Gaming Consoles: Stop-gap Technology or Mainstay Trend?

By John Greaves

Gaming consoles have enjoyed a unique niche in our culture fueled by a fairly loyal and growing fan base. Now they face challenges to their product offerings on several fronts. Blu-Ray players and set-top boxes continue to compete with consoles for streaming video and television content and OnLive has emerged as a contender in the video game world with partnerships with game developers like Electronic Arts, Take-Two, Ubisoft and Atari.

The advantage game consoles have is a pre-established fan base, one accustomed to the world of online content, Internet streaming and more than stand-alone set top boxes like Vudu can offer. According to blogger Michael Wolf in a 2008 post for eHomeUpgrade, “The price tag for standalone boxes is more than most would pay, especially if they can get similar (if not equal) services through another box like a game console (which also, it goes without saying, plays games and DVDs)”.

According to Netflix vice president of corporate communications, Steve Swasey, his company is aware of the value consoles add industry wide. “There are three jewels to the crown and Netflix is wearing the three jeweled crown with three devices the Xbox 360, the Playstation 3 and we announced that we’ll be available on the Nintendo Wii in the spring. The Wii has sold 22 million units in the U.S. alone. So we are able to reach a lot of subscribers through these consoles alone.” This adds a lot of value for these consumers as Swasey points out that Netflix revolutionized the video rental industry by saving people from going to video stores.

Still it is significant that Netflix is not exclusive to consoles. “The goal here for Netflix is to be ubiquitous on any device to watch movie and TV episodes on. The game consoles are one way for us to reach that level of ubiquity. We also have deals with Blu Ray disc manufacturers and TV manufacturers like LG Electronics and Samsung and then of course stand alone devices like the Roku and TiVo, now we have more than fifty devices which stream instantly from Netflix,” Swasey says.

Add to that the fact that Boxee, arguably one of the fastest-growing software solutions for internet streaming content, doesn’t currently run on any game consoles. Andrew Kippen, vice president of marketing for Boxee, says he doesn’t know what technology issues would have to be addressed to get Boxee on game consoles but they’re interested in working with manufacturers to make it happen.  “We see Boxee as the Android of the living room - software that runs on TVs and any device that connects to them.  With game consoles already sitting underneath millions of TVs - we’d love the opportunity to provide our media experience on them.”

While Kippen acknowledges the attractiveness of the large footprint Sony, Microsoft and Nintendo have, he says Boxee is also watching a newcomer to the space. “I like the idea of something like OnLive as well. If we look at a platform like that, the minimum requirements that Boxee has probably gel pretty nicely with the minimum requirements that that platform has, so I hope one day we can create a Boxee OnLive box. We haven’t had any formal discussions with them but I think it would be a great customer experience to get that kind of all in one box for all of your entertainment.

Rob Green of Imagine Communications says, “I think consumers want the content they want, how they want, where they want it.” So in order to remain relevant it appears that consoles are going to have to do more.

Encouraging news for Sony and Nintendo at least is that Netflix appears open to the idea of coming to the PSP and Nintendo DSi handhelds at some point. “Long term we want to stream on any device you want to watch on,” Swasey says.

This means at least two of the big three can hope to increase the attractiveness of those platforms. Nevertheless, consoles cannot rely on pushing sales across their platforms to save them. As the danger of “box fatigue” grows the resulting push for cross- functional devices means that the race is on to plant flags in prized living room real estate and consoles need to be among those running. Console manufacturers seem to be reacting dynamically to the threat.

Microsoft which was the first gaming company to partner with Netflix, and has planned an IPTV offering since 2007, has announced that Xbox 360 owners in the U.S. will be able to get AT&T’s Uverse offering by this spring. Xbox Live members already have access to Zune, last.fm and social networking through Twitter and Facebook integration. According to blogger Michael Mahoney Microsoft also has a deal with British broadcaster Sky to leverage Xbox to stream live television programs, including sports, TV shows, and movies.

