on the course. The first hole was a downhill par 3 and I shot par. Having done that, I put the clubs down and never picked them up again. I had nothing left to prove and I am a scratch golfer. If my first marathon was sub 4 hours, I could have said I was a sub 4 hour marathoner and quit.

Even though I ran it in 3 hours 57 minutes today, unless I run another 30 marathons - not going to happen - my average will remain above 4 hours. I will have to settle on a slightly sub 4 hour personal best. I was on course to getting my average pretty close to 4, but it just didn't happen. When I got to the starting line noticed signs sticking up with different finish times on them. These people were assisting everyone in keeping a pace. They started at 3 hours and worked their way up in 20 minute increments through 5 hours. I wanted to be sub 4, so I lined up at 3:40 thinking this would give me plenty of room to fall behind in case I had pee, or slow down.

The race horn sounded and we started to move like cattle down the too narrow street to the starting line. The pace people were there so people would be able to line up based on their capabilities, creating a clear path everyone. Unfortunately, many of the runners did not get the memo. I tried to pick up to a run as I crossed the start line, but instead I found myself in an uncanny simulation of the 1982 Stanford/Berkely football game when the band ran on the field. People were everywhere. Big ones, little ones, smelly ones - coming from all angles. My pacing man was getting away and I hardly even started.

After the first mile the road widened and I closed the gap. I was running right behind the 3:40 pace guy and started to bond with him. He was great - not that I talked with him or anything - but he was there for me. He held up his sign and ran and a steady pace. The right pace. At each mile marker he would signal water and and gatorade on the sides and run over himself to grab some. Turning his head sideways, he was able to squish the cup just right to drink without losing the pace. He knew he couldn't lose the pace - he had a responsibility to us, his minions. Sure, others were trying to suck up to him, running along side and talking to him, and one woman ran directly behind - even to the water holders - with the tenacity of a bulldog. I chose to keep my distance. Let him be - until the end of the race.

I didn't think I was going to keep up with him, but the miles seemed to go by much easier than last year. With each passing mile, my appreciation grew. At mile 3 I was thinking about a heartfelt thank you and a hand shake. By mile 14 I was ready to invite him over for a passover seder. Then, he betrayed me. This year's revised course was mostly flat for the first 14 miles, and then mostly uphill for the last 14. You would think Mr. Pace Setter Pants would take this into consideration - slow down for us. Especially after the bond we built over the last 14 miles. But, no. Shortly after mile 14, this asshole yelled "big hill after the turn," turned left and ran uphill at exactly the same pace. No consideration whatsoever for those of us who don't run a marathon every weekend. I probably don't have to tell you, not only did he abandon me at the intersection, but he increased the distance between us for the balance of the race.

Sure this was a great disappointment, but I was able to get over it and complete the race. Each mile marker was a welcome pat on the back for trudging, rudderless, through the race. Around mile 19 the 3:50 pace setter came up behind me and I picked it up a bit to hang with them. The pace was good - he was much more considerate than Mr. 3:40 - but I really had to pee. I ducked into an outhouse at mile 20, and when I came out, Mr. 3:50 and his minions were gone. Once again, I was on my own. As I approached the mile 25 marker, the race clock read 3:49:30. I was perilously close to not making the last 1.2 miles in time and wasting this opportunity to beat 4 hours. As I crossed mile 25 I kicked on my power song, this year was Matisyahu, King Without a Crown - try it, it works - and dug in. There was no way I was going to let this get away, and I was certainly not going to do it again. I looked down at the iPod and say was moving at about an 8:30 mile. This would get me there, but not with a great margin. As the song moved into the guitar riff, I looked down again and saw myself running at a 7:21 pace. Then, the song ended and the race did not. After using Freebird as a power song last year, I miscalculated the button push I was in front of the Staples center, and I had half a mile to go. I pressed firmly on the center button, kicked the song in again and dug down to move my ass. I turned the corner and saw the 26th mile marker and the finish line just after that. I looked at the stop watch I started at the beginning of the race and it was rolling over 3:57. I had to make it. I did not spend the last four hours running to miss it by seconds. The guitar riff kicked in again, the crowd started to cheer, and my legs started to move. I crossed the mile marker and had 2 tenths of a mile to go and the official race clock next the finish line was reading 3:58 and change. Just enough time. I crossed the line at a clock time of 3:59.17 and a chip time of 3:57:39. After spending over a year with a finish photo bearing a clock time of 4:32:54, the 43 seconds came is a welcome relief. No 4's this time, and no more marathons.

