In addition, we’ve just completed construction of quids.org, a non-commercial implementation of the superfluid technology. With a focus on volunteer projects, it has a simpler process, and a cost-free model that requires only a $1 donation to the Electronic Frontier Foundation.  -superfluid.biz is also free for the time being (at least a year for beta users), but will eventually have an annual subscription fee.  As quids.org is all about collaborating on services, it doesn’t allow commercial transactions, or those involving physical goods, so we don’t collect W9 information and membership is available to international participants. We envision it being used for social good/software/games/art and any number of other areas we haven’t yet conceived.

Upcoming for quids.org is a facebook application, allowing you to pull together your volunteer projects from that site as well, and a mess of other stuff that we won’t spoil by mentioning now.

If you have any questions or suggestions, please do let me know. We continue to develop superfluid.biz and quids.org with a lot of feedback from the community, and are pretty responsive to needs, whether that’s in the form of functionality or rounding up offerings of specific interest to current members.

Aside from those talking to Europe, I know very few in the US who use Skype for voice/video communication. I’m not sure why it’s so big there (maybe phone call prices for more frequent cross border calls? maybe they’re smarter and don’t mind the settup process for cheap voice/video? who knows), but here it’s primarily just another IM technology. My business partner is european and a major Skype user, who periodically asks me to get on voice with him (across town), but I don’t see why I’d use fairly lousy voice when I could just use my unlimited voice minutes on ATT. I have dozens of Skype users in my list, but the americans tend to stay gray, and those that are active IM me, while the bulk of active users all light up during european activity hours.

In terms of the massive number of Skype users that Wagstaff mentions, it does seem like all of Europe is on Skype. I’d suggest that this isn’t the same early adopter audience we used to see on Skype, as much as it’s just everyone who wants to save on phone calls, so integration with social media isn’t the no-brainer hit he implies. I feel that perhaps Skype’s primary competitor in the US is the chronically underrated MagicJack, which exploits the complexity of competitors’ installation processes to rule the market.

Also, although it’s a bit difficult to track the actual usage of a freestanding app like Skype, it’s even harder to track Twitter usage, given the heavy reliance on third-party apps for usage, although Fred Wilson puts in a credible attempt. I’m just not sure that Skype really eclipses competitors within the social space in the way Wagstaff’s numbers assume. Especially as I’m not sure it’s really a social thing as used in Europe today. -Vivox is much more a product of the social era.

In a recent interview, Josh Silverman described a situation in which “1/3 of usage is video, despite the fact that video calls can only be 1-1. Voice calls are multi-party.” Which shows that Skype actually isn’t doing spectacularly well with multi-party voice calls for social purposes, where new players, like Vivox and Ventrillo are highly active and and have cultivated strong relationships with that audience.

If Skype can do some brilliant things involving integration with social nets on mobile devices (bypassing carrier voice functionality), maybe they do win big worldwide, but I think that will be a hard space to take, and I’m not sure they’re actually the best positioned to do that right now.

What we’ve come to realize is that in this economy, many businesses have stripped down to a bare minimum of employees and rely heavily on outsourced talent (especially in the creative and technology fields where we’re initially focusing). So we see a lot more individuals attracted to the system, both because that’s where the surplus is, and because this is clearly a bootstrapping era, where the value we can provide is quite often in helping talented folks come together to create new projects and businesses. Some of these efforts are commercial, and some are not; we’ll now be relevant to both. -And b2b continues to be important, as we provide a path for businesses to legitimately barter in compliance with IRS regulations for such things.

So, the b2b side will continue to service business needs, where the service traded has a real commercial value (including any barter of physical goods). And the new c2c side will service users’ needs for a mechanism enabling the trade of avocational services. -We had a very nice mention recently, by Douglas Rushkoff in his Web 2.0 keynote, that ties in to some of our thinking in this area.

We do have a couple of changes that we’ve just put into place within b2b superfluid, as well. When we launched a few weeks ago, we made a few assumptions based upon the thinking that it would be better to be conservative to start, then loosen up appropriately. One of those assumptions was that members would be sensitive about who saw their offerings, and who was admitted into superfluid. This led us to take two actions;

1) We required new applicants to have an invitation from an existing member.

2) We required new members to immediately fill out a W9, before viewing offerings or completing the membership process.

