DMS3019 - Various Panelists - Games And The Online Community
You, could please do it outside and. The, last session is on gaming. Which you've heard a lot of discussion, about today. Dagli. Higley has been with us ubs. Investment and. I. Guess, last week to start a venture, fund okay. Right, so he'll. Introduce the speakers. Thanks, it's, nice to know we can go for a couple hours so, that that should be good. For us here. What. We're going to talk about obviously is games and community and we'll go through this I think, what I'd like to do. Outside. Of. Give. You a little bit of my background, and. Have, the panelists, give some of their background sense. Of from, the audience because, as we're going through the QA we can kind of try to direct things, one. Direction or another. Who. Are just, in the audience as far as like who are entrepreneurs. Maybe. Show hands. Who's. In the you. Know media industry. Who. Are investors. Okay. There's a good chunk of no hands but I don't, know what other category. Ployed. Right. Here good okay. Yeah. Oh and, gamers. There. We go. All. Right. Just. Just, quickly. On my back and it was mentioned, as of Monday, I'm formerly, a managing, director and, global head of digital media at UBS. We're. In the process of raising la event-based, venture, fund and i can give, you my thoughts around, that. This is the right time to do it but maybe there's. And. I'm. Also doing some advisory, or work with some ongoing clients. And part of it as I've been doing this for a long time and I, have a lot of relationships, is important to kind of stay in the flow I, started. Out as a securities, lawyer I moved into Investment, Banking, and. Ran the digital media group for eight years we've. I've done about 70 transactions. In my career about, 20 billion dollars in value, clients. Have been Activision, acclaim Atari I dos foundation, 9 info Grom line. Head midway games and th. On. The internet media side of the about.com aquantive. Cnet elevation. Partners we, open with a Forbes deal emusic. Google, Hoover's. IGN. Mapquest, rent com turbine, and then. Wireless, was jammed at iPhone kong zhang and smith micro so. That's. A little bit of my background I'm. Also a proud, member of the board, of directors, of Gamecock media, encourage. You to check out the site it's the old got, games guys and they're. Relaunching. And I think they're gonna have a lot of fun and hopefully be. Successful, in what they're doing. Why. Don't I turn over the panelists, just to have you guys to give just, a brief intro, of yourself and your company as well. I'm. Keith how for the CEO of kuma games, coming. Games is building an analog for television with the game industry these are free, episodic, ad-supported. High-end. Video games similar. To what. You would see on the console game my. Background I'm Viacom. Guy I produced, many many. Branded. Games including Star Trek Tom Clancy, Jerry, Seinfeld, and others and. Also ran, our. Help to run a community site called cyber. Sites which. Was, similar. To many of the things that became very successful after, us. My. Name is Darren Herman I'm the co-founder of IJ worldwide and I calmly, currently. Handle, all company, strategy. IJ. Has built in it dated. Video game network ranging. From console, games pc, games and mobile games we, leverage that for brand advertisers, and agencies alike, my, background, is in entrepreneurship, and technology, and media my. Name is Shane Satterfield, i work at mtv, networks as, the editor-in-chief of, gametrailers.com. The. World's first and only video, only site for video games my. Background, is definitely, in journalism, worked, at gamespot, com for several years before becoming editorial. Director at g4. To. Be a games only network. Times. Mike Cassidy I'm the CEO of xfire expires. An instant messenger for PC video gamers we, have about six and a half million registered users. It. Helps, gamers play, online with their friends, it's, a very sticky application, gamers typically run xfire, 96. Hours a month every. Day there's about 300. Million user minutes of people running xfire. We're. Now part of MTV they bought us last. Year there you, know focusing on the male. Demographic, my. Background, is in third company I've been CEO and co-founder of, last. One was a search engine and one before that was computer. Telephony. Hi. My name is Liam. With accent technologies, we're. Not a consumer brand but we power, self very, non consumer, brands like, Turner. Broadcasting, gametap. Comcast. Games on demand verizon's, games on demand and a bunch of other q1. Service providers, and media companies, across the world. A. B. As a company we work, in three different areas one, of them is digital distribution where essentially we put together video, gaming services, high-end video gaming services, for a broadband, service provider media companies, and, large, portals, the. Secondary, that we operate in is in-game, advertising and. The. Further it we operate in his social, networks around the video, games.