Onlive: Apple Acquisition Edition

noreply@blogger.com (Keith) — Wed, 01 Apr 2009 20:36:00 +0000

Last week, we heard the news of Onlive. The view of the company's potential really depends on the perspective of the viewer. The mainstream media, the rapture is upon us. The game industry is in a state of turmoil and publishers are fighting a losing battle here on earth while those who signed with Onlive are ascending to heaven, only to return in the 4th quarter when all other publishers died on the swords of their own hubris. The gaming press is looking at it the way a cat paws at a dead rat hoping it will jump up and start to play, all the time saying "so tell me again why this is better than Steam?" Either way, I just wish I had a piece of it because these guys are going to make a lot of money.

With Mike McGarvey involved, it is no surprise the company is a press juggernaut. In a former life, Mike, Dave Cox, Paul Baldwin, Sutton Trout and a handful of others launched Tomb Raider from a then two month old Eidos, generating a ton of press and instantly turning the company into the second largest publisher in the world. He is a smart guy who knows how to use the press to his advantage. It is also no surprise that the press sparked debates. GDC discussions and subsequent news reports were filled with debates over whether the thing would work. I am not smart enough to understand the tech or the arguments, but based on the folks involved, I believe it does what they say. Steve Perlman is a very smart guy with a track record of delivering on technology promises, and after years of working on this thing, he would not make an announcement if he could not back it up. The only question in my mind is whether there really is a problem to fit this solution.

Assuming the technology is solid, I still have concerns about the market. The service provides high quality PC games on demand to consumers. They lined up nine publishers and a ton of games, but are the people who don't have game consoles or access to Steam or Direct2drive on their PC's really clamoring to play Crysis. I mean, it is almost a tautology. If you want to play Crysis and have 5 megs down, you have a high end PC, a broadband connection and a game console or two. If you don't have that stuff, you probably don't even know what Crysis is. I know, I know, they have a lot of games and they only focused on Crysis to get our attention, but the games they have are all PC games. While the company is promoting the games as playable on a TV, most PC games don't translate well to TVs and most people don't play games on their PC. When it comes to the type of games being delivered by Onlove, the console game market dwarfs the PC. And again, is the person who is inclined to subscribe to a dedicated game service and has broadband next to their television really someone who does not already have a game console? You know, those things with a ton of downloadable content made for consoles and a ton more on the way. If I own a PC, why wouldn't I buy games through a progressive download service so I can use my VOIP phone or someone else can watch video while I am playing games in the other room?

But you see dear reader, thoughts like this come from the simple mind of a guy in the game business trying to figure out whether the service will be a success. This is the wrong way to look at the operation. This isn't about games. It is about high finance. The kind of stuff that makes Richard Garriott look like a pauper. When viewed from the correct perspective, it becomes obvious the service has achieved its first milestone and this Jesus Box is well on its way to spewing money from the heavens for the equity holders.

There is an old joke about a shipment of sardines. The story describes this single case of sardines moving from buyer to seller with a consistently escalating price. Finally, after a number of turns of the same case a potential buyer cracks open one of the packages and tastes one of the sardines.

"These taste like shit." the potential buyer says.
"Yeah, so." says the seller.
"Well why would I buy bad sardines."
"Idiot" says the seller. "These sardines aren't for eating, they are for buying and selling."

This Jesus Box is for buying and selling. When Steve Perlman created WebTv, he created a working technology, a patent portfolio and a set of strong strategic partners. He also created a news story which would give a lift to anyone who acquired it. The buyer was putting the internet in people's living rooms. Before anyone could tell whether consumers would buy in, Microsoft acquired the company for a big number. We saw the same thing with Massive Media. Anyone in the business who looked at the company saw the guys hand coding behind the facade of the great and powerful Oz. But for Microsoft, it told a story. The company had a pile of hard to get contracts with publishers, a semblance of technology, and a very nice story to tell about the growing world of in game advertising. The pattern isn't Microsoft, similar stories can be told about Yahoo's acquisition of Broadcast.com, Google's acquisition of Youtube, and hundreds of other mergers and strategic alliances. The pattern is buying into a story.

If we look at Onlive from the perspective of the game industry, it is a big question mark. If we look at it from the perspective of the rest of world, it looks pretty cool. There are no bandwidth, viability, consumer adoption or game quality concerns. Where we see another game box, they, like Newman looking at Kramer in the Butter Shave Episode, see a big tasty turkey dinner. The story is simple. This purchase puts a company in the hottest business on earth. To a cable company, hardware company, bandwidth provider or studio the company looks like a big stack of hard to get content deals wrapped with a bunch of blocking patents which could keep their competitors not only out of this space, but other spaces in which they operate. If they are a media company in anything other than games, their industry is down while the world is saying games are white hot. This thing is a story to shareholders waiting to be told.