Mahoney says Sony and Nintendo are working with BBC’s iPlayer to provide recent television shows to their consoles. According to Mahoney, “A major benefit of console subscription-based service is it eliminates the need for set-top boxes and satellite dishes, a huge cost-saver for Pay TV operators to deploy, service, and upgrade.”

Another major offensive strategy is gaming consoles’ encouragement of social networking in their fan base. According to a December 17, 2009 Sony press release, “10 million users around the world have visited PlayStation Home to play games, attend special events, watch videos, listen to music, meet new friends, and launch into multiplayer PS3 games — averaging 60 minutes per visit. Over 250 community events have been held in PlayStation Home since its launch, many organized by the PS3 community.”

Sony is sweetening the deal at Playstation Home by giving Playstation 3 version 3.10 users the ability to “easily showcase their game accomplishments to friends and family, and post information about the PS3 games they purchase from PlayStation®Network to Facebook.”

It’s not clear whether these moves will be enough or whether current game consoles will join the Sega Genesis and Commodore 64 as museum artifacts.

Partnerships Profit From Gaming Consoles

By Alan Smodic

It’s no secret that online streaming content is quickly becoming the first choice for many viewers and the battle to expand that beyond the computer screen continues to build.

Microsoft’s Xbox 360 and Sony’s PlayStation 3 stand at the forefront to provide consumers with a set-top box that offers a complete multimedia experience as a gaming console, DVD or BluRay player, online content provider and social media aggregator.

Both consoles attempt to stay on top of the game, and one step ahead of the other, in this venture. But as they do, who stands to benefit the most?

A prime example of the possibilities was brought forth by Xbox last month when it was reported that the system may soon reach a deal to stream ESPN-televised sporting events, for a per-subscriber fee.

CNET gaming writer Jeff Bakalar says that setup should be a no-brainer for TV networks. “Theoretically, a TV network could reach millions of people with an Xbox Live ‘channel.’ Microsoft has sold 39 million consoles worldwide, with half of those systems hooked into Xbox Live,” he says. “With numbers like that, it’s no wonder cable companies are looking to game consoles as another outlet.”

The content provides added value to the hardware for consoles like the Xbox 360, PS3 and Nintendo Wii, which benefits each company. For Xbox, it also allows the company to charge a premium for the extra content such as its current setup with Netflix streaming movies.

On the other hand, the content creators are able to reach another mass audience without much effort, thus displaying its ads to many more eyes.

Currently, however, the top streaming site, Hulu, limits its video sharing, which was not always the case. Hulu had been made previously available through applications like Boxee (a media-aggregator application for Windows, Mac or Linux) or the PS3’s browser. But that fact is leaving a number of people perplexed, including the U.S. Government, which asked NBC Universal CEO Jeff Zucker about the decision during a recent congressional hearing. Hulu is a joint venture between NBC, Fox, ABC and others.

Zucker’s response to the questioning didn’t clarify a thing. “This was a decision made by the Hulu management to, uh, what Boxee was doing was illegally taking the content that was on Hulu without any business deal. And, you know, all, all the, we have several distributors, actually many distributors of the Hulu content that we have legal distribution deals with so we don’t preclude distribution deals. What we preclude are those who illegally take that content,” he says.

Boxee issued a response almost instantly, stating that it uses a browser to access the content, just as anyone with a computer or PS3 was already doing and wasn’t stealing a thing. It even offered to speak with Zucker and noted that Hulu should be taking advantage of Boxee’s userbase.

“There are now close to a million people using Boxee,” Boxee says in a statement. “When they watch shows from Hulu they are watching the ads and generate real revenues to NBC. We hope we will be able to work with NBC and offer more content and value to Boxee users as we believe a good number of our users will also be willing to pay one-time or subscription fees to access NBC’s content.”

Boxee, in addition to its computer software, has plans to release its own set-top box later this year, which will provide direct competition to the gaming consoles — minus the gaming factor.

The high number of consoles already sold (a reported 60 percent of American homes have at least one console), though, gives the PS3 and Xbox 360 a nice headstart. But, as Hulu is showing, providing that content can be tricky.