It turned out that users were much more concerned with growing the community and had little or no desire to hide offerings from the greater public, which is an inclination we’re more than eager to facilitate. So, we have ditched both of these elements, and now users now only have to provide W9 information when they first either post or order an offering. This frees up users to see what’s on offer, and really try out the functionality before committing all of their information.

superfluid is all about fair value for participants; it’s built to facilitate utilization of unsold or spare time, and to compensate each participant fairly within the system. This is also a great way to create a project from scratch, without the insecurities of buying into someone else’s vision, or giving a piece of your project to someone who may or may not be the ideal partner in the long term.

I believe that in general, the existing models of executing on a concept tend to be less than ideal, and don’t draw on community in the wholesome, yet self-interested way that superfluid can. One conventional path to completion of such things is for an entrepreneur to spend enough, from savings or debt, to fund the project. Another classic path (especially in open source) is for one person with the vision, personal magnetism, and technical skills to start the project, to work like mad on it until eventually it’s complete enough that he can draw others in to join him on it. In this context, a shared vision brings in others who join together to create the finished project. -The problem with the latter is that the timing, personalities, and skillsets don’t always necessarily align to enable even a brilliantly conceived concept.

It’s simple to use superfluid for such a project. You’d first want to define your needs (programming, design, project management, marketing, etc.) then assess how many Quids this is likely to cost you from vendors in superfluid. Then sell your own services into the superfluid system and claim Quids to convert into a project. If you’re a programmer, you sell programming into the system (possibly to other concepts at startup stage), if you’re a marketing expert, you sell that, and so on. You keep your own project and everyone else keeps their own projects, while the organic whole allows for execution of as many projects as possible.

btw: If you’re a business (game developer, designer, marketing folks, etc.) that’d like to participate in superfluid, for a limited time you can submit for the beta here.

-Nathan

It seems to us that in the current economy, most entities and individuals are straightjacketed by either a lack of clients, a lack of available investment dollars, or a lack of credit. And while all of these are real issues, they’re a bit pathetic in hobbling worthwhile efforts. So, we came together with an idea for a project that could bypass these problems, and help businesses to thrive and better enjoy what they do have.

Our goal with superfluid is to provide a barter exchange in which businesses can sell the surplus time and goods that they cannot quickly move in money-based transactions. Using superfluid, participants don’t need to find someone in the system with whom they can directly swap goods, they simply use in-game currency (Quids) to buy and sell from each other.

So, you may be wondering what the hell this has to do with games; and, as that’s the background I bring to this project, clearly I think it’s a valuable aspect:. On the one hand, we’re bringing the experience and understanding of negotiation from gameplay, and the structure of an MMO economy. On the other, we think that a significant subset of interest for the userbase could be the creation of games. If a base of programmers, designers, etc., come into the system to offer their own skills, and purchase the skills of others, it could enable a variety of projects by professionals.

On September 8, we begin a closed beta release of superfluid, and I’d very much like to begin testing its facility in the development of games. -I should emphasize that superfluid is entirely business to business, so all skills should be at professional level. The beta will be free of charge, and the initial participants will have a year of free usage, before we begin charging an annual fee of $200.

If you’re interested in helping to test superfluid for game development, please shoot me an e-mail at nathan[at]superfluid [dot]biz to request participation. A membership will enable you to post your skills and a Quid-based price for services.

1. Sales departments at publishers have long been the primary drivers of revenue, and these folks are compensated by how many units they can place in retail, so this major stakeholder naturally stands against a change to digital distribution.
2. Retailers can drive sales pretty efficiently, so it’s hard for publishers to make a change to online distribution until volumes become large enough through this channel that it’s a strong freestanding revenue-driver.
3. I remember when EA was first looking at getting into mobile games; they told me that they would get into the business when their production capabilities and marketing muscle could have significant value in the category. An ongoing problem is that lower cost digitally distributed games don’t really need expensive massive production capabilities or vast marketing budgets. The $60 packaged game is hard to sell for $60 through online distribution; really, even core games online want to be smaller chunks, and that means a different sort of business model and a different allocation of production resources. This is a significant transition to make, and likely why game publishing execs seem to be jumping ship from major publishers to new online entities.
4. In addition to the the marketing difficulty of selling a $60 game through download, there’s the bandwidth issue that makes the full game download process very non-instant, and pushes most users to just visit a local retailer.