When Apple was launching the iMac the company aggressively pursued publishers to commit to day and date release of their games on the Mac. They found out games were an important application and they had to have them for consumers. But with a market share of only 2% it didn't make sense to make sense for publishers to make the investment. You may remember, Steve Jobs responded to this issue in 1998 by announcing Connectix virtual game console. Sony sued and the thing was pulled from the market, but before that happened, Jobs was able to announce the arrival of over 350 games to the Mac platform. The entire PlayStation catalog was now available. Consumers who never intended to buy a game were more inclined to buy the iMac because they could buy games if they wanted to.

Let's take a look again at Apple. AppleTV and Xboxes are both trojan horses - hang in with me and you will see where I am going. The biggest difference is Microsoft put the trojans on the inside and Apple had them riding on the outside. The end goal for both is ownership of the set top and more specifically, the video distribution channel going into the set top. Microsoft got the box pulled in through games, Apple is doing it through video. Microsoft is way ahead - for now. It would cost Apple billions in R&D and years of product development to come close to the 360 on the game side - unless it pulls in a service like Onlive. If Apple acquired Onlive, they would immediately have a portfolio of games deliverable in a quality rivaling the 360. All of a sudden there a hd movies and tv shows delivered through iTunes, streaming video from sites like Hulu through Boxee and a portfolio of games rivaling those on the 360 at a fraction of the price. In one simple acquisition, Apple would get to the same point as Microsoft with a more elegant solution, less legwork on publisher deals and without spending billions of dollars in R&D. Does it work? Who cares. Sure they are still PC games on a television, but this story is being told to people without consoles. The appearance of a large selection of games is more important than the games themselves. It is like computer expandability. Everyone considers it during purchase, very few people actually ever expand a computer. Like all those people who only own Wii Sports, if they feel they have access to more games than a PS3, they will like it, even if they only ever play a handful. It is a great story and Apple is about stories. Was there really anything you could do with an iMac you could not do with any other PC? Can't you see the Apple ad with the continuous background "ca - ching" every time a game title goes up on screen for the 360 and one flat fee on the AppleTV? The system will be elegant, simple and usable. Would it make me throw my 360 away or buy an AppleTV? Hell no. But will it move high margin units of AppleTv and get them a nice rise in the stock price? Hell yes. If you really want to dip your toe into the deep sea of speculation, think about how an acquisition fits with this.

Apple isn't the only one who can benefit from this story. Warner who is already an investor, Comcast, Cisco, Logitech, Viacom and Newscorp are just some of the potential suitors who would benefit from the story. So if you think you would not buy this box, don't worry, they don't care. It's not for you anyways.

More Irrelevance Warning: Foreshadowing Edition

noreply@blogger.com (Keith) — Sun, 22 Mar 2009 14:50:00 +0000

Sometimes everyone is thinking the same thing as I am and other times, I just notice the references more because I am thinking about it. I don't know which one is happening now, but the New York Times seems to be saying the same thing about Harley Davidson as I wrote about the game business. It just seems like we could substitute Harley with the name of any one of the console publishers and the story would still be accurate. They are just further along the curve. The consensus on Harley is they must change or die.

I added the emphasis. You can read the whole article here.

. . . But Harley persevered by capitalizing on its revered brand, made famous in movies like “Easy Rider,” and more recently by appealing to boomers’ desire to recapture their youth. . . .

By building such a powerful brand with offbeat, behind-the-scenes efforts — little advertising, lots of accessories and minor visible changes to bikes over the decades — Harley has become a case study for academics, marketing gurus and other corporations. But Harley’s longtime strategy of marketing to the boomers, which was a blazing success, is now backfiring.

Its core customers have grayed, and they are buying new bikes less often. The average age of a Harley rider is 49, up from 42 five years ago. But company executives don’t seem outwardly worried by the lackluster growth among those 35 and younger, even as it takes steps to turn them into Harley owners.

They say they’re confident that the baby-boom generation has 15 more years of riding life. “They’re not about to stop riding because they’re getting older,” Mr. Richer says. “It would be dumb to walk away from our core customer, the most lucrative customer.”

As Harley keeps most of its focus on its aging consumers, rivals like BMW, Honda and Yamaha are attracting younger customers who seem less interested in cruising on what their old man rides. United States sales of light sport bikes, intended for the younger crowd, have increased more than 50 percent in the last five years, and the Japanese makers have popular cruisers of their own. Harley has roughly 30 percent of the overall United States motorcycle market, but it accounts for half of the heavyweight bikes sold in America. . . .

“Harley understands the baby-boomer consumer incredibly well, in a holistic sense,” says Gregory Carpenter, a marketing professor at the Kellogg School of Management at Northwestern. “But to grow and thrive, they must create a deep emotional connection with younger consumers.”

