Train2Game are one of those odious companies which threaten legal action every time they are criticised or their business practices are put under scrutiny. I did precisely these things back in 2009 with this article on this blog. (Click highlighted text to open article). This was fair, balanced, factual and truthful.

As a result I received this outrageous threatening letter from Patrick Charnley at Eversheds. (Click highlighted text to open article).

Obviouly I referred Patrick to Arkell v. Pressdram. And as you can see the article is still there on my blog in its entirety for all to see (though they succeeded in censoring the YouTube videos I had referenced). But still he persisted in prolonging our correspondence. But as I had only told the truth he had no possible action against me. So he lost. Just as Evony lost when they sued me for libel.

In view of the facts I reported in my Train2Game article and the outrageous way they had behaved I was utterly amazed when they got into bed with TIGA. I knew that this had to end in tears. And so it has. TIGA issued this press release on 8th April 2015:

TIGA has ceased to act as an awarding and examination body for T2G courses. TIGA will no longer:

• award TIGA Diplomas to students studying any T2G courses;
• accredit any T2G courses;
• act as an external examiner for any T2G examinations;
• provide quality assurance for any T2G courses and examinations;
• benchmark any T2G courses and qualifications; or
• promote any T2G courses, examinations or qualifications.

MIS is no longer permitted to use TIGAâ€s name in relation to its T2G courses, or imply that TIGA endorses its courses.

So, in the end and with experience, TIGA have seen sense and have kicked out the odious Train2Game, let’s hope that the rest of the video game industry does the same.

Firstly an explanation. I am not writing regularly here now because I am concentrating on another blog, Bruce on Politics.

There are two developer/publisher companies which have consistently claimed to be the biggest in Britain. Jagex in Cambridge and Codemasters, outside Leamington Spa. Let’s put this to the test. The best source of figures are their annual accounts, which are available from Companies House for the cost of £1 a pop. Each of these covers the last year the accounts were filed for and also the previous year for comparison. I have Codemasters Group Holdings Limited accounts for year ended 31 March 2014 and also 30 June 2011, also Jagex accounts for 31 December 2013.

The first measure we can look at is turnover, or sales as it is more commonly known. Jagex has a 2013 turnover of £46,537K down from £53,098K in 2012. Codemaster figures were £51,969K for 2014 and £53,242K for 2013, so there isn’t much in it. But both were down year on year. Interestingly Codemasters turnover was £122,961K in 2010 and £119,182K in 2011. So the company is doing well under half the business it was doing just a very few years ago.

The second measure is number of employees. Jagex had 515 in 2013 and 472 in 2012. Staff costs were £21,699K for 2012 and £22,858K in 2013. Codemasters had 731 staff in 2013 costing £28,202K dropping to 588 staff in 2014 costing £22,063K. So once again there isn’t much in it. Going back to 2010 Codemasters then had 778 staff costing £32,331K and in 2011 814 staff costing £32,782K. So whilst their turnover has more than halved their staff numbers have dropped far less.

The third measure is profitability. Jagex made £9,758K in 2012 and £945K in 2013. A huge drop. The balance sheet for 2013 shows accumulated profit of £7,067K. Codemasters accounts show a LOSS in 2013 0f £12,868K followed by a LOSS of £3,337K in 2014. Accumulated losses in their 2014 balance sheet total £188,957K. So Jagex has Codemasters very comprehensively beaten on this measure but with a worrying trend.

Of interest, considering the above, is the remuneration of their highest paid directors (and we know who these are). At Jagex the highest paid director received £437,166 in 2012 and £381,815 in 2013. At Codemasters the highest paid director received £862,000 in 2013 and £816,000 in 2014. So making losses at Codemasters pays around twice as much as making profits at Jagex!

Overall, on these figures, it is pretty much a draw as to who is biggest. But accounts are always historic, so the current situation might be a lot different.

