Traditional Games Breaking into Social Networks

by danhon

Traditional Games Breaking into Social Networks
A View from the Frontline
Develop Evolve – Keynote
Louis Castle, CEO InstantAction

Going to talk a little about traditional gaming: complicated games that cost a lot of money, and how we make money off those games since we’re heading for disaster in the retail space.

Going to talk about premium games, the internet business, then at the end, what kinds of technologies are going to be the right/probable ways to solve these problems. Not about my company, but there’s lots of others. I’m going to talk about competitors, too.

My bio: I started at Westwood Studios: Dune II, first game was an Apple type-in game from a magazine. We started Westwood because we wanted to work somewhere which we liked. I got into games from an art point of view. I was really impressed back then by the colour and the screens, that was before there were drawing programs. Pre-mouse, pre-tools. You’d draw on graph paper and then type in the hex codes. Which meant artists became programmers. Games Westwood’s famous for: Command & Conquer – one I was truly delighted to work on, Bladerunner. One of the things I got famous for – we became part of Virgin in ’92, people think we moved from Vegas to EA, but that was EA. In 92 we sold to Virgin lock stock and barrel, we didn’t have equity though. We sold to Virgin, Virgin sold to Viacom, we got to renegotiate, they got sold to EA. I sold the same company 3-4 times and didn’t get arrested.

Those guys at Virgin were shrewd. They got a good deal. By the fourth time…

We always built games we wanted to play. We were our own consumer. Biggest, brightest, biggest bang for buck. People were surprised to see me leave EA as VP Creative Development, I could work on anything there. What happened was the compression of the market – the hits driven business. You’re all feeling this. What I saw happening – I worked with Spielberg on Boom Blox – I saw teams condensing down to fewer teams of more people. Everyone is chasing the big hit. Everyone is chasing Call of Duty, Fifa, Madden. I don’t think anyone’s chasing Madden anymore… I saw this problem: few new ideas I was thrilled to see Bulletstorm. Fantastic game. Made in Poland? One of the few newer games. Really neat. I couldn’t believe how few new projects were getting started. At the end of the day, we saw what Hollywood was at the worst before the independent festivals.

It was really hard to get an organisation like EA behind something new. There’s a lot of money there, they have to go after the big dollars. If you’re guys in a garage, it’s hard to go after EA. Or Halo. Or Call of Duty. You can’t do it. When we started Westwood, you could do that. You could take on the big boys. You can’t really do that anymore.

Part of the reason now is so much production value. But the brands and the franchises become so important. You need awareness and to break out of the crowd. If you don’t have an existing one – a movie, a tv series – then you have to do your own stuff.

All gaming, casual to premium, has been or will be disrupted by internet technology. But we’re the first industry to have internet technology built into our products. At least premium games are still made the same way I made them in the 80s. You get a team, make a game, goes into a box, goes on a shelf, people buy it.

Premium gaming, PC and console gaming is not going away. The death of consoles? You’ll never see another Call of Duty? That’s not going to happen. Human beings like high quality entertainment. It’s not the same experience. People will make those. People will buy them. Where and how will they buy them?

All gaming will evolve.

Internet business disruptions: they’ve come down to a couple of categories. Pricing – everyone gets that. A market for something where there’s competition. Distribution, like Amazon. Full inventory – they can have everything. Direct to consumer and consumer powered filters, where consumers have control. That’s a powerful one in our business which hasn’t been explored yet. Connecting people who make it to the people who play it.

Finally, entertainment media training. This is the most important bit. Entertainment media training – discover and share, try free, pay for use. The way that we find entertainment is that we find it wherever we are. RSS feeds, stuff tied into web pages. The first thing I do is go to Google and type stuff in. I don’t do that now. I got to Daily Beast. I don’t have to search. From an internet point of view, what is it? It started with YouTube. You’d send someone a link to a picture and then they’d look at it. Then they’d send the video. That sharing of content is what we’re being trained to find. We don’t have to go to portals. It’s out there, we find it where we happen to be. We can try all this for free.

Brett, the Westwood studios co-founder, told me: games want to be free. I know people want games to be free. People want their entertainment free. That doesn’t mean they won’t pay for it, they don’t want to have to pay to *try* it. Can you imagine paying to read a headline on the NYT? When you get to where you’re hooked? I’m not saying it has to be entirely free, but it has to be free to be discovered. Charging to see? Bit tough.

The last one – people will pay for use. People will pay – if you do something they like, they’ll pay.

Premium gaming – the cost of games keeps rising. $20m+ I can’t think of a game I’ve worked on a game in the last 6-7 years that wasn’t above that figure. With the exception of Boom Blox, exceptionally engineered to be less expensive. Expensive games look virtually like film. They take a lot of money to make.

On the PC fan. I love the Macs, the PCs. They feel like a personal device. The gaming devices have been fun to make games for, but I don’t have that personal attachment. The problem with the PC market is piracy. It’s just horrible. The publishers have callbacks for certain games, behind the scenes they know for a fact 7-9 copies are played for every copy purchased. That’s really painful. Then you have people pirating games because they say they’re expensive. It’s a lost cause. The piracy issue is not unique to PC, it’s coming to consoles. When you start looking at terabyte drives for a couple hundred dollars, you can download anything and hook it up to your XBOX 360. As a former hacker, anything that can be made can be hacked.