Really?: New Record Traffic Day Edition

noreply@blogger.com (Keith) — Tue, 17 Mar 2009 13:07:00 +0000

Sunday night's post about gaming on the verge of irrelevance drove record traffic to this blog - by orders of magnitude and from 66 countries. Thank you to those who linked and those who visited for the first time and to all of those who chose to comment and email with an opinion. It is fascinating to see what resonates and what doesn't. I guess that one did.

I hope I have something else interesting to say again.

The Game Business Is A Year From Irrelevance:Where are Our Easy Riders and Raging Bulls Edition

noreply@blogger.com (Keith) — Mon, 16 Mar 2009 02:00:00 +0000

Every time I told people in suits and ties - or my parents - I was in the game business, they started to talk about kids. They viewed our business as the toy business. Games are for children. This was when I pulled out my silver bullet. I had The ESA's (then IDSA) latest report showing the average age of gamers. I started when it was 27. The "average age" went up a year each year, but was still a neat statistic when I could say 30 or 31. Whether it was directed at a school parent or an audience at a conference, It inevitably led to a dropped jaw and a "wow, I didn't know that." The industry instantly became relevant to their business.

I haven't really paid much attention to this number because my proselytizing for the business was taken over by outlets like the Wall Street Journal, Newsweek and USA Today, which all have a larger reach than this blog or my speaking engagements. But this past week I saw some slides for an ESA speech indicating the average age of a gamer has risen to 35, or roughly, the median age of the US population. I suppose reaching this point was inevitable, but in the back of my mind, I always thought the aging would slow down. At some point it would have to reflect the disproportionate number of people under 25 playing games. After all, our consumer used to be younger than the median age of the population, and you would think, like the movie business with an average age a full 3 years younger, our product would appeal disproportionately to the demographic universally recognized as more likely to spend money.

Those of us who have aged out of the 18 to 35 focus of media can appreciate the dwindling selection of interesting product coming from savvy media channels who know how to make laser focused offerings for the most lucrative segment of the market. We are relegated to the "Bye Bye Birdie" lament of "Kids these days" when considering the most popular content in every media but our own. I know its an old reference, that's how our kids feel about our stuff. It would be great to say we are not "our father's games" but when looking at the most recent offerings to my thirteen year old son and the upcoming blockbusters - Street Fighter IV, Resident Evil 5, Tom Clancy's latest kill the foreigners, The Godfather 2, WWE Smackdown 286, Final Fantasy 15 or so, even Guitar Hero with Metallica and other songs that were old when I tried to find a dance partner in junior high, followed by this year's big excitement The Beatles - I realize they ARE his father's games.

Over the course of twenty-five years we got really good at making games for gamers. We taught them how to play and what they should pay and then followed them through the market. Our planning stages focus on what they will buy, and if we can't confirm they will buy it with a high degree of certainty, we don't make the product. The games are so tailor made to the desires and skills of these gamers, they are about as easy for mainstream consumers of entertainment to crack as ancient Mandarin dialect. No one wants to work for their entertainment. There was a time, not so long ago - last cycle - when this audience was enough. A one million seller was extremely profitable. Two million had publishers doing cart wheels. Anything more had them taking money out in wheelbarrows. Today, two million is break even. Before it was nice to tap into a little itty bitty corner of the mainstream with something like GTA, Halo or Tomb Raider. Now it is imperative for our own survival. Our aging consumer, steady tie ratio, and consistent unit sales numbers across generations of console indicates our business is not really growing the way it could, should or has to. The initial ship of this year's Street Fighter IV was the same size as the initial ship of Tomb Raider 2 eleven years ago. In other words, we are not exceeding the patterns established by prior console generations. Like the movie industry touting box office growth when all they do is raise ticket prices, we are enjoying relative unit growth as a function of generation growth in the installed base, rather than growth in the number of game consumers. Worse yet, our audience is aging. An aging audience means less dollars spent. The Wii has the lowest number of consumers in the 18 to 24 demographic, and it also has the lowest tie ratio among the platforms.

A precious few companies float product over a consistent demographic, but not many. Look at the handoff of Nickelodeon to MTV to VH1. They can give a shit less about maintaining their audience after 14 or 24, respectively. If you are my age, you know what I mean. One day every show on the channel is great, and then the next you seem to be enjoying VH1 a lot more. It's like something invaded your brain while you were asleep and made everything on the channel repellant. MTV just doesn't care. We were their first audience, but from my point of view, there is not a single intelligible note left on the channel. If you are under 30 you don't have to believe me. Just wait a few years and you will see what I mean. The result, MTV Networks continue to go great guns and generate revenue.

Unfortunately, we seem to be falling in the category of the majority of industries with loyal consumers. The only open question is whether today's publishers will adapt or die.