We’re at the beginning of the time when these barriers can be seen coming down, and the downloaded sales volume is meaningful. A few elements have brought us here, and will bring us to next steps:

1. Incremental content has become a significant part of the game experience, enabling user comfort with the download process, and building an easily converted audience.
2. Steam has shown itself to be highly effective in driving sales.
3. Casual and social games for PC and Mobile have taken a strong position, with business models that seem more attractive to investors (and industry execs).
4. Whether in games or other media and software, customers are simply more used to it coming through the network than through a store.

So, the question at this point is really just what effect this will have on retailers, publishers and developers. I’d suggest that physical media won’t go away any time soon, but it is highly likely to flatline. More games are sold online, many with specifically online models, but losses here will be somewhat balanced by physical aggregations of games available online (for an offline and older audience, as well as in special-edition boxed sets). For retailers this will be an interesting change to manage, as growth in videogame sales go flat. The margin on videogame console software is insignificant, so each major player makes their money in a slightly elliptical manner, making the effects of change different for each:

1. Best Buy -Will be fine with this; they dealt with the transition of music to digital distribution, and have an ongoing expectation of dealing with this sort of transition. They make their money in games from hardware (screens, etc.) and bundling physical products with games.
2. Target -Use games as a traffic driver, but could easily replace it with something else.
3. Walmart -This audience lags a bit, and may take up more physical media for longer, in any case.
4. Gamestop -Depend upon sales of used product for profit margin, which is definitely going to have less value in a new world where fewer titles ship and tie-ins to incremental content degrade the value of used product. They have a true gaming brand, and if they can act pro-actively moving into the new world, significantly changing their model, they have great potential. But, from the outside, it really doesn’t look like they’re doing anything to deal with this.

In terms of publishers and developers, I think this should be a positive change:

1. A $60 game requires huge investment in development and marketing, making things far too hit-driven to be a sane and attractive business model. Digital distribution is also hit driven (as we see with casual titles) but it’s to a much more limited extent.
2. When a game publisher releases a game on disk, they must pay the console manufacturer a licensing fee of as much as $12 per unit. This is a sunk cost, whether the units sell or not, in addition to packaging and logistics costs.
3. It’s a lot easier to allow creativity and innovation in a downloaded or online game than in a $30 million game with a $15 million marketing budget. I remember E3 in 2006, just before this wave really hit, when the titles on view were just astoundingly unoriginal. Everything there was an iteration of a franchise, or a ripoff of a franchise, aside from a couple of original works that simply didn’t live up to expectations. Games were dying, and now they’re flourishing.

The idea of cooperatives as they exist today was first formalized in 1844, in the Rochdale Principles, and updated  by the International Cooperative Alliance a few times in recent years.  A number of U.S. commercial entities exist in this form today, including REI, Ace Hardware, and the Associated Press. -You’ll see more on the diverse range of US co-ops at the trade organization, NCBA.

Perhaps the element most central to the cooperative model is that it is owned by its members, and controlled on the basis of each member getting the same single vote in running the organization. This member ownership means that it cannot take in external investment, so it must earn its own capital, and only take on debt when members choose to do so. Many cooperative entities end up with the flexibility to loan members funds for their various initiatives, and the community of cooperatives is a supportive one.

A cooperative, being member-run, is very much built on specific, yet living, bylaws, and the efforts of an elected board. As we look at the needs of developers, and the ways that a cooperative group can facilitate them, it seems that a core requirement is for a board that can leverage the power of this group in an effective way.

This brings us to the benefits that a cooperative can specifically bring to game developers today, in a time of great growth in the industry, despite the turndown in the rest of the economy. -A turndown that primarily affects game developers in its constriction on liquidity, because, as we are well aware, games continue to sell.

Until the modern era of game development (the past couple of years), game distribution was throttled at publishing and at retail, and this meant that a fairly fixed base of developers could have real businesses creating interactive entertainment. The throttle at publishing being on obtaining a deal to enable large scale marketing and development costs, and at retail, simply garnering placement. These barriers have fallen away with digital distribution, and there are all sorts of ways to push out content, in various media. However, game development can’t readily become the sort of “user generated content” that other media can, as the requirements of developer skills and time investment for a worthwhile interactive experience mean that games involve significant crafting.

But, now we have a situation with a vast number of games, developed by small new shops, hitting the market via digital distribution, especially in places like Apple’s app store. These games don’t need a budget from a publisher, and it would be hard to fund such initiatives anyway. -Although they certainly could use the distribution clout of a publisher in doing the deals of product distribution. And they don’t need an enormous marketing budget, but could very much use some support in getting the word out. A great majority of these games will fall away from public notice, because their placement or marketing will be insignificant or nonexistent, and game developers can’t afford to support a “long tail” model that they’ve long known won’t work for the category.