Great. Okay. Well why don't we get, into this I. Think, the start I mean the name, is games in community. You. Know I always think. Games. Have kind of gotten a bum rap is, kind of an anti social, environment, I mean I remember, growing up I mean the arcades, were actually, an incredibly, social, area. Where. People would go and interact and watch each other play games, and. You. Know whether it's people why playing Madden football of, the group or even, what's going on with the you know xbox live but. I wanted, to turn it over to the panelists, and maybe get your views on how. You define pretty. Within. Gaming. So. I would, say that the gaming, is the whole is a you, know by if. We look back at the historic, origins. Of gaming, the social activity, and. People. Are there to either. Pete and brag about their achievement, or to. Collaborate. With their partners, in the game in order to achieve a common result and. Unfortunately. You know at the. Earth the 80s and the 90s. Gaming. Was video, gaming was never a collaborative. Experience or rarely, a collaborative experience because of Technology limitations. And really. If you think today, but what gaming. Community, gaming. Applications. Means, it's. Everything it's everything from, a. Playing. A multiplayer game, such, as you know what Mike's, xfire. Lobby. Services, enable, it goes through assuring, your experience, and creating ugc, our. Walkthroughs. And hints. And how, do you achieve a certain result, in a game and it, goes through also. Even creating, video games which today can or, start to be a community, effort where. We have some open source game and we have even companies like Microsoft. Launching. Things like XNA. Studio. Express which, allows essentially. End users to create video games so there. Are a lot of different aspects. To what. Does a community, around video games actually means. Okay. Any thing. To add or otherwise move, on yeah just, seconding that nine. Out of the top 10 pc, games being played are our multiplayer. Games you know world of warcraft it's. A 40-person. Team to do one of the big raids you. Know battlefield, and call, of duty and counter-strike, are all sort of team-based, games, eighty. Percent of the time for forex, fire users they're playing online with friends so I think it is a stereotype, that it's a solitary activity it's very much a social activity, the. Most successful gaming communities, are the ones that manage to humanize, the digital avatar, just. Last week Sony showed, a new product for the PlayStation, 3 called home which, is basically a 3d, virtual world where you can create your own avatar you can look like you can look like somebody else but. You basically venture throughout this 3d world you have your own apartment people. Can come over hang out in your apartment watch TV join, to play games so I think sort. Of the push is towards, creating this virtual world where people can interact and at the same time connect, to play games together okay. Just one. Data, point that we had from our own product we recently, completed a deal with the history channel, and we had a lot of first-time, gamers. Coming, in who had never played before and those first-time gamers would typically come in and play single player they were intimidated, by, some of the social aspects, and playing with other people we. Are now two months, after that deal and so the people who have stayed with us have now really. Migrated, almost entirely into multiplayer we're, seeing 20 21 plays. Multiplayer. Two single player from those original games so that seems to be the carrot I would. Just like to add to that I mean certainly we see that, multiplayer. And.
Because. Of the somme indoctrination. To a certain extent that the gaming community has, gone, for is really one of the most, common. Aspects. Of community, in. Games however you, know even you know in relatively. Simple. Types of environments, where, people just go to a website to download as long as we have that big to share their experience, from games we, see them stick around for tens of our right. So we see for example on, our services, the service that we have up and running with verizon, people. Spent in excess of, thirty, five hours a month on games, that are not multiplayer, games or that they can do is essentially post, you know their impression, of the game and put it up on on forms and such this is the, most simplistic, way of sharing. Your. Experience, and this they still stick around for 35 hours a month. Okay. And and I think, you. Know there are also you. Know companies. Or, games like, runescape. Club. Penguin, habo hotel. Adventurequest. I think we we, look at second, life although they don't like to say their a game. There's. Certainly social, elements strong social elements, to each of those and certainly mass appeal, and all, them seem to be having, very. Good success and, certainly could traffic, one. Of the things that I found at least in talking with a lot of the folks there is there, really is an interaction on, those, games and it's give, there's. An active collaboration between. The users, and. The. Companies that run the game as far as trying to continue. To refresh content, it really kind of moved the storyline, cinder, is that the users want. Why. Don't we talk a little bit as we're, talking about this as far as the revenue models when we do talk about community, and we do talk about traffic, that leads obviously, the next thing which is you, know how how, do you make these. Sustainable. And I think clearly it's there. There needs to be some sort of revenue model around there, you. Know the ones that we've seen obviously started, with subscriptions, you've seen some micro, payments in. The ad supported model, but I'd love to get the. Panel's views. On this you. Maybe start with you Mike just on the the, revenue models with it so. We're pure advertising, and I, think, it's a great market. These days for advertising, to. Gamers, some. Of the big advertisers. On. Our service are you know stride gum dodge, Pepsi. Unilever. A. Lot of them are trying to reach the sort. Of the young male demographic they, they, realize a shift in in, consumption. Of media in. Some ways away from TV, and. More, to you, know games and. I think, is 50 billion dollars a year spent annually. Now in TV advertising and far far less in the gaming arena so if