social gaming: boom, bubble, business or bust?

(eyeball time: 2.5 minutes but you might read faster…)

the dea skinny on what’s happening:

for those who closely monitor the gaming industry, the term, “social gaming” may conjure up images of gaming farms in korea or large mmo conventions in las vegas. it’s the world of warcraft crowd or the halo armies on an xbox360. nope. it’s not that. well. sorta. it’s the complex multi-player fully interactive experience played by (and sold to)  the millions around the world. what once was a simple collaborative gaming feature for is now much bigger….it is a full multi-million dollar business. social networking and collaboration is not a simple  “collaborative game feature” anymore. they have merged into social gaming.

the stakes:

in late july, 2010, news spread of disney’s $763.2 million acquisition of playdom games. the purchase not only diversifies the entertainment company’s media portfolio, but underscores a growing trend of reaching potential customers via platforms they prefer. playdom is the third largest social gaming platform on facebook and zynga with about 42 million monthly players. it also claims that half of all facebook users engage in a social game amounting to 40% of total usage time spent on these games. that’s 42 million potential new customers for disney. as noted, social gaming is by no means a new concept. however, social gaming built on social networking platforms has only recently emerged as its own industry. these games tend to be less complex and far more casual than its predecessors on microsoft xbox or sony playstation.

consumers’ appetite for social games is growing — zynga’s “farmville” has more than 60 million active monthly users, as of july, 2010. according to appdata.com, zynga, the leader in social games, has raised approximately $520 million in venture capital, and the company claims 1.3 million daily active users. the company also recently announced the development of a $150 m US joint venture with japan’s softbank to accelerate development of the social game industry in Asia. these numbers are only attracting bigger players, like disney, who want to tap new sources of growth. retailer, gamestop corp. also recently agreed to buy online game distributor kongregate inc. for an undisclosed amount.

the value is also not lost on future entrants into the social-networking world. reports indicate that google, who has been rumored to be developing “google me” (a competitor to facebook) is also in discussions with social gaming developers, such as game network inc. and razorfish. a successful google offering would mean social-game developers wouldn’t be so heavily dependent on facebook, where the vast majority of users access the games. indeed, by august, 2010,  word leaked out that google has invested $100 million in social gaming with zynga in anticipation of its roll out of google gaming.

the dea takeaway:

will casual social games become as lucrative as its console brethren? the increase in offerings, funding and attention would indicate so. indeed, will probably go far beyond.  even nintendo, known for its casual gaming wii console, recently reported a net loss of about $289 million for its fiscal first quarter, compared to a profit of $487 m US in the same period a year ago, citing a strong yen and weaker sales of its hardware.

however, as the market becomes saturated and interacting on a social network becomes a daily norm, several questions emerge:  is the rash of new acquisition activity in social networking and social gaming just another tech bubble where people are over paying and over funding them? could disney’s acquisition of playdom be short-sighted? or will social networking become so prevalent that it is included in all future business development and practices? finally, how will mobile gaming play into this equation. the possibilities are vast; or is it a bubble and will it burst? we are betting it is a new vibrant global business.

for more information, please contact us at 512.825.6866 to discuss the issues more fully and the specific impact & implications to your business. it’s free!

why the“flower” user experience changes everything for everybody…

(eyeball time: 2.0 minutes but you might read faster…)

the dea skinny on what’s happening:

while the mainstream anemic usa game industry plugs along trying to woo new viewers with hd, wireless, 3d technology and interactive gizmos like wii and microsoft’s kinect, a quiet but potentially seismic revolution has been taking place elsewhere. it is a “game,” rather, an experience called flower, and it is not about gaming…it is about user experience. ask your local hipster about it. they will know.  thank the people at sony playstation for trying to take the whole industry in another direction with this innovative move. this affects all user experience design because it implies an entirely new design paradigm: human emotions. and that is powerful stuff to be messing with.

comes a company started by 2 people out of university of southern california’s usc games institute… thatgamecompany led by two geniuses, kellee santiago and jenova chen, who we visited and interviewed in their santa monica studio. their idea? make user experiences based on human emotions. whadda concept. forget stupid categories like “casual gamer,” “hard core gamer” and “gamer.” their games (ahem, experiences)  are designed around a single emotion, amazing images, music and free exploration with mind-blowingly simple interaction. there is no “objective” except an amazing experience of chasing flowers across a landscape. you need to see the two video clips on our site to see what this is about. the first is an interview with kellee santiago, ceo of thatgamecompany which created it, and the second is a clip of flower. you need to do this now to get it.

several years back, kellee and jenova went to sundance and showed cloud, their first graduate-level “student” game done while at usc. next thing you know, enlightened executives at sony playstation sign them and cut a 3 game deal and place them on the sony playstation network. now you can download flower from the sony playstation network for just under $10us, making the purchase of a playstation3 worth the entire purchase just to get the ability to play this game alone. it is ground-breaking and will make you experience intense happy emotions. whadda concept, but we said that before! some users have reported literally tearing-up emotionally, it made them so happy.