There will continue to be efforts by digital distribution retailers and portals in this category to  focus merchandising and presentation to optimize (or simply restrict) what effectively moves to the top of the deck. It is as we move forward in this environment that developers need to create an entity through which to represent their own priorities in specific business negotiations.

A games cooperative will need to launch with an active and experienced board. -One that has the clout in the industry to move forward deals. The nature of a cooperative is such that the board is elected by membership, and conventional wisdom is that three-year terms are ideal for getting the best of folks. Starting up, an initial board will be up for re-election on a staggered basis.

The first stage of the co-op’s existence will primarily deal with business development; then, as revenues begin to come in, the cooperative will be able to put funds toward marketing, and finally the cooperative will be able to loan members development funds.

So, my question to industry folks is; does this seem to have enough value to developers that it’s something on which I should spend my own spare time as well as that of a few other folks, to get it started?

Both rely for now on the lack of  universally available connectivity or hardware to combine with the lack of a universally compelling business model, to drive certain specific users to their locations. -Neither is yet broadly enabling under a new philosophical reason for existing. But, as Bijan’s posters note, in fairly short term, the barriers will indeed fall in both of these situations. This leaves, in the case of game specialty retailers, thousands of high traffic locations and a brand well known to a lucrative demogaphic, that, for appropriate shareholder value, really should/must have value beyond the place where boxes are moved. And, in the case of libraries, an important social asset that goes beyond simply being the place where users get books, to being a safe place for kids, and an important safety net.

Both are gathering places for youth, and for each the medium should be secondary. Kids will always draw together physically, no matter what they have in the way of online media, both because there’s a basic human need for proximity and because their homes won’t always be safe, useful places for them. That doesn’t mean that they’ll be buying discs or checking out books. So, the question is; what do you do with your physical space to make it useful?

Connectivity is good, combined with a physical space from which kids won’t be ejected. -Although, given the ever-changing nature of connectivity, and the promise of ubiquitous 3G and beyond, proximity-based connectivity is a transient benefit. In a mall, store managers will often switch off interactive kiosks (gameconsole demo machines), in order to keep kids from dawdling; this is the wrong approach. Stores should create and use in-store technology that keeps employees part of the physical and online community. Growing social aspects of retail beyond anything yet seen, is what would save a GameStop. As they stand, relying on logistics to enable massive, very fast distribution of soon-to-be redundant media, they are an elephant, but they could fairly easily be something significant that won’t lose value in the new environment.

Libraries are a bit similar; their masters often think of them simply as places that hold books, and see the end of physical books as the end of library value. But they are a critically important place for youth, and as importantly, they create an alternate distibution model for knowledge in our society, which is not a bad thing. If libraries take as a starting point those two elements, there are a hell of a lot of useful forms they could take. Even at the most primitive concept of being on one hand a place for people to borrow kindles (or perhaps an open licensed e-reader) and load them up with content, and on the other a quiet place to study and take in face to face education.

If libraries or physical game presence die over the next few years, it won’t be because it’s inevitable, it’ll be because the people behind them lack the vision (or funds, in the case of libraries) to take a necessary next step to something even better for a new era.

I’m looking forward to seeing how Natal and the Sony tech match up. Microsoft certainly has significantly larger user and developer bases. -And there is something inherently nifty about not having a controller in hand. The questions I have are whether this can really work well enough that a number of developers can make compelling quality gameplay reliably using it; and MS is not known for having a mastery of the human/computer interface, so how many annoying Microsoftian tweaks will be present, and how much will this impede usage. 360 has succeeded largely because it’s just a game computer connected to a television, and has successively enhanced its implementation of things on 360 that already exist in the broader computer game world.

Sony has been awful with marketing and business development throughout the life of the PS3, and it’s hard to assume that they’ll suddenly get a whole lot better. But I do believe they’re correct that a device in the user’s hand will allow more accurate tracking and gameplay. This would be useful both for core gamers and for casual gamers who actually golf/bowl/whatever, and care that the console experience accurately reflect their skill level. It makes a bit of sense as a next step beyond Wii, since Wii does have that weakness.

Overall, Microsoft and Sony are probably right to head in this direction, but somehow it only makes me more eager to see what Nintendo does next. And there’re getting to be an awful lot of things connected to my television, so who know’s what’ll actually be powering games by 2015.