“We want to offer the best entertainment on Xbox Live in as many countries as we can,” Xbox corporate VP John Schappert told G4 at E3. “But it takes a while to get these deals done, it takes a while to form these relationships, form these partnerships and find a great experience for [all] of our partners.”

In addition to streaming other videos, both Microsoft and Sony have offered their own direct-to-console shows - The Guild, which airs exclusively on Xblox LIVE; and The Tester, a free reality TV show that will debut on PlayStation 3 and PlayStation Portable this month.

The success of these two ventures for the gaming giants opens another realm of content distribution. With that in mind, they both are poised to serve as a be-all, end-all box-top system.

That success, however, may lie with whomever secures the better partnerships first and that answer could come soon enough.

Virtual Worlds Go Mainstream For Businesses

By Ron Callari

Viximo, a 2-year-old start-up company, is fast becoming a leader in the burgeoning virtual goods industry. For those who are new to this commercial space, virtual goods are digital products that are gifted, bartered or paid-for items online or via mobile phones. Videos, icons, e-cards, personalized avatars - items that allow people to better express themselves, add gravitas to their online persona, or increase their enjoyment of a game - make up the products that are now known as virtual goods.

Considered an unlimited opportunity for thousands of Web publishers, Viximo distinguishes itself from its competition in how it addresses the market. It claims it is the first and currently the only virtual goods provider that brings together everything a publisher needs for virtual goods in one complete, easy to implement, customizable solution.

Viximo is one of the only companies that offers both a system for selling virtual goods and the goods themselves. This then permits clients to either upload directly into their own virtual gift stores or customize at will.

In addition to partners such as Fotolog and Zorpia, Viximo just added BlackPlanet.com, SmartDate.com and FanIQ.com into its virtual goods platform. These deals extend Viximo’s reach to 60 million users, a new milestone for the company.

The increased interest in virtual goods is apparent by how quickly it has scaled. U.S. consumers spent $1 billion on such items in 2009, according to Inside Network, a market research company focused on Facebook and social gaming sites. Daniel Strang, the newly appointed CEO of Viximo, says he “sees these types of purchases as a potential substitute for dying revenue streams (such as subscriptions) in the publishing world.”

Brian Balfour, founder and vice president of product marketing for Viximo, speaks with DMB about how companies can capitalize on the virtual goods market.

What is the current status and future of the virtual goods market and how does it break down percentages between social networking, online gaming and online dating sites?
The current size of the virtual goods market in 2009 was about $1 billion in North America, and about $7 billion world wide. While North America still represents only one-seventh of the global market, it is the fastest growing - quadrupled in 2009 - and the youngest. There is still a lot of room to grow in North America and we expect it to double in 2010. I am unsure of exact percentages, but the majority of virtual goods purchases are taking place on social networks, which includes social gaming - probably around 50 percent. The next biggest area is more traditional gaming and virtual worlds, with online dating being the smallest piece at the moment.

What do traditional brands use virtual goods for? (e.g.  Kohl’s, American Apparel, Sears, K-Swiss, Eberjey)
There are a couple opportunities for brands to get involved in virtual goods.

The first way is a sponsorship model. Users are highly engaged with virtual goods and spread them virally to their friends, so it’s a great place for brands to embed themselves. Brands can pay to have branded virtual goods offered to the users in various social networks and games. It basically acts as a very engaging form of promotion that performs much better then banner advertising does on social communities.

The second way is a licensed model. Certain brands that have a luxury appeal to them have an opportunity to sell virtual goods around their brand to users for actual money.

Does Viximo supply Second Life with virtual goods? According to the blogosphere that site has lost popularity over the years? Why?
Viximo does not supply virtual goods to Second Life. We primarily work with social networks, online dating and casual gaming sites. These areas are where most of the growth happened in 2009 and will continue to happen in 2010. I think the fact that the public has lost interest in Second Life is a good thing for the virtual goods industry. Typically people originally associated virtual goods with something very geeky and non mainstream like Second Life or other 3D worlds. The fact is that they represent a smaller portion than other areas like Social Networking. Virtual goods is a mainstream thing and as users become exposed to it more often, it will become more socially acceptable and we will continue to see the industry as a whole grow.