But I was looking for a proper business of my own, not just a way of selling my time. The ZX Microfairs were dead by then so I decided to start up a new series of one day events, but for all computers, hence the name All Formats Computer Fairs. This took the novel idea that business and home computers could be sold side by side, the market at that time had split into two parts that were totally separate and I thought that they would come back together again. Lots of people told me that this wouldnâ€t work and it nearly didnâ€t. One help was that MGT launched the Sam Coupe at my first fair. Working 100 hour weeks for years, often for negative income, the business eventually thrived. We ended up with events all over Britain, every weekend attracting thousands of people. The business was widely copied and soon there were a vast number of similar events for computing and gaming enthusiasts serving every population centre. This was for me the most financially successful phase of my career and attending the events kept me at the very sharp end of what was happening in both consumer and business computing. I ran the business as what is known as a virtual company with all the staff being hired as and when they were needed. This made it easy to add and remove events according to demand and once the business had stabilised it meant that I didnâ€t have a great deal to do. Codemasters had asked me back several times so I had a chat with David Darling and pretty soon had a job there in charge of communications, working 3 days a week. A lot had changed in my absence, it was now employing hundreds of people organised in departments churning out console games sold all around the world. So I put in place, developed and ran a press release system designed to produce 2 press releases a week, all supported by assets and released simultaneously in the local languages in every market around the world. This became a very powerful tool that pretty much guaranteed we would reach millions of people with our marketing messages.

At this time the Internet was coming very quickly into prominence. I both loved and hated this. The bad news was that it destroyed the business model of All Formats Computer Fairs. We had existed by providing lots of competing traders under one roof and the internet did this far better. So I gradually closed the business down as each individual fair lost its viability. The good news was at Codemasters it became possible to communicate directly and immediately with customers anywhere in the world. We were developing an MMO at the time called Dragon Empires and they has a community liaison person as part of their team. I took this idea and adapted it to work with boxed console games, creating a social marketing department years before Facebook and Twitter even existed.

But once again game piracy came very close to killing off my employer. The market consisted of the PlayStation and the PC, just 2 platforms. And Codemasters majored on the PlayStation because initially the games were copy proof so it had a better business model. However its copy protection was cracked and suddenly our games only sold on launch weekend, after that they could be bought far more cheaply from the many commercial pirates who had banks of disk duplication machines in their homes. Our income collapsed and we had to make 20% of the workforce redundant. To keep the company going we published a series of PC games: Prisoner of War, Insane, IGI2, Severence etc. But it was another one that was the saviour of the company: Operation Flashpoint. We had very little money for advertising so we worked like crazy at public relations and internet marketing. So it was immensely gratifying when we launched the game and it went to number one in nearly every country with a chart around the world. It is an utter travesty that this game was not developed into a gaming mega brand and that the space that it occupied in the market was given over to other publishers.

Eventually the Darlings decided to reduce their stake in the company and introduced a venture capital company to the business. These people parachuted in their own management team and I left. As did other key talent over the next year or two. I decided to spend some of my time using the internet so I set up the Artfotrums.co.uk online community and started writing the Bruce on Games blog, both of which were very successful. The blog has over 900 articles covering many areas of the business of making games and is one of the largest bodies of work by a game industry insider. Alongside this I also went back to game marketing consultancy and did work for a number of different companies around the world. One simple change made to one company website increased new business for them by 30%. But this sort of work is not satisfying because it lacks the emotional engagement of actually being employed by a company, of being a part of the team. So when David Darling told me he was setting up Kwalee I was quick to offer my services and very happy when they were accepted.

Imagine Software was very profitable to begin with, the cassettes cost us well under 50 pence to manufacture and sold to distributors for between two and three pounds. We built up turnover during 1983 to a million pounds a month. So although the directors had nice cars the hire purchase payments on these used up very little of our cash flow.

Then in 1984 sales hit a brick wall and we suddenly had no income. It was as if someone had turned a switch. We employed quite a few Youth Opportunity Programme people and they told us that all their friends had stopped buying games, they were tape-to-tape copying instead. To double the problem, a number of illicit duplicators now had manufacturing equipment to counterfeit product to sell cheaply in markets.

One of our largest customers was the newsagent chain W H Smith. One day a truck filled with literally tons of our games appeared from them which Smiths told us were all faulty and they refused to pay our bill. We tested the games and they were all perfect, the kids were buying them, copying them and then returning them as faulty.