The shortcoming of not being integrated into the Walmart system for credits is likely a short term concession to publisher sensitivities, until Walmart can see if the project is worth the bother; they’re likely also looking at whether they want to get involved in this and/or other sorts of pawn-broker-y activities. The name frustratingly eludes me, but I know there’s a small chain of big boxes down south that focuses on re-selling small consumer electronics and media (games and music, I believe); they also have a cafe involved in the model. I really like that sort of combination, and it seems well suited to these times.

EA is actually in a rough position; unlike Activision/Blizzard and others that have been successful in creating/acquiring succesful alternate distribution and models, they are sort of in the process of another re-start of such efforts. Apple would largely get them out of this bind, as they could grow and learn on Apple’s digital distribution platform from a privileged position, while also growing their IP base and sales generally.

The real issue is this, though; most things can be returned even if the case is opened, but generally not videogames (for full value anyway).  This is a remnant of videogame’s heritage as software, because clearly once PC software is opened it can be installed, so the software cannot be returned with the opened box. But that’s not the situation with console games, a returned game in an open box is a full return. Being weird about the purity of “newness” would just be amusingly neurotic, but it drives more games to be re-sold as used, instead of just returned, either to the retailer or the manufacturer under a more reasonable model.

The GameStop situation sort of epitomizes the silliness of the current mindset; prissy store employees take home the disks, and test them in no doubt pristine consoles, and folks think it’s some sort of ripoff to sell these disks as new.

The game media websites have been handy resources, as they provided easy searchability for the in-depth reviews that are required to drive such a considered purchase. But still largely the same old content; deep editorial previews and reviews, cheats, walkthroughs, etc.

Don’t get me wrong; at the time of their inception, Gamespot and IGN (or at least the interesting part of its amalgam, Gamespy) were unique and groundbreaking beyond such simple content. It’s just that they’ve atrophied and their founding sparks have departed, as conventional media entities have taken over. Gamespy, with community building/user-generated content and the early integration of their matchmaking technology into frontline games, prefaced most of what’s interesting and groundbreaking today in the web generally, so many years later. Gamespot had a sub-focus on collecting all of a user’s interests into something presaging a semantic web sort of solution (that its founder is focused on today), and a content-licensing model that worked uniquely well, built on consistency of quality. If Surfas and Broady were building their game businesses now, they’d certainly be something a lot more interesting than what their abandoned offspring are up to.

Today, there far are better solutions for gamers than conventional in-depth static content. Integration of game content (via XML feeds, add-on functionality, etc.) facilitates play in a much more satisfying way than the simple aggregation of non-editorial game info (cheats, etc.). -It sort of makes you wonder if the conventional media entities will always be buying the dying limbs on the tree. Ziff’s creation, then shedding, of 1Up to Hearst, sort of epitomizes the inclination. The trend for these publications seems to be static or downward, and definitely has the feel of print pubs of 2006.  The Escapist does a nice job of providing depth and analysis for anyone wanting a good and informed read about a game or the industry, with value based upon its quality and bloggy style and structure; rather than all-inclusiveness or hardcore dissection of gameplay. And as we come closer to a business model for game sales that actually works, and we really do seem to be on that course, editorial and news from Kotaku (and, on the indie side, playthisthing.com) should be the sort of resource to drive game sales. Because that provides a much more appropriate and useful level of information for a category of entertainment product that’s now so much more diverse and flexible in form.

But many of the most interesting things in games these days thoroughly bleed over into other online categories as well; hence, much that is of games doesn’t need to be at a GDC. For years, I’ve been missing SXSW Interactive, as it tends to come a week or two before GDC, and both combined would be more conference than I really want in a month. But next year, I think I’ll head to Texas, instead, as that seems like a bit more fun and just as relevant now.

I actually think this is a nice turn of events, as it demonstrates games’ integration into the broader, more DIY-able, technology ecosystem, from which it has been absent for some time.  For the first half of this decade, each year I’d ask friends in the scene for lists of indie games to publish as a special label at Electronics Boutique, but there was never sufficient volume of quality to make that happen. Now, though, that would be no problem, and one thing I did quite enjoy at GDC was how consistently good the Independent Game Festival finalists were, while a few years ago, these games tended to be derivative and fairly lame.