as kellee says, flower is a video game poem that asks something different of the “player” with “no score, no time limit, no death.” their company tag line is “life in balance”  and they have another game under development for sony called journey to augment their other titles flOw and flower. hopefully sony and others will sign them to keep things flowing out of that game company in the future.

the stakes:

the future of user experience. what they are doing has much wider implications for anyone and everyone in trans-media. think about it: if you can deeply touch feelings, emotions in a user experience, this has many touch points way beyond gaming. it is about experience design.

kellee, jenova and their crew of ten+ others at thatgamecompany in santa monica are trying to push the boundaries of what games can do. but they are pioneers in developing new ideas about what a user experience can be: there is a simple interface which makes the experience immediately accessible (apple kind of made some hay with this concept, ‘ya think?), a user navigational experience that feels explorational without boundaries, a use of images and music that provide an intense emotional experience that alters your state.

besides altering user experience, thatgamecompany represents the game-changer almost-a-do-it-yourself-production small company which can make games at a fraction of what the big boys and girls like our friends at ea or lucas games spend. no mocap, hd or expensive cgi. but highly competitive with around 10 employees right now… as such, they represent the shift to network-based game delivery which traditional game companies are only starting to explore with sony, xbox and wii.

the dea takeway:

if you are a game company, think about exploring this space or acquiring a company that can do these things. it will improve your legacy product lines on a go-forward basis. it may push your offerings in entirely new directions.

for everyone else, including chief marketing officers at fortune 500 institutions or any company providing user experiences on the web, look at how you can re-position your current offerings and make them more emotional. much more.

application designers of every type should look at flower, cloud, and journey and determine how they can simply their user experience design and make it emotionally pleasurable. there are a million ways to do this.

for advertisers and brand managers in all walks of life…well, this is what you do…manipulate emotions to get people to buy your stuff. look at how you can leverage emotions on the web around your brands. this is the key to brand management. strong powerful emotions. (btw, we have already seen a tv ad done which literally ripped off flower to sell some financial services product…come on people…let’s have some original thinking here!

may all your user experiences flower. to everyone at thatgamecompany we say: BRAVO!, BRAVO!, BRAVO! and THANK YOU! you move us emotionally  bigtime.

for more information, please contact us at 512.825.6866 to discuss the issues more fully and the specific impact & implications to your business. it’s free!

e3 and the future of gaming (for maybe the next 12 months or so ;-)

(eyeball time: 3.0 minutes but you might read faster…but if you check the cool video links which take forever to load…god only knows… you are on your own…)

e3 los angeles 2010

dea is LIVE FROM E3 in la

the dea skinny on what’s happening:

http://www.e3expo.com

in case you didn’t get the tweet, e3 is the big momma of all industry gaming shows in the usa. every major game developer, hardware platform provider and distributor shows up at this huge industry show in los angeles each year to show their wares. this week, we attended e3 and notice several longer term patterns in the video game industry. overall e3 looks like a 1950s automobile show in detroit. mostly all men with scantily clad blonde barbie dolls doing demos. ironically, women are the fastest growing segment of the gaming market but the testosterone geeks don’t get this in the industry. (check out www.womeningamesinternational.org) and because we are americans, the shooter/killer games rule. but there are amazing new directions starting to emerge (check out the flower video and interview with kellee santiago, ceo of thatgamecompany in our video gallery…that is where it is going!)

what is most notable also was the absence of zynga, the popular facebook provide of social networking games like farmville, mafia wars, etc. this show is very old school, mainstream industry, brought to you by the entertainment software association.

also duly noted as missing-in-action were all the mobile game players – publishers and cell phone, tablet and mobile device industry players. just not there and they represent the fastest and largest gaming platforms out there…according to the un’s itu, there are nearly 5 billion mobile phones worldwide. and not a single vendor of note at e3!

1. major publishers continue to take names and kick ass with mega titles in hd

you need to see the new games being rolled out..they look like movies you control. take the time and click on some of the links…(the commercials are a pain but the demo’s worth it) the use of hd tcnology makes old time game look obsolete. we are on the primitive edge of full simulation machines. check out lucas star wars II: force unleashed, (you remember the film maker…now games are his main activity), activision’s call of duty: black ops, or square enix’s the third birthday (featuring a new woman here ala lara croft but realistic). Yeah, they are all killer games but that misses the point about the technology and the direction simulations are taking. reality is really real these days…

2. user interface experience is morphing

ok, so the big headline at e3 is microsoft’s xbox 360 release today of its new interactive user interface called kinect (project code name “natal”). this is redmond’s answer to nintendo’s wii interface except it is more revolutionary….no devices! users simply move in front of the set and infrared sensors pick up movement and are incorporated into the game. it is pretty primitive  today but one can see where this is leading. sony playstation 3 is appealing to hard-core gamers with 3d technology although the jury is still out on 3d displays (due to side effects of headaches, etc.) and tv content producers and networks are dragging their feet on 3d programming which will affect adoption. but these are the first primitive steps into immersive user experiences at low price points (kinect is $150) and have deep implications across all industries for applications involving interactive use experiences from product sales and customer experience to education.