To try and prevent people copying instead of buying we tried many things, including writing a letter to all of the magazines, which some of them published. We wanted to bring the retail price of our games down but our big customers (W H Smiths, Bootsetc) wouldnâ€t let us. The “megagames” (Psyclapse and Bandersnatch) were an attempt to make our games copy proof by incorporating a “dongle” that plugged into the back of every customerâ€s computer. But we ran out of money before they could be completed and we went bust. Lots of other game publishers also went bust. We were particularly vulnerable because our development process was drastically under managed, so lots of staff created very little product which resulted in us being one of the first to go.

After Imagine, I went to see Barry Muncaster, the managing director of Oric and he offered me the job of managing director at their software house, Tansoft. He wanted to inject more excitement into the market for his computer. There were rumours that they had financial problems so I asked Barry if the job would be safe, he said that they couldnâ€t go bust because they were a subsidiary of a public company. Unfortunately I believed him and my new job didâ€t last very long. Working in Cambridge was very interesting because there were so many technology companies staffed by exceedingly bright people, but it was a desert for marketing. If we added some marketing competence to Cambridge we would have a British Silicon Valley.

At Tansoft I had met Bill Richardson of Oxford Computer Publishing, based in Chalfont, who published serious software for the Spectrum. Bo Jangeborg from Sweden was writing a graphics programme and Bill employed me to market it. But he sold it toTelecomsoft who published it as The Artist and I was looking for something to do again. Luckily one of his friends, Vic Cedar of Citadel Products, had a spare desk for me and I set up a company called Abbot to buy and sell computer related stuff using my contacts in the industry. Working at Citadel was fascinating because it was an early PC clone manufacturer and the workshops were always full of the very latest technology so I learned a lot about what made the IBM PC tick. At this time I started exhibiting at the ZX Microfairs held at the Royal Horticultural Halls in London, which were incredibly busy.

Then one day I saw a cheeky advert in CTW for a new game company in Banbury, set up by the Darling family, called Codemasters. I went up to see them and they asked me to work for them a couple of days a week. Within a month I was full time, in charge of marketing and I sold Abbot off. Back then Codemasters consisted of David and Richard Darling mostly managing product but also massively involved in the business side of things, their father Jim Darling (who today is the chairman at Kwalee) applying his vast business experience, sister Abigail running the office and Anne Pinkham ringing round the industry to generate sales.

Codemasters†business model was to combat piracy by selling games at the lowest possible price. This meant that they were not worth copying and became impulse purchases at places like petrol filling stations. We came up with a very effective marketing strategy of telling the world that our games were full price quality at a budget price. This was very effective against the competition. Why buy a full price game when you can buy something of comparable quality for a fraction of the price? And why buy from one of the other budget publishers when you could buy a higher quality game from Codemasters? The £1.99 price point meant that we had to sell enormous quantities of games and that there was not much money to spend on marketing. So we concentrated our efforts and spend on marketing to the trade, with advertising campaigns in the trade newspaper CTW. To reach consumers we used public relations and went to the Lynne Franks agency (which the Absolutely Fabuloussitcom is based on). They got David and Richard on to lots of the weekend morning kids TV shows and into most of the weekend newspaper colour supplements. Within the first year of trading we had 27% of the total UK market by sales volume according to the Gallup charts, but in reality we were selling much more because we were selling vast quantities of games through outlets that Gallup didnâ€t monitor.

A lot of marketing effort went into trying to recruit other developers whose work we could publish. Andrew and Philip Oliver were the most prolific, churning out game after game, all to a very high quality. Most famously they developed the Dizzy series of games and today they run a large development company in Leamington Spa calledBlitz. Gavin Raeburn was another excellent game developer who is now development director at Playground Games in Leamington. Peter Williamson came from Scotland and created many titles. He is now Managing Director of Supersonic Software in Leamington. And so it went on, a panoply of young talent who went on to have a major impact on the game industry in Britain.