When the movie business encountered a similar issue in the late 1960's. This was a time when Clint Eastwood was starring in the musical Paint Your Wagon and Francis Ford Coppola was directing another musical, Finian's Rainbow. The studios completely lost touch with their audience. MGM paved the way to film success with musicals in the fifties. The studios cultivated this audience and continued to provide content to the same audience, as the audience aged and stopped going to movies. The younger audience just didn't care. Films were expensive to make and audience growth was flat. The studios were taking guidance from the past rather than looking to the future. They were recreating the films they grew up on and expecting a new audience. Then, all of a sudden, almost by accident, and outside the system, Easy Rider slipped out. The film cost nothing and made a fortune by attracting a young audience. It gave the studios a much needed kick in the ass. They realized the system was broken and reengineered the pipeline from production through release. The new production process opened the door for an inexperienced crowd fresh out of film school - Steven Spielberg, George Lucas, Jon MIlius, Martin Scorcese to name a few. Their type of movie did not bet the farm on every production, allowing for greater risk with each product. The distribution process, arising from Jaws, created the blockbuster. Rather than rolling a movie slowly across the country and letting the audience find it through word of mouth, they started to market movies aggressively so people would know they were in the theater. As a result of the changes, the audience, number of revenue streams and overall market grew (this is an extremely truncated version of history. If you are interested take a look at this books about Lew Wasserman, Sony and of course Easy Riders, Raging Bulls ). Sure they have their issues today, but we are looking at the end of a single cycle that is longer than the entire life of our industry.

The US auto industry, so far, has not been so lucky. There was a time when Cadillac was the "Cadillac" of cars. From the forties to the seventies it was the epitome of luxury, technology and status. General Motors jealously guarded the jewel in its crown and maintained its status at the top of the GM aspirational hierarchy. But when it came to design, Cadillac was so concerned about alienating its core user base, it maintained styling cues and appointments well beyond their relevance. This strategy maintained their audience for 30 years, but that is all they did. As the group aged, the younger market was wide open for competition from all around the world. Worse yet, as the average age creeped up the older side started to die off, shrinking the market size. Ultimately the company realized it would need to take a risk because their customers were dying. It started selling trucks and jettisoned the old branding to focus on performance. A large portion of the audience ended up staying and the average age of the Cadillac consumer fell from 64 in 2000 to 56 in 2008. Turns out my Grandfather didn't really care about the change from Sedan DeVille to DTS and new buyers like the 600 horsepower CTS. Still a far cry from the 42 year old average consumer of BMW, but a very positive move. The entire industry down and it is still too early to tell whether the strategy save the company, but it certainly moved the 107 year old company in the right direction.

I don't believe either of these examples provide a roadmap for sustaining our industry. However, they do provide effective warnings about complacency and fetishistic attachment to existing consumers. We have to start taking risks again. We are not at the point of drastic Cadillac-like measures, but there should be a risk component in publisher portfolios. The gap between the sub USD one million XBL/PSN downloadable and USD 20 million console game is to great to have nothing in between. Traditional publishers' relevance and the premier creators of interactive entertainment is under attack by movie studios, Miniclips type sites, DVD games, Facebook apps and other social network games and a ton of others. They are using the same game mechanics and the same hooks we abandoned years ago in favor of the pursuit of "advanced technology." The audience is being conditioned to pricing models that don't demand up front investments of USD 60 or monthly subscription fees. It is not just a question of a simple interface change. The Wii mote led the horse to water, but so far they are not drinking. We need end to end revisions. Changes in production, release timing, marketing and pricing. We can continue to believe EA, Actard, Microsoft and Sony will always dominate the market operating business as usual - kind of like MGM and Cadillac - or we can look to new audience segments and determine how we can make the changes needed to remain relevant. If we don't I am afraid my son's generation will view today's games as the new polyester shirt.

Out Gaming Microsoft: Apple About to Move Edition?

noreply@blogger.com (Keith) — Thu, 12 Mar 2009 15:30:00 +0000

I was just sitting down to write a post about our need to expand beyond the core gamer. We are really good at making games for the 2 million people who buy good games and 5 million who buy great games, but that barely covers our budget. Sure Nintendo brought more people to the game market, but they only buy Nintendo games. The tie ratios are no where near what we need to consider the platform disruptive. Then I saw the post I stole and copied below from Appleinsider.com.