What types of sites are “hot” right now? And why?
The three verticals [that we] mentioned are where we will see most of the growth in 2010. There are still thousands of these sites worldwide that have yet to institute virtual goods. But looking forward beyond 2010 there is a question of how virtual goods will expand into the broader social Web and content arena. It will happen, but just how we don’t know yet. Other areas of potential opportunity in North America would be consoles (xBox, Wii, etc).

Ron Callari is a freelance journalist and editorial cartoonist whose work has been published on AlterNet, CounterPunch and the Sacramento News & Review. He is currently a social media blogger for InventorSpot.com and the author of two graphic novels.

For Mobile Gaming’s Success, ‘Constraint is the Mother of Innovation’

By Alan Smodic

When the Facebook platform went live in May 2007, Zynga’s Bing Gordon says it changed everything about the social gaming industry.

“Its developer APIs were as solid as any video game console development tools, and it achieved mass market penetration much more quickly (Facebook apps are estimated to have reached 40 million users in just 12 months),” he wrote.

Social games, like Zynga’s Farmville and Mafia Wars, burst onto the scene and never looked back in the last two years, which led to the rapid growth of the industry. Zynga alone sees about 230 million monthly active users on Facebook.

But as the realms of social media move away from the computer and onto mobile platforms, more specifically to those of the iPhone, Android and BlackBerry devices, the young industry must adapt with it.

On the developer’s end, that hasn’t been too much of a problem, especially in terms of Apple’s iPhone. “The iPhone apps development environment has also proven to be enormously productive,” Gordon says, “and the iTunes Apps store is clearly a new ‘killer app’ for mobile computing.”

However, things begin to get a little trickier when other platforms come into the mix. Translating game play from the Web to fit onto numerous devices running either Android, BlackBerry, iPhone or even Windows Mobile takes time. And money.

Foursquare, which recently launched a beta of its BlackBerry app to about 5,000 testers, stated before that it ramped up its BlackBerry development only after it secured more funding. Gowalla, Foursquare’s biggest competitor, has yet to implement BlackBerry or Android native clients.

“As soon as we felt good about the financing going through, we hired our friend Pete to start working on it,” the company says in a press release.

Even then, it took another four months before the beta released. Meanwhile, iPhone and Android users were already growing well accustomed to their apps thanks to what many developers consider a better programming experience.

What has slowed down the applications more, though, (other than the opinionated arguments behind the SDK, API and IDEs) is the lack of ability to transition all profitable elements of the gameplay from the Web.

Each major social gaming company has admitted that they are tinkering with the elements that make them profitable. But most have found success through virtual currency, which hasn’t fully optimized yet on the mobile platforms.

For instance, Zynga reports that purchases of virtual currency account for most of its more than $100 million in revenue in 2009. That says a lot for its necessity to be included in all versions of its games to be successful.

It’s these limitations, or others that may surface as the industry continues to grow, which will only help it flourish, according to Scott Jon Siegel, a former iPhone lead designer for Zynga who now works for Playdom.

Playdom boasts more than 20 million monthly active users and possesses the no. 1 game on MySpace, Mobsters, which recently launched on the iPhone.

Siegel likes to work with a personal slogan: “Constraint is the mother of innovation.” ”As a game designer, I refer to this principle on a daily basis,” he writes. “Whether working on a brand new title, or making improvements to an existing one, the best ideas are born out of limitations - boundaries which designers must work around to achieve their goals.

“Easy problems are simply those with too many solutions. It’s when our options are severely limited that we begin to look in new and exciting directions.”

Playdom’s CEO and co-founder, Dan Yue, takes it one step further, stating that sticking to his company’s values of relying on user feedback and metrics to understand exactly what players want and expect will make social games successful on any platform.

“As long as we continue to respond to our players, we’re confident our games will be successful on new platforms and as player expectations evolve,” he says.