During this time I started reading the two computer industry newspapers, Computer Weekly and Computing. Occasionally they carried articles about the amazing idea that an individual person could own a computer and have it at home, using a kit of electronic parts centred around the only recently available microprocessors. Then came news of people actually setting up retail stores to look after the people who were interested in these products. I knew that this would explode in popularity and decided to do the same. I begged, borrowed and stole the money to set up Microdigital in Liverpool in 1978, one of the first computer stores in Europe. Most British people couldnâ€t afford the expensive American home computers, but luckily we had a home grown device called the Nascom 1, which cost £200. This was a kit with 1,200 solder joints and which gave users a massive 1K of RAM to play with. We created a very successful business fixing kits that people had built but which had failed to work.

For rich people we sold the Apple 2, which had 16K of RAM for £1,200. This was a fortune in those days and used a cassette interface to input and output content. Eventually Apple brought out a disk drive that cost £425 and which had a capacity of 113K. Everybody thought that this was incredible.

Over the years we sold many other machines: the Commodore Pet, the Science of Cambridge MK14 (from Uncle Clive), Exidy Sorcerer, Hewlett Packard HP-85, Sharp MZ 80K and more.

Getting hold of stock to sell was problematic, as the demand was so much greater than the industry could possibly keep up with. It was not unusual for our turnover to double month on month. Our bread and butter was selling books, which we imported from America, to satisfy the thirst for knowledge. We set up a mail order department and pretty soon we were shipping stuff all over the world. We also set up our own monthly computer hobbyist magazine called Liverpool Software Gazette and used our extensive contacts to fill it with excellent articles.

During this time I went to America a lot, they were well ahead of us and were the place where the products and ideas were coming from. On one visit to Apple in Cupertino, California, I was offered their UK distributorship but turned it down because I knew we just couldnâ€t handle it. On these trips I also visited the early computer stores, such asComputer Components of Orange County. I noticed they had some polythene bags attached to a noticeboard containing a cassette (or disk) and a sheet of photocopied paper in each one. These were the very first commercially available home computer video games that people had written and duplicated at home to sell on the noticeboard. I bought loads of them and brought them back to use as demonstration software in the shop.

Eventually I sold Microdigital out to a large chain of Hi Fi retailers called Laskys for them to use us as a template to put computer stores within their shops all over the country. Then there was a phase of consulting. I did the business plan for a home computer industry magazine for Felix Dennis at Dennis Publishing, this becameMicroscope. I did a pile of stuff for an office equipment company in Liverpool calledDAMS and I did some work for Bug Byte. This was fascinating, one of the very first home computer game publishers in Britain. I managed to convince them to upgrade their cassette inlay cards from crude mono sheets, sometimes photocopied, that were the industry standard, to professional four colour printed cards with an airbrush image to represent the game.

Then, in 1982, one of my former Microdigital Employees who worked at Bug Byte, Mark Butler, told me he was setting up his own company with a programmer he worked with called David Lawson. I joined them as Operations Director at Imagine Software and took over marketing, amongst other things. Then Eugene Evans joined us who had been a Saturday boy in the Microdigital shop before working for Bug Byte. Eugene is now VP, Studio GM, Bioware Mythic, at Electronic Arts. Back then there was no proper video game industry. Most people who wrote games ran their business from home (often part time) and sold directly to customers by mail order. We decided to do it differently with a proper company with departments and offices. Our first problem was getting sales. I remember sitting with everyone else on the carpets, packaging up games to go in the mail and then filling rows of mailbags up. This was no way to go. So I recruited a couple of tele-sales staff from DAMS (something that was then new and which I had learned there). They were given every Yellow Pages for the UK and they rang retailers telling them to stock our games. This was the foundation of video games as an industry in the UK. They would ring every newsagent, then every electronics shop, then every photographic retailer, doubling turnover every month. Obviously once a retailer started selling games they would look for more to sell and would contact our competitors. So the industry moved from a mail order hobbyist footing to professionally run companies selling their products at retail.

After a while I recruited two more tele-sales staff. One who spoke French and German fluently and one who spoke Spanish and Italian fluently. Then we sold our stuff like crazy all across Europe. This was the beginning of the dominance of the British video game publishers in Europe. At the same time we developed our inlay cards adding more and more folds and on these we put development credits, company profile, sales material for our other games and translations for our overseas customers.