Used and rentals: Gamespot and Wal-Mart – fortunately, I’m in the online space now. They need those retailers. Even though those retailers are patting them on the back and sticking them at the same time. If they even paid a small commission, that’d be decent. They legally are not required to, so they don’t. The big retailers are accelerating the decline, I called them parasites.

What’s happening? Didn’t we see this in the console business? Direct download is what we think – what people purport to change the industry. Not taking anything away from Steam, and it installs that widget on your desktop. They are doing a lot of downloads. 15-20% of direct download are Steam now? Why not 100%?

Bricks and mortar path is learn – pay 1st, wait, sample. Learn about it in a magazine, go to Best Buy, Walmart, then wait, have to drive out and buy and get it, come home, install it. Then update. Then they get to sample it. All of the things that are wrong.

Direct download – it’s better right? You learn on one website, pay for it in advance, wait for it to download, then sample it. No benefit. The only reason I go direct download, I can’t get it anymore, I can’t be bothered to go to the store. The bottom line is there isn’t any kind of benefit. There isn’t any benefit over B&M.

I don’t know what this is going to be like, but: discover and share, find for free, then pay after we’re comfortable that that’s what we want. This whole point is changing the offering at a fundamental level. Everyone’s focussing on the games. Fantastic games. Frontierville etc. The bottom line is – I see the game, I click, I play, I find, I have no choice but to share, I play for free, but if I want to shortcut I can pay. That fits the exact model.

We have seen the online games disruption. We discounted them because of the type of activity. If it had been Call of Duty, we’d have paid attention.

The established portals: Popcap, Pogo, Ads, subscription and buy 1st business models. These are the old way. They don’t go away. But they – Pop Cap, all these guys, they can’t survive by advertising to drive people to their portals. But the CPM, etc. If you look at that, Facebook and all these other networking sites – Facebook is driving it so it costs more and more. It drives price per impression down. It’s a failing model. Driving people here is not working. They don’t want to go someplace else.

The disruptive networks – we’ve seen it already. Playdoms, Zyngas. Facebook has a platform. This is what our industry will look like – it may not be exactly like this, but it will have these components. I stayed away from Everything is a Game. Even cars have games. Games are everywhere. Someone should be waving a flag. But we’re not the ones who invented evolution of games – it was the web guys.

The actual customer funnel. Visitors to customers to money. The graph is wrong. We’re missing the portal. Peopl ehave to use money to drive people to a portal. It isn’t a wide space. It’s a narrow point. It’s a social network instead. It’s a bunch of people talking to each other. You’ll go from the social network to the game directly. Games on Facebook work this way, this will apply post that, not just to games.

What will disrupt premium gaming?

It’ll be discoverable, direct, sharable, free. It’ll be thin client. This works really well. Gaikai and Onlive are great services. There’s a small number of people who are getting a fantastic, a pretty good sized people who have an OK experience, but then lots that have a bad experience. The tech isn’t there yet, but the solution is right. We can get latency down and bandwidth up across the board. Bandwidth is cheaper, but dependable latency is getting worse. It’s not going the right direction. Gaikai’s solution is different from OnLive. OnLive is depending upon a few supercenters and Gaikai is more widely distributed.

Progressive download like Awomo and Steam. Steam was progressive when they first started. Turns out that’s a pain in the butt. Awomo – super fast, but no. It’s quick.

Hybrids: instant action, gamestreamer. Thin client partner, our partner at instant action is Gaikai and progressive download. It’s work. But this bridges the gap.

Financial model is microtransaction based.

What are the barriers?

AAA hits are built for bricks and mortar where the big moeny is. The teams have even less time for adaptation. Every single big team on every franchise – works exactly the same way. Big least of features. You’ll never get them. Zero time for refactoring. After it ships, some other team might patch in. It’s never built in. They put all heat, all gas, into the game so it can be the best it can be. Discoverable, sharable – has to take no time away from the AAA teams. It speaks against native client, Unity, Torque. They are not going to refactor games for you. They build technology, use the machine to its potential.

Abstraction layers will not work, yet – virtual machines are too much of a performance hit. Crysis, Call of Duty, they push it right to the limits. We will need some number of generations before we can emulate an XBOX so well you can play through a browser. Once we make that transition, we’ll take up all that computing power and memory guaranteed anyway. Sandboxes means we don’t have access to resources. Thin client requires connectivity we don’t have yet.

Plugins and browser extensions. There’s a huge dropoff. We lose 27% when they have to say OK. They won’t do it. The most beautiful thing for packaged to online is metrics. You measure everything. You watch the funnel. You ask a click. Every time you ask for one, you lose people. Very painful. OS and browser combinations are painful.

Business resistance. Where we have premium content, it has its market built. An unholy alliance between B&M who want to kill it and the people who want it to live. Resistance to change. Access is painful, download times are painful, piracy is painful. Publishers will say – I can’t offer a game $10/hr online. Then Walmart want $50 upfront. Pricing round the world gets difficult.

We have no magic bullet. There is no solution. I’m not saying I have it. I am saying I have identified the problem but we need to work together and hard to focus on the consumer experience. Find, share, purchase. Have you spent time thinking about it from their point of view? Other people are thinking about it. Zynga are – they got Google funding – they are doing very well. They are taking all of our customers, offering something we haven’t yet. I’m not saying this is the only way, I’m proselytising the process. We need to get premium games out to the masses – how do we stop people from pirating. When we buy an original game, where is the consumer benefit? That’s the problem for used games.