I liked the guys I spoke with, and they seemed open and forthright about the product, giving me the feeling that OpenLive isn’t bunk so much as the product of good technical people creating something moderately useful. But that product has, for strategic purposes, been positioned by their marketing and biz dev folks as something it truly is not; competitive with existing products or in any significant way market changing.

When I quizzed these guys on how well the system would work in the real world, they were open about its limitations. The Internet is squirrely, and the way that most folks configure home networks (wifi, multiple users, etc.) degrades performance, while an instantly streamed video needs ideal performance. You really couldn’t play a frontline game on OnLive. The most you could do is get a basic feel for the graphics and gameplay, so it could usefully be positioned as a marketing device for frontline games, and I can see this being a worthwhile use of the technology. -The easy gut check on this is to think of clicking on any content on a webbrowser, and how often you have to wait a moment for connection and download to start, even with an edge network employed.

They did advocate for OnLive being a good place to play less demanding or casual games, but I don’t get how that business needs this sort of technology. Casual has a fully functional model in browser-based and small executable games, which tend to require similarly minimal processing power, so OnLive’s posited server side GPU advantage is basically obviated. When I first saw this sort of tech demo-ed by g-cluster for Comcast some years ago, it was intended to leverage the broadband network to help minimize the barrier to gameplay of cruddy settop boxes from MSOs. There’s a lot more going on around the television these days, so that’s less important, especially for anyone with an interest in games, even casual. My own feeling, though, is that the big push by OnLive to present itself as significant and strategic is largely to achieve presence at the headend of broadband providers (especially MSOs), because I don’t believe it will work well enough for any sort of games unless they have ubiquitous presence at the headend. -This is where the questionable feel of the thing comes in; they need to sound game-changing, but they’re not, and anybody that’s familiar with game and/or internet tech knows that they’re not.

Where the guys at OnLive almost had me on their product having a unique value was in their description of video compression and decompression technology. My feeling generally is that the problem models like OnLive must deal with best is optimizing video streaming, and that with all of the major entities putting significant resources to this problem, I don’t see how a game-video-streaming entity can compete. Hence, their core technology is never defensible.

But the fellow at OnLive responded that games have a unique need for immediate “bufferless” video with instant compression and decompression. Which seemed valid at the time, but not completely sayisfying to me. Upon further consideration, my opinion is this; while it is true that games have a unique need, all that “instant” compression and decompression actually is is highly efficient compression and decompression. And highly efficient compression and decompression is the holy grail for a number of powerful and important entities. The game-specific focus doesn’t really drive the need for a different sort of compression, it just changes the requirements for compression of the stream, most likely forcing the 1:1 ratio of “servers” to users that OnLive utilizes. The unique aspect of video for games distributed in this manner is in making the video feel like an unbroken experience, rather than sequential pieces, somehow masking the ugliness of connection irregularities, but that’s likely just a matter of aesthetics.

1. I saw G-Cluster demo this sort of system for Comcast a number of years ago (perhaps 2002?), and G-Cluster is running it today in a number of places for a broad variety of systems. -Including an HD iteration that OnLive lacks. If OnLive is enabling this so much better than a company that’s had a commercial product available for years, that’s most impressive. However, given that there is a functional system for this sort of thing that has not yet taken over the world, I’d also suggest that it’s far from a sure thing for success. Something that Takahashi glosses over is that the problem is getting the video to the user fast enough, not getting the user commands to the server. -User commands are trivial amounts of data. So, the solution must be largely a video compression solution, and not really game-tech specific, aside from optimizing the game on the server.
2. The statement that “I’ve seen it work” is meaningless, because any demonstration of streamed content has so many variables, and it’s so very easy to simulate good functionality.
3. Sony doesn’t suffer if this tech is real and significant (not certain yet), because they already have an appropriate hardware offering in the powerful and largely amortized cell technology, and streamed video has a lot of big brains working toward optimization of that side. MS similarly seems unthreatened. -If OnLive masters video compression technology beyond the numerous other entities working on that issue, that would be most impressive. The threat to Sony and MS seems more that eventually making this sort of thing work ends up being trivial, but that’s not good for OnLive either.

Lastly, it is worth noting that Infinium did not attempt to launch a similar technology, despite what Takahashi says. -They were a conventional streamed application play (along the lines of Exent, etc.) with the addition of a hardware element. Where OnLive is similar to Infinium’s Phantom is that it shares the same defensibility issue in that if it does end up being successful, its pieces are too easily reproducable using existing best of breed providers, so that as soon as it can fly, it can be surpassed by an aggregated tech offering.