Remember, Apple entered the MP3 player and smartphone markets when they appeared to be mature. All of the apps in the app store could easily run on Appletv and with incremental improvements on interface and design of the Wii mote, Apple could just skip over the hardcore gamer and pull the mainstream right in. This would not be the first time Apple the innovator borrowed a great idea. The Mac interface famously came from Xerox Parc, the iPod was introduced into a robust MP3 market and even iTunes was acquired from the outside. After all, Steve Jobs' favorite artist, Picasso did say "bad artists copy, geniuses steal." The box already has direct distribution of HD movies, television shows, Hulu and more, now it could have mass friendly games. Kind of a reverse on the trojan horse used by Microsoft. Maybe Nintendo proved something and Apple will perfect it.

Then again. . . . I could be nuts.

Apple is exploring the possibility of including a wireless "remote wand" with future versions of its Apple TV media system that would provide users with precise control over a cursor on the Apple TV screen in very much the same way a conventual mouse controls a cursor on a PC. It would also unlock three-dimensional controls similar to those offered by Nintendo's Wii controller.

The wand, which was revealed in a patent filing published for the first time this week, would control the movement of a cursor displayed on a TV screen by the position and orientation at which it is held by the user. As the user moves the wand, the on-screen cursor would follow.

Unlike the current 5-button remote shipping with the current version of Apple TV, the wand would be capable of controlling a plurality of new operations and applications that may be available from the media system, including for example zoom operations, a keyboard application, an image application, an illustration application, and a media application.

According to Apple, the Apple TV media system could identify the movements of the wand using any suitable motion detection component such as an embedded accelerometer or a gyroscope. Another approach for identifying the movements of the wand would be to determine its absolute position relative to one or more infrared modules positioned adjacent to the screen in the living room.

"The wand may include an optical component for capturing images of the infrared modules, and may calculate its orientation and distance from the modules based on the captured images," the company said. "In some embodiments, the electronic device may direct the infrared modules to identify the position of an infrared emitter incorporated on the wand, and may calculate the absolute position of the wand relative to the infrared modules."

By incorporating the wand controller into future Apple TVs, Apple would unlock a tremendous amount of capability in its set-top-box interface while blurring the lines between a conventional PC and a media system. In one example, the company shows how pressing the remote's menu button would trigger a Dock to rise from the bottom of the Apple TV screen, which users could then navigate by moving the wand from left to right.

The wand could also incorporate several new selection techniques that would reduce dependency on physical buttons such as the menu/select button on the current Apple remote.

"In some embodiments, the user may provide a selection input by moving wand in a particular manner," Apple said. "For example, the user may flick wand (e.g., move wand in circular pattern), rotate wand in a particular manner (e.g., perform a rotation of wand), move wand a particular distance off screen, or any other suitable movement of wand."

When it comes to navigating album art or other media presented in CoverFlow mode, the user could draw a circular pattern on the screen to cause the CoverFlow carousel to rotate, displaying different selectable options. Wand movements could also direct the carousel to turn in a particular direction based on the direction in which it's rotated.

When inside Apple TV's photo application, similar movements would allow the user to navigate large sets of thumbnails and make selections. However, a more powerful aspect may the ability of the wand to zoom in and out of images based on its proximity to the screen.

"To zoom out, the user may move wand away from screen such that the distance between wand and screen may be larger than the initial distance between wand and [the] screen," Apple explained. "The larger distance between wand and screen may be depicted by the position of wand relative [to its] origin. [...] In some embodiments, the user may provide an input in the z-direction (e.g., to zoom out) by providing an appropriate input with an input mechanism without moving wand. For example, the user may roll a scroll wheel, provide an input on a touchpad, or move a joystick to provide an input in the z-direction and zoom out the image of [the] screen."

Rotating the wand could also serve to rotate and skew images on the screen:

Another advantage of the wand would be its ability to trigger a keyboard application from within any of Apple TV's core applications and provide swifter input. Instead of navigating the keyboard with left, right, up, and down arrows, the "user may select a character on the displayed line by pointing wand at a particular character to place cursor over the character," Apple said. "To access other characters not displayed on a particular line, the user may select one of [the] arrows to scroll [a] line to the left or to the right. In some embodiments, the user may simply place cursor at the left or right edge of the screen to scroll [a] line."

Apple goes on in the massive 64-page filing to describe methods for using the wand to control media scrubber bars, jump around the Apple TV interface, and serve as a digital pen for an illustration application.

The May 2008 filing is credited to Apple employees Duncan Kerr and Nicholas King.

In January acting chief executive Tim Cook said, "We will continue to invest [in Apple TV], because we believe there is something there for us in the future." Cook's comments were in the context of the news that unit sales were up over three times year-over-year. He still cautioned Apple is considering the device a hobby, as Steve Jobs has often said since its release.