Games originally were written by one person using assembler software and writing on the target machine. The first improvement was when John Gibson was having difficulty getting the clouds to look realistic in Zzoom. We dragged an artist in and using a piece of graph paper he represented pixels and created realistic clouds. David Lawson seized on this and soon we were employing artists, then he extended the concept and we were employing musicians. Then we looked at getting away from using the target machines and bought very powerful 68000 based professional computers running Z80 assemblers. Then we started to move over to the C programming language.

So throughout the life of Imagine software we continued to lead and innovate in many ways. What we did was very widely copied. The reason we had to be creative was because nothing existed before us, we were the pioneers in many ways.

How many complaints have you heard about Apple destroying the video game industry? Competition is so high, prices went so down, no publisher can pay the development of a high quality video game selling at 99 cents….

But a few publishers, mainly newcomers, are making good money –which means it is possible. Here we are going to analyse market data to understand which variables make a successful application.

Application stores like App Store, Android Market or OVI have increased competition, shrunk margins, and up to a certain level cannibalised the console market. But on the other hand they have also introduced positive novelties for publishers:

* Zero distribution cost
* Huge market size
* New technologies
* More than everything: data. Publishers can monitor almost on real time the effect of price changes or, for instance, on-line ads.

Let’s then take the available data, and see how we can build a relatively simple model to forecast the success of a mobile game.

First question: when will a game appeal to customers?

1. If it’s good quality
2. If it has good visibility.

At In Numero, we monitor the Customer Satisfaction and the Web Visibility for about 4,000 applications. Let’s then plot the following chart: on the horizontal axis a number which ranks Customer Satisfaction and Web Visibility of Top Grossing games, i.e. it is “1” for the application with highest quality and highest visibility, and on the vertical axis the Top Grossing ranking. Ideally, applications on top of the Customer Satisfaction and Web Visibility ranking should be the stars on the Top Grossing ranking. Below is the chart.
Although there is a certain correlation between the two variables, the result is not satisfactory. We could hardly predict grossing levels from this chart. But if we have a look at the table below (the five most visible iPhone applications, all with excellent customer Satisfaction) we see something strange: The price factor The two games with the lowest price, Angry Birds and Tiny Wings at $0.99, are grossing much more than the ones with higher price. We should not rush to the conclusion that publishers should always price their games at 99c, but we can plot a similar chart as above, where the index on the horizontal axis has a new factor, which “penalises” applications with a too high price: The linear fit (the straight line) in the chart above can predict better when a game with a certain “index” is going to generate revenues or not. It makes sense: between two games, both with the same visibility and quality, customers are going to buy the cheaper one. When my nine-year old nephew saw FIFA 11 priced at $5, decided to invest his little money in a $30 console version. If the iPhone was $1, he told me he would have bought both –one for the boring holiday trips, one for home.

Dynamic Pricing

The particular day (2 March 2011) data are referring to, no game was very close to launch. But we know that, for instance, Dead Space was a superstar in January, when In Numero was not yet scraping iTunes data. And still its price was well above 99c. Why did not last? Because fans of the console version, with a bigger budget than my nephew, bought the game during the first two-three weeks after the launch. After that period, the game is considered for purchase mainly by the occasional customer, who wants a simple game to play during a boring lecture, or during commuting. And this customer would just download the best and cheapest game in the top most popular games.

We then introduce a new factor, which penalises products far from launch, depending from the price. Or: if a publisher launches a fantastic game at $9.99, it would sell well during the first weeks, but then revenues would go down unless the price is reduced. (For a better understanding, try this simulation). Here is the chart: It is hardly visible by eye, but the average error on prediction has been reduced by more than 15%. After launch, prices have to go down. Not in the same way on all platform: where a game on the iPhone must approach $0.99 after a while, a game on the iPad can be priced higher, because customers recognise a higher value to the product.

Conclusions

The model can be developed further, considering the relative size of the market for each particular game, the distribution of the value given by customers to that game, and the distribution of prices for a certain segment –being the most expensive in a group of very similar games is not the best recipe for high revenues. But what should be clear, is that no “right price” exists –only a series of right prices. On the fast digital market, prices must be dynamic and value based.