-Nathan

At the same time, I think that developers, who tend to have a less strategic and more visceral response to pre-owned, may have less issue with used games at TRU or Amazon. Simply because they feel that Gamestop is an entity that they do a lot for, with in-store marketing, etc., and are just generally a part of the game community that should understand their pain better than an external entity would.

However, if the generalists actually move the needle in sales, I don’t see publishers going along with it, and response would be fast and significant. -My initial guess is that they won’t move the needle, and that there will be a less direct impact from their entry into this area.

As has been pointed out, Amazon, the most interesting of these from a usage perspective, is fairly insignificant when you look at actual market share. They may do well on the model of having users ship games in to them, and nobody is better set up to do so, but this isn’t a new model, and it hasn’t taken off yet for others.

Toys R Us has only 585 stores in the U.S., so that’s pretty much a destination store with only a limited demographic overlap with GameStop. -Probably incremental pre-owned sales, which is great for GameStop, but seems set to rile publishers.

Best Buy’s depth of involvement appears fairly undefined at this point, although they do look like the most direct threat, if they choose to get heavily involved. But there are several factors that make BBY seem less likely to be wholehearted in this area:

• They make their money on hardware, and brand is meaningful here; now, though, in the current economy, this is less true, and it may well be what they feel gives them the chance to move further into pre-owned games. But, nobody knows better than BBY that content on physical media is transitory.
• They are aggressive in moving toward support of digitally distributed product. -You’ll remember how they jumped on music distribution, and that would have been even more substantial earlier if they could have gotten their buyers more into line. It is an odd time for them to double down on sales of games on disks.
• If they’re going to push publishers on anything at this moment in time, it doesn’t make sense for it to be pre-owned. If I were Best Buy, I’d threaten to do this, then find a way to partner on sales of digital content revenue. Best Buy could stop selling games on disk entirely, because their bottom line comes from other categories, and this is a key strength they have over GameStop. Getting more reliant on physical media today, at the cost of vendor relationships seems unlikely unless just it’s bizarre desperation.

These moves from retailers do however seem to combine with an economy in which:

• Developers have a hard time finding backing or loans to make full frontline titles.
• Larger publishers and developers are laying off talent, freeing up creative for other projects/models.
• Users still buy a lot of games, but are likely to buy them in smaller pieces, if they can.

To form a perfect storm for accelerating the move to digital distribution and more varied content models.

EA’s woes are widely documented, including closing the door on the Wii horse a bit late. THQ now seems in dreadful shape, with only Activision Blizzard truly flourishing among the majors. There are endemic issues with the existing models for game sales, and as we move to digital distribution, it remains difficult for the big publishers to find the right way to that transition.

When you look at smaller publishers/larger developers, the current economy is painfully throttling, as development of a conventional title takes a significant period of time, and is generally dependent upon debt or external funding for some portion of the cycle. Alternate models are able to coast a bit at the moment, and hopefully will find a way to thrive; many online startups were funded last year and continue on that investment. -The word is that A rounds are not happening, but Bs are solid, although it’s hard to get real stats on that sort of thing.

With various low-overhead casual intitiatives (including iPhone) thriving, I suppose it’s a nice time to be a garage developer. But the two entities that are doing fantastically well are Activision Blizzard and Gamestop. Activision because it’s sublime in management, cash-rich and, in World of Warcraft, owns the leading online game entity. And Gamestop because it’s highly effective in taking advantage of the benefits of increasing game sales, without suffering from the downside of an inefficient publishing model. -It also happens to be about the only retail chain that’s doing really well these days, so they’re in an incredible position to negotiate real estate.  What will they do with this additional footprint, to say nothing of the existing footprint, when things move further to online distribution? It’s hard to say, but the power that being the strongest player standing in games today, combined with the pause that the economy is creating, give them the best possible shot at bridging to the next era. A question has been raised about whether GameStop’s influence over the industry is entirely positive at the moment. But I don’t believe the problem, if there is one, comes from them; it’s rather lack of vision from publishers, and an inability to move forward appropriately.

But, it also continues to be the case that interactive entertainment is a story of the ongoing compromise between on one hand minimizing the burdens of the cost of development for a rich experience, and on the other the potential for monetization of any content. So, while MapleStory is a highly successful business, it’s not strong enough material to monetize at the level of WoW, and there will continue to be a demand for richer quality entertainment, although probably not for more than one of these rich MMOs at any given time.