Car 2.0: Where Silicon Valley Meets Detroit

By Sheila Shayon

“Imagine a dashboard that reconfigures itself for each driver, or a car infotainment system that tells you where your friends are, or that points you to the nearest gas station when it notices you are running low on fuel - that’s the kind of user experience the QNX CAR application platform is making possible,” says Andy Gryc, product marketing manager, QNX Software Systems.

The QNX CAR application platform is already being designed into next-generation vehicles and includes Internet radio, video on demand, games, dynamic navigation, location-based services, climate control and a virtual mechanic. QNX provided the software foundation of ng Connect’s LTE Connected Car concept vehicle. The platform provides all of the car’s system software and infotainment applications. More than 50 cooperating technology partners and automotive customers, including Adobe, Cisco, Daimler, Delphi, Freescale, General Motors, Google, Gracenote, IBM, Mercedes-Benz, Microsoft, Panasonic, Pandora and Volkswagen, make this the largest collaboration of its kind, to date. The motive? To encourage mass applications and the healthy growth of the underlying development ecosystem.

Ultra high-speed, high-bandwidth connectivity will replace heated leather seats, traditional GPS or sunroofs as must-have options for new cars. A revolution for drivers and passengers, the in-vehicle experience will provide consumers access to network and cloud-based applications - available by touch and voice activation.

The LTE (Long Term Evolution) Connected Car operates in the 4G world - actually, 3.98, as it’s still in prototype and not ratified - but the performance gain is four to five times the speed of the 3G-networked world. Unlike 3G, which is a voice-based channel with data as an afterthought, 4G puts data capacity first, and is an IPV6 mobile platform. Furthermore, LTE has a lower latency making applications such as networked gaming and 1st person/player interactivity quicker — particularly across continents.

Vehicles connected to the cloud become private networks — Wi-Fi hotspots. An obvious question arises about safety — or as the industry has named it, the ‘driver distraction issue.’ According to Gryc, “The vehicle’s integrity systems isolate the Internet content. It’s really about additional technology such as adaptive cruise control - a radar system that alerts a driver to slow down when approaching another car, or voice control of radio stations or climate control. It uses TTS (text-to-speech) — a complete language.”

As for the privacy/security issue, it will be the same as personal privacy on your cell phone — no better, no worse.

In addition to in-vehicle entertainment, ng Connect 4G services will take a development leap forward and include e-Health: Home monitoring and instant connectivity with doctors and personal health history records; Digital Signage: Kiosk-based billboards connected to the Internet for remote-controlled changes of content — such as updating advertising or locale-based messaging; and M2M — machine to machine.

“The appetite for data services is not diminishing. The number of devices will shrink - and there will be an ultimate smart phone device that will service various other devices,” Gryc says. QNX software is the leader in the Connected Car platform, presently operating in 12 million vehicles worldwide. The reason for its success? “We’ve had the ability to understand the automotive companies ‘pain points,’ and develop reliable software that is production ready. Traditionally, once the consumer drives a car off the lot, there’s no more relationship between the manufacturer and the customer. ng Connect applications allow a longer-term loyalty and the ability to update customer software through cloud connectivity.”

Is the car industry ready? “Video streaming will be one of the major drivers to bring broadband connectivity to cars,” says Dominique Bonte, practice director, Telematics and Navigation, ABI Research. “The auto industry, however, has a number of concerns such as the lack of consistent 3G/4G cellular coverage, the lack of standards in hardware and software, driver distraction issues, etc. As a consequence we might see third-party providers from the CE space bring portable solutions to the car.”

In 2007, at the Detroit auto show, Ford Motor Co. displayed a large-screen video projection of Bill Gates instead of a car. It was seen as a sign that selling cars in the future would take so much more than attractive sheet metal and powerful engines.

Ford is now working on a project with the University of Michigan dubbed American Journey 2.0. The project offers students open access to a developmental operating system to help bring cloud computing and social networking to Sync, the company’s in-car connectivity and communications/entertainment system. The goal is to have the students - the next generation user-base - help figure out what’s next. As Silicon Valley meets Detroit, and Gen Y takes the driver’s seat, it’s definitely time to fasten the seatbelt and see what consumers and their cars will be doing together in the near future.