As predicted here smartphones have grown exponentially in usage so that they are now the dominant internet device for large swathes of the world’s population. Certainly their arrival has acted as the mechanism that has facilitated the uprisings in the Arab world. And of course mobile phones are the most used video gaming devices on earth by a substantial margin.

Many many years ago (in 1978) I opened one of the first computer stores in the world, Microdigital in Liverpool. I sold Apple computers and even visited the then rather small Apple facility in Cupertino, California where I was offered the UK distributorship. So I have been a follower of Apple since most people didn’t even know that they existed. And I saw them grow to become the dominant supplier of personal computers in the world, until Bill Gates came along and destroyed their party, relegating Apple to the role of bit player.

Apple’s weakness then was that they designed and made the computer and they also designed and made the operating system. They lived inside a patent and copyright protected walled garden. Then Microsoft came along with an operating system (which was not as good as the Apple one) that any manufacturer could use on their computers. So suddenly Apple were competing against lots of hardware companies, each of whom was also competing against the others. And Apple lost, principally because they were vastly too expensive compared to the Microsoft based computers which had prices honed in the furnace of competition.

And now we see history repeating itself. But this time they are being destroyed by Brin and Page. Once again Apple has created a walled garden with their iPhone and iPad devices, once again they came to dominate the market and once again competition between lots of manufacturers using an operating system from a third party is destroying their business model. Currently the iPhone is the sixth best selling smartphone in the UK, the top five all use the Android operating system. But the reason they are beating Apple is not because Android is better, it is because Android phones are cheaper, honed in the furnace of competition.

Apple aren’t going to die just yet, the upcoming iPad 2 and the next iPhone will sell well off pure momentum. But the writing is on the wall, unless they radically change their business model Apple will soon fall back to become, at best, a niche player. Exactly as they did with personal computers.

Which brings us neatly to Nokia. Throughout the short history of the mobile phone they have been the number one dominant supplier of handsets by giving the customer what the customer wanted. But when it came to smartphones they lost their way completely. They too went for a walled garden with two different proprietory operating systems (Symbian and Maemo). And they thought that smartphones were for “business” and not for people. So their market share collapsed.

Now they are in crisis mode and with new management in place have made one of the most stupid strategic decisions I have ever seen. Quite simply they have chosen Microsoft as strategic partner for their smartphone operating system. Now I am not saying that there is anything wrong with Windows Phone 7, it is just that it is extremely strange for a hardware manufacturer to lock their future into that of a piece of software from another company. Nokia would be far better off being operating system agnostic. They should offer their customers a choice of operating system, then they would be back at what they used to be good at, giving the customer what the customer wants.

So I can’t see Nokia competing with the likes of HTC, who do as I suggest and back all the main horses, which means they are guaranteed to win. With the Microsoft alliance Nokia are pretty much removing their ability to compete on level terms with other hardware manufacturers. It does not look good.

The eternal problem of selling a video game as a stand alone package is that it can and will be stolen. If people think that they can get away with stealing then they will, so the level of theft can easily reach the high nineties in percentage terms. In other words often very few users of your product are actually paying for the work that you have done.

The way round this is alternative business models, so the customer is forced to pay in a different way. These can include online games with a monthly fee, pay per play, sale of in game items, advertising or sponsorship, etc etc. All these and more are being used successfully and the industry continues to experiment in order to find viable ways to be rewarded for their work.

When I was Head of Corporate Affairs at Codemasters working for the Chairman, Jim Darling, we were fully aware of the blight of software theft on the business and often discussed ways round it. One idea was online gambling, where we made money from people betting within the game. After analysis we concluded that the level of expertise and investment needed was too big a risk when we were heavily geared up for the conventional gaming business model.

However one major figure in British video gaming who was in the same position did take the risk and that was Jez San and he has explained much of this in an interview he did for this blog. In it he says “Trust is everything!  The honesty and compliance issues surrounding online gambling are a huge obstacle for a computer game or video game company entering the gambling market.  in computer games we simply accept that there are cheats and try to avoid them.  in online gambling we simply cant allow cheating of any kind.”

His online gaming company, PKR, is a huge success.

There are two kinds of gambling online. Some games, like roulette, the player plays against the house. This is a pure percentages game with the odds slightly in favour of the house so that over time they always win. The second kind of gambling is a multiplayer game where the players play against each other, such as poker, here the house makes their money out of taking a small percentage of the winnings, known as the rake.