As I’ve said before, assuming that one can easily build a hugely successful subscription MMO is an ugly illusion, unfortunately much indulged in during the past few years. WoW is built on successfully extending gameplay over the years and an extensive and well-developed social network, including incredibly sophisticated guild relationships. It may be the case that WoW is so good and its infrastructure so comprehensive that no one can compete against it, but that quality will be its bulwark, rather than the changes in market conditions. However, the social nature of the MMO is uniquely well-suited to enabling a leader-killing scenario. WoW sucked the life out of Everquest with a specific and reproducible model:

• Better gameplay for the opinion leaders who cared about that sort of thing. -And sublime guild support to keep them.
• Easier entry for novices.
• Better graphics, which, despite what some of my ludologically purist friends may say, is a significant driver of both groups.

-All led folks to try the new game, and, once there:

• They invited friends from Everquest and RL, because the game is inherently social.
• The game had enough momentum in user growth that it was hard for players to justify remaining at Everquest, because very few individuals will pay subscription fees for more than one MMO.

There are currently some interesting development projects out there, and one of them might be able to pull this off as well. The GigaOM piece mentions Bobby Kotick’s statement about a new WoW costing a billion dollars to create, and that being an insurmountable obstacle to competition. This is a convenient positioning from the man who merged with Vivendi to get WoW. However, that figure certainly reflects the aggregated cost of development of the game, all incremental content (BC, LK, etc.) and a few other things, that really would be investments over time. The two elements that have made investors probably over-interested in MMOs are ongoing revenue and the fact that it so clearly provides a structure under which an initial launch reception can indicate whether additional development costs are justified. -The latter of which negates Kotick’s stated issue.

While it is a bit of a fool’s errand to go up against WoW, that’s just the sort of effort that makes the world interesting, and I’d hate to see anyone blocked from giving it a shot by erroneous assumptions. -Because it is possible for something to be good enough to kill it, and there’s nothing but quality of execution keeping that from happening.

• Too little emphasis on the well-performing Wii platform.
• Too large a percentage of sales coming from lower margin co-publishing efforts.
• New titles didn’t take hold.

EA’s recent announcement of about 50% of their efforts now going to the Wii sounds not so great; it just makes you think of open barn doors and horses. Announcing an emphasis on Wii two years ago might have been very clever and insightful, but it will be hard for this action to do everything they need it to do at this point. EA’s salvation by Wii will face two challenges; the first is that they are assuming that they’ll achieve hitherto unseen levels of third-party success on a Nintendo platform. The second is that they’re assuming that FY 2010 is a fairly predictable extension of 2009 in terms of consumer usage of technology, including Wii trends. Of course, it will be to some extent, but, there may be significant variations, both because of where all the consoles are in their respective life-cycles, and changes to the television and PC game environments, and this variation will likely not favor EA’s goals.

One element that may come into play relative to these environments is that it’s long been difficult (and unattractive) to directly invest in game development. This has led investors to a few different paths in game investment. One impact of this was last year’s excessive flowering of MMO titles. Perhaps more significant in the long term will be the investments in infrastructure for PC titles and the casual PC-game industry in general. Invariably, some of these efforts will bleed toward the gamer audience, because that’s where the big money still is. These new casual publishers, developers and tech plays are much more flexible than a conventional frontline publisher can be, and invariably will come into competition. If EA leans strongly toward the Wii, it is leaning into soft competition with casual, and in short order may find itself in a position where it could be difficult to keep the margins it depends upon. Casual can be a dangerous place for EA; their core casual offering is large but simply a white-labeled Oberon offering. Last year EA closed their casual division, and while they presented that as representing a realization that casual could touch all categories (quite true), in practical terms, it’s a different beast, with different demands and opportunities, and it can’t be prioritized, built and sold by exactly the same folks as $60 core titles.

Regarding EA’s issues with co-publishing deals representing too much of topline sales, and driving down margin dollars; this seems like it could be troubling to investors. EA is in a very strong position to represent a title to a retailer, and push product out, so getting that part of the deal is only dependent upon beating a very limited pool of competition (Activision, Take2…) to a title with name developers, or in production or complete. Not much vision is required in this. So, if at this moment EA is too dependent upon sales of co-published titles, that might indicate that they are neither identifying nor acquiring enough successful new IP early and also not generating enough of it internally (Dead Space aside). This would be a real problem…