Used Games: Howard Beale Edition

noreply@blogger.com (Keith) — Mon, 09 Mar 2009 02:53:00 +0000

For years video game platforms and publishers alike worshipped at the alter of the channel - victims of Stockholm Syndrome. We put up with extortive demands for MDF, price protection demands and shelving charges all because we can't piss off the channel. We acquiesce to uniform box size because it's what the channel wants. We make sure the box covers are not offensive because the channel demands it. We can't sell units on line at a discount because the channel will get angry. Most significantly, we can't distribute digitally because the channel will get angry. We take their abuse and delude ourselves into believing retail prices are not eroding even though channel charges continue to escalate. But with Amazon, Best Buy and Toys R Us announcing they are following Gamestop’s lead and getting into the used game business it is time for our Howard Beale Moment. While they think they are claiming a beachhead, we have the power to make it their Waterloo. As proven out by the music industry, shifts to online distribution are tsunamis, not rising tides. In a world of 30 some million connected consoles and hundreds of millions connected PC's the channel we can seize control and force them to cater to us. It is time for our industry to show them consumer loyalty lies with the content, not the retailer.

Even the movie business is crying revolution and they are a bunch of market fearing, research heavy, herd mentality, wanna be like the other guys, sunglass at night wearing, take my picture, babies. I’ve traveled among them and they are not half the warriors you are:

[p]erhaps, desperate times call for desperate measures; which might explain why 20th Century Fox Home Entertainment will start making two different versions of its DVDs: a stripped-down version for DVD rentals, and a premium version with extras for DVD sales.

Variety's Video Business reports that starting with the March 31 DVD releases of Marley and Me and Slumdog Millionaire, Fox will put this new strategy into place. The retail DVD SKU for Slumdog Millionaire will contain "special features including deleted scenes and commentaries;" while the rental DVD SKU will only have the movie and trailers. There will be variations on this theme depending on the particular title; for instance, the rental DVD and Blu-ray SKUs of Marley and Me will both include special features, but the retail Blu-ray version will be "a combo pack with a DVD movie and digital copy."
. . .
As to the justification behind this strategy, it is all about differentiation--making the retail version of the DVD movies appear that have more value than the rental version. This might increase the possibility that someone would buy a DVD instead of renting it, as well as possibly reducing the likelihood that previous-viewed DVDs can also cannibalize new DVD sales. Fox provided a statement to Video Business that stated:

"We have developed product variations to feed different consumer consumption models and behaviors... For rental customers, we're delivering a theatrical experience in the home while promoting upcoming releases; for retail [or sell-through] customers, we're offering a premium product that expands the entertainment experience of that particular property to further enhance ownership."

At the risk of mixing icons, stand up, step to your window, open it up, raise a fist in the air and yell with me:

"I AM MAD AS HELL AND I AM NOT GOING TO TAKE IT ANYMORE. LIBERTAD! LIBERTAD! LIBERTAD!"

I've written a lot about used games and there is no reason to get into it here again. Suffice it to say, no matter how many times our friends at Gamestop say it, repeating a lie will not make it the truth. The more they do it, the more the insult our intelligence. Because they continue to spread their used game propaganda and fail to realize they are biting the very hand that feeds them, they will be the first victims of the revolution. How dare they have the hubris to build nearly one half of their game software business on the sale of games they don’t pay for and tell us they are doing us a favor? Our revolution will change the way we connect with our customer and will send waves through every aspect of our business. It won't be pretty, and there will be carnage, but it must be done. Perhaps some innocent store managers and employees who really don't believe in the sale of used games will be caught in the carnage, and I am sorry, but collateral damage is a fact of war.

I want to be clear, I am not calling for destruction of the channel– it will still have value to us - we just have to show our solidarity by taking down the largest in a statement to all the others of what will happen if the continue down this course. Any one lacking confidence in our strength can try to pick up a CD at Tower Records, The Wherehouse, Sam Goody or half of the Virgin Megastores. If there is still any question, explain the difference to me between their bits and ours.

The game channel grew from the same fundamental inefficiency eliminated by the music industry, the delivery of the bits. Our respective channels made money through elimination of this inefficiency. In our case, and formerly in the music business, intermediaries delivered bit filled pieces of plastic to our consumers. They exacerbate the inefficiency, created further friction and sustained their place in the market by converting our customers to theirs - even though we are the ones bringing them in. No one goes to a store for the name on the door. They go to the store for the content we put on the shelves. When the need to deliver music bits on plastic went away, by fiat of their consumer, so did the retailers who added no value beyond aggregation. Music retailers did not die from illegal file sharing. They died from a lack of value. content controlled. In contrast, added value retailers survived and quite painfully another a third party intermediary stepped in to once again extract its tithe from the music creators.