Online poker has a huge advantage over real world poker in that it has very low operating costs, all you need is space on a server. Whereas real world poker requires a building with all the associated overheads which are very difficult to finance with a rake. This, and the fact that it more a skill than a chance game, have made online poker extremely popular. If you want to increase your skill there are even online poker schools.

Some people have moral scruples about gambling. I look at this two ways, firstly that it is just video gaming monetised in a different way. Secondly that people only have so much leisure time in which to spend their money doing what they enjoy. Gambling is very enjoyable so why shouldn’t people be allowed to spend their money doing it if they want to? The only problem comes with the minuscule minority who become addicted with bad social consequences. But there are plenty of other addictions, some of which are much worse.

One problem the online gambling industry has is that the main companies involved are not American, obviously the people who govern America, who are very trade concious, didn’t like this. So it is no surprise that online gambling is banned there. Which is pretty abusive of the state, taking away their citizens’ freedoms. It also dampens the business model when the largest market is officially closed. Of course Americans who want to get round the silly restraints can do so very easily. An Antiguan credit card sorts the money and it is easy to hide behind a proxy server when online.

Which brings us to an interesting facet of online gambling. As an industry it is very new, far newer than the video game industry. So their marketing is fairly unsophisticated and their communications even more so. They obviously have issues with stakeholders, just as the video games industry did with the issue of violence, for example. But the video games industry engaged with government, and other stakeholders, worldwide to explain their case. The online gambling industry seems to be a long way behind with this sort of engagement.

It will be interesting to see how much, in future, the video game and the online gambling industries move together. One thing that may ease the process is when individuals, at all levels, move between the two. This way the culture, practices and technical knowledge will be on a two way street.

After nearly 30 years the unholy Wintel alliance is over. Microsoft have finally realised that there are other processors in the world and have embraced the ARM chip. Superficially this is because ARM processors are far better suited to mobile devices than Intel processors, which is why they feature in portable gaming devices. But there is far more to it than that. Vastly more ARM processors are made every day than Intel processors and they are very easily embedded into other chips and into all sorts of devices. With this move we have the possibility of Microsoft software running on anything with a screen, which these days is a lot of things. Initially Microsoft will go for the low hanging fruit but you can see that the potential for mission creep is immense.

There is lots of bad news in video game retail with many shops now closing and the retail companies in big trouble, something predicted a long time ago on here. I really don’t see any future role for a bricks and mortar video game retailer. Currently they are kept afloat by secondhand sales but this has incensed the publishers who are doing everything in their power to destroy this business model. Supermarkets will continue to sell gaming products for far longer because of the impulse purchase of putting a game into your trolley and because their overheads can be amortized across many thousands of product lines.

Android smartphone sales have caught up with iPhone sales. Another inevitability forecast on here. Apple are in trouble, they are a marketing company who sell a customer experience whilst lagging behind on the technology. Their late adoption of OLED displays and the lack of camera in the iPad being just a couple of examples. Now they have lots of manufacturers marketing Android products, which are often better specified, competing against them. The time has come for a massive technical upgrade of their entire mobile product range. And they need to be more price competitive too.

Just 43 file sharing websites have 53 billion visits per year between them in 2010. If people can steal and get away with it then mostly they will. As a result many industries, from music to porn, are in tatters. Now, with eReaders, the book industry is headed the same way. In the games industry we are lucky because consoles are fairly effective anti piracy dongles and because server based games are too complex for the casual thief to copy. But the lesson must be that if you are going to develop any game it is essential that you have the means to prevent it being stolen by the masses, because if you don’t you are wasting your time.

Games in education. I have beaten the drum about this on here. The fundamental gaming model makes video gaming the perfect educational tool, far better than teachers who are flawed as a mechanism in many ways. The classroom  is outdated and at long last more people in key positions are starting to realise it. Expect to hear a lot more about this in the coming year.

Facebook is not the be all of social networking as the success of Quora and Chatroulette have proven. As social networking and games often end up being the same thing this is pretty important. If someone bright was creating a Facebook replacement they could come up with a far better product. Just look at how clunky Facebook is with video, for instance. And how limited the forums are within it for making new friends.