3. the network is the game not the box now

“the network is the computer” sun microcomputer’s then-ceo and founder scott mcnealy prophetically stated well over 30 years ago. well, it is true now. the game console is slowly going the way of the doodoo bird. even giant activision get 70% of it net operating profit games from non-console games. new companies are rolling out network device independent online gaming platforms where you simply buy a subscription for multiple  gaming experiences, much like buying a movie ticket. check out onlive.com for an example of one of the new players….and they are cross-promoting with at&t…why? because scott mcnealy was right. online gaming has HUGE implications for network providers as well as all pc and chip makers…

4. the asians are doing amazing things but the gringos don’t get it (as usual)

ironically, the biggest publisher at e3 is a korean company named nexon. they dwarf everyone else in terms of users and represent the future of the gaming, social networking, promotion, advertising, micropayments, branding and the attendant infrastructure for years to come. how big?  try this: today microsoft brags it has 20 m users worldwide on xbox 360. nexon has a huge portfolio of “free to play” games (you play free games and make small payments of $1-3 us for accessories like clothing, cars, etc.) one of their games, dungeon fighter has 200 million subscribers and 2.5 million simultaneous users. their second biggest title maple story has 100 million subscribers with 1.5 million simultaneous online users. american game executives right this off saying it is china which is in one time zone and doesn’t matter. hey dudes, the world is flat and nexon is making billions of dollars and growing exponentially in a market whee us gaming was down 10% – 20% and it wasn’t the recession that did this. wake up and smell the coffee you auto-centric americanos. to dismiss this under the banner of different cultural adoption and usage patterns misses the point completely.  you need to get out more and see the world. something is going on and you don’t know what it is…ok…rant over…you get the point. asia is driving gaming innovation ni this space. check out tainengmiao.com, d2home.com, and cddmb.cn to get  a sense of this. there is a major game industry in chendu, sichuan province and all over china, as well as nexon’s native korea.

the stakes:

huge. billions. and the biggest thing is that the us gaming industry is a laggard. there are major opportunities in all segments for layers within the traditional gaming inustry and outside it….advertisers, sponsor, hardware and communications infrastructure and more…in all the categories above.

the dea takeaway:

1. major publishers continue to take names and kick ass with mega titles in hd

the increased use of high rez image and motion means major opportunities not for just chip makers like intel, amd, and nvidia, but also for all processor-related industry players at the hardware level. for network service providers it is a double edged sword..more revenues for more bandwidth-management players like cisco (good) but more major capital spending for players like telcos such as verizon, at&t, sprint, t-mobile, etc. (bad for telcos but good for cisco).  for content players like major film studios, there are obvious trans-media tie-in’s and licensing plays (see “prince of persia” piece we did on this). ditto for brands, advertisers, etc. and there are myriad niche service and digital advertising integration lays as well too numerous to go into here.

2. user interface experience is morphing

this area is very exciting and has deep implications for game industry developer and hardware and chip manufacturers. but the largest and most interesting opportunities lie in adapting his technology for new customer experience and cross-industry applications. imagine an atm or online service experience where you interact virtually as one of a set of optional user interfaces. microsoft’s kinect (based on the root words ‘connect’ and ‘movement’) says it all. citibank already uses video conferencing at its drive through branches. this could be the next wave and applied for many net-based interaction applications. 3d…not ready for prime time.

3. the network is the game not the box now

game over. the net wins. if your business is console based, those thin, cloud-based client interfaces spell the inevitable day your consoles will not be needed except as game controller interface hardware devices and that, my friend, is a zero-margin business over the long haul. with all respect to everyone from activision to ubisoft, get in gear to transition. this has radical implications for our product distribution strategies. now you can go distribute directly over the net to millions of subscribers worldwide like nexon already does and cut out your distributors! it is a scary world out there! the network providers need t be ready for this growth and for mobility, in particular.

4. the asians are doing amazing things but the gringos don’t get it (as usual)

hey, get out and get educated. book a trip to china, korea, japan, and india. ’nuff said. monitor developments in these countries even if it is difficult and things look too “hello kitty” for you at times. hey, we told you about nexon. this is truly where the innovation is taking place, not the usa. we will try and help there also.

for more information, please contact us at 512.825.6866 to discuss the issues more fully and the specific impact & implications to your business. it’s free!