Mobile Gaming: Profitability Still in Limbo

By Alan Smodic

Although mobile gaming is gaining an audience, the vast majority of gamers still opt for external devices or desktops, says Microsoft’s Larry Hryb. But that’s not to say that mobile isn’t catching up. In fact, today’s more popular games may require the use of a PC or Mac, but are played in the cloud.

The result is a number of games that can be accessed from any number of machines, including a computer, traditional gaming console or mobile device. And it’s this revelation, Hryb says, that will translate to a new gaming market.

If it hasn’t already.

“I play the games because I like to get a feel of everything and it’s obvious a lot of people are playing them,” says Hryb, the director of programming for Xbox Live. “It’s in a different realm than we are in terms of gaming and the audience, but it’s made great strides.

“The iPhone, the [Sony] PSP, the [Nintendo] DS — these could all show major advancements in the next year and beyond.”

Two major driving forces reside within the streamlined development of social gaming and its advancement to a broader audience: 1) games can be developed by any decent programmer or company on the cheap (especially when compared to console games) and 2) games can be marketed to millions of registered people on Facebook and other social networks across the world for free.

These traits provide a process that is beneficial to both ends of the social gaming community, writes Jeremy Liew, a managing director at Lightspeed Venture Partners.

“Social game developers have taken a leaf out of the Web 2.0 page. They launch a game in beta, without completely fleshing out all elements of gameplay,” he wrote. “If the game finds an audience, it will earn further investment in development. But if it does not, then the investment is stopped. This helps mitigate risk.

“Furthermore, developers know quickly if a game is going to work, and are able to iteratively launch new features based on actual data on what players like to do.”

What most Facebook users are vying for now, however, is the ability to play their favorite social networking games on their mobile devices. Zynga, the leading creator of the social games (including titles such as FarmVille, Mafia Wars and Vampires) hears the cry.

The company’s continued success on Facebook and MySpace (with unique monthly users now reaching 230 million) has delivered revenue from the estimated one million players that spend money on virtual goods within the game each month.

“With the popularity of virtual goods today, we are in the early stages of a new economy that could grow and shape the future of the Web,” says Mark Pincus, Zynga’s CEO, in a press release.

But therein lies the greatest problem when making the transition to the smartphone platform. Few, if any, game developers have found ways to be profitable.

For starters, the ability to implement the same in-game virtual purchases is not available for free games (despite the fact that the iPhone 3.0 software did enable it for paid apps). Opening this feature, Pincus says, would allow developers to concentrate on mobile gaming.

“To me, this is Web 3.0,” Pincus says to Venture Beat at this year’s Social Gaming Summit. “If Apple can make these improvements, they should be able to go from a billion apps sold to four billion quickly.”

Zynga has recently pushed a handful of its games to the iPhone platform, most notably Mafia Wars and Vampires Bloodlust. And the company is banking on the hunch that the iPhone and iPod Touch will flesh out the shortcomings limiting the full potential of social gaming.

Earlier this year, Zynga hired Steven Lurie as its general manager of its mobile game group. Lurie worked previously at the venture capital fund MHS Capital and served as CEO of online firm Advice Company. Needless to say, monitoring the iPhone platform will be high on his list.

Meanwhile, as games on this front fine-tune a working Facebook model for mobility, another wave of social gaming activity gains steam close behind, featuring geo-location companies such as Gowalla and Foursquare.

The aim of these two gaming platforms is to allow users to check in at various locations throughout the world, while connecting with socially networked friends and building points along the way.

The games act as a service in connecting friends in real-time situations in addition to serving as fun gameplay. Foursquare has seen its reputation rise suddenly, especially after being dubbed “Next year’s Twitter” by Mashable founder Pete Cashmore.

What all these innovative companies are doing is proving that they are listening to the players. They are breaking new ground, accommodating users on the go and reaching out directly to their pockets wherever they may be at the time.

And no matter who may come out on top of the competition, 2010 will prove to be a pivotal year for the iPhone/iPod Touch platform and the social gaming industry.

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