I thought that with the way things are going in the video game industry just now it would be good to give one person’s view as to what is going so badly wrong.

Just two years ago the game industry seemed to be booming, rapidly growing sales, lots of new titles, exciting leaps in technology, popular new platforms. It looked like the place to be. Then look at it now, moribund, going nowhere and , frankly, pretty boring. So what has gone wrong? Well the fact is that during the boom far too many products made a loss and for the last few years far too many games publishers have run at a loss (we all know who they are) and this is mostly down to the sheer ineptitude of many of the people who run the industry. There are plenty of customers out there with plenty of money who want to spend it on interactive entertainment but our industry has failed to give them compelling reasons to spend it.

So let’s look at what is causing the problems.

Platform proliferation. Not so long ago if you were a game developer you made games for the Playstation/ Playstation 2. That was the market. An occasional PC title added a little bit to the mix, but the real market was with Sony. So business models were easy, put about 20 fairly gifted people together for 18 months and you had a good chance of actually making a profit. Now there are more than a dozen viable, thriving, gaming platforms. So knowing where and when to apply assets has taken a lot of skill and that skill has been conspicuously absent.

Barriers to entry. In the Playstation/Playstation 2 days the barriers to entry were just perfect. It cost a handful of millions to develop a game. This was sufficient barrier to keep the hordes out but it was low enough to make risks acceptable. Now the barriers to entry are either too high or too low. To make a profitable hit for current generation platforms now takes a £100 million plus punt and there are not that many people with the balls and skill to do this. At the other extreme iPhone and Android games can very easily be made for a few thousand pounds, so anyone can and is putting products on these platforms. There is such a plethora of titles that it is difficult to stand out and attract custom. This dichotomy of high and low development costs has really caught out most of the world’s well known game publishers, they have not known how to deal with it.

Poor development tools. The way we make games is still very primitive, between the creative talent and the finished product there is just far too much mindless, repetitive slog. This really needs to be fixed if we are to go forwards with ever more powerful platforms. The number of man hours that the development process consumes can be radically reduced.

Industry pathetically slow at going online. The customers have been well ahead of the industry here, many big name publishers are trailing two years behind what the market is really doing. Video gaming is no longer about cardboard boxes in retailers, it is about interactive online entertainment. Just read the gaming forums and see what the real customers are doing in the real world. I could name names here, but there is no need, the spectacular failures are very evident.

Microsoft’s pricing policy. This is an epic fail. Sony with PS3 made a platform that was too expensive to manufacture and Sony as a company was on the ropes. Microsoft, with the Xbox 360 had a platform that was cheap and elegant to make, and they had the riches of Croesus to invest in it. They could have, should have, taken the market by the scruff of the neck and driven it. Instead they have dilly dallied around with no obvious purpose. The prime example of this is their pricing policy on the console. This has always been far too high. It is too high today. We are in a razors/razorblades market here, what is important is getting volumes of platforms out there, whatever the cost. The proven mechanism is price elasticity of demand and Microsoft have failed to use it, they just haven’t had the drive to break out and become mass market.

Sitting round waiting for saviours. The big platform manufacturers and most of the big publishers are equally guilty here. “Just wait till we have 3D and everything will be OK” or “Just wait till we have a gesture interface and everything will be OK”. This really, really doesn’t work, if you are not making a profit out of what the customer is actually buying today then you have made some big mistakes.

I could go on, but you get the idea. Now I thought I would highlight two people who have massively outperformed the herd by having the brains to see what is going on and the balls to do something about it. The first is Bobby Kotick at Activision. He saw clearly that the console market was going to consist of two sorts of games, blockbuster and loss makers. When so many chose the latter he chose the former. A small number of huge hits with no distractions allowed has proven him right time after time. Secondly Kristian Segerstråle, who has been absolutely on the button at making money from where the market actually is, I have heard him almost angry at the stupidity he saw all around him in the industry.

The really frightening thing is that both of these guys quite openly said what they were doing and why, yet so much of the game industry management thought they knew better, ignored them and then made massive losses.