I draw the line between Walmart/Target/Bestbuy and Apple/Amazon. The market has fundamentally changed but the former builds the artist while the latter builds their audience. One adds value to the artists, the other, to themselves. WTB realized their music business was going away. It was no longer good enough to just add real estate and diesel fuel. They had to add value to the bits to get consumers to come to them rather than download. After some exploration, they discovered the point of maximum leverage for their investment is at the artist level. By promoting the artist the way the music label used to do, they were able to drive traffic into the store and move units. The store is no longer fungible with all other stores. They now have a USP. The artists benefit from a marketing program well beyond those received from music labels, and their name is promoted along side the store. Did you see the wacky thing there? Rather than collecting MDF and channel fees, WTB actually paid money to the content and in these cases, directly to the artist, a very clear value add. Before you argue these deals are limited only to the upper echelons of the business, realize only the upper echelon still receive investment in promotion and development from the labels. Which developers are commanding publisher deals now? Even though WTB are acting in their own interest, there is a net value add to the artists. As much as it pains me to take an adverse position to my dear Apple, this is simply not the case with the on line retailers, and especially the largest.

Apple promotes the freedom of the artist, but they don't promote the artist. iTunes attracts consumers through the same aggregation as the extinct physical retailers, and provides the artist with only a substitute for the record label - without the advance and music video money. The complaint about labels and the channel was they made all the money and paid the artists only a pittance. In an inverse Gillette business model, Apple collects all of the money on the sale of the razors and gives the blades away for free. Likewise, Amazon and other on line players without hardware made money only on the aggregate sale of music, with no individual artist ever doing very well.

The lesson to be learned is we have value. We can fall prey to a short term appeal of an aggregator providing a ready made audience we can build their brand while providing our content for free, or we can command value from the channel commensurate with the value of our content. If we don’t take action, the channel will make the determination for us.

Ok, you waded through the inner recesses of my mind to get to the revolution part. If you are still with me, let’s talk about our attack on Gamestop. I called for a boycott once before because they are the most vulnerable. The Gamestop customer is the hardcore gamer who wants a wide selection and their game on the day it comes out. This is also the gamer who has a broadband connection to one or more consoles in their home. Gamestop’s most painful impact occurs with the purchase of used games at only a 10% discount within weeks of release. It is their smallest discount level, but it is given when they ordinarily reorder. The first tier or gamers rush through their game so they can get them back to the store and receive maximum value, creating enough inventory to avoid reorders, decreasing the supply of games in the channel. However, if we make games available directly to the hardcore at or near launch, there will be no incentive to drive to the store to buy the used game. Sure we will hurt our Gamestop orders, but sales follow the path of least resistance. Most will buy on line, others will simply purchase at WTB, driving reorders in the short term and increased sales in the long term. Even at a 10% or greater discount, the publisher can generate a greater profit than selling through Gamestop.

The beauty of the attack lies in its surgical nature. We are stepping on the accelerator for direct distribution, but we are not fighting on multiple fronts. The WTB buyer is more opportunistic. While there is some overlap with Gamestop, they are largely outside the hardcore. These are the folks who require us to buy network television ads to reach them. Games are significant to them, but their consumers are in the store for other reasons. They pick up a game while they are their to pick up milk and deodorant – well- maybe Mountain Dew and not deodorant. This is why WTB is still in the retail music business and dedicated stores are all gone. We can even make them our allies by providing added value download for physical units purchased at WTB. Of course WTB would pay for those and co market. Who knows, maybe they will even pay developers directly . . . SHHHHHH don’t tell.

Once we get to the other side, we will realize the USD 59.95 price point, and even the USD 49.95 were not carved in stone by the finger of the almighty. They are an industry created construct, which continues to drive us to make USD 20 million “Fields of Dreams.” In this insidious cycle, the consumer demands a certain amount of gameplay for their dollar and we supply it. Perhaps in this new world we will be able to build games of all sizes at various price points. Without inventory we can shift prices up and down and all around until we determine the proper price for each type of game. Really, Gabe Newell says its ok. We can take risks again. New mechanics and gameplay can be released in smaller versions or even to limited large scale beta groups to see if we are on the right track before putting in the second USD 15 to 17 million. We can even capture the long tail currently exploited by Gamestop in their bargain bin.

I don’t know if I’ve seen the future or if the revolution will even happen in time to rescue the industry as we know it. I do know we can’t be so ignorant as to believe we are immune to the reconfiguration of the markets for every other form of media. If we don’t choose to be proactive in the change, it will be done for us and we won’t be happy.

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Tue, 22 Jul 2008 00:00:00 PDT

A Tree Falling in the Forest

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Fri, 04 Apr 2008 00:00:00 PDT

What a World: Byron Review - Parent Edition
grown up talk about game ratings

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Mon, 31 Mar 2008 00:00:00 PDT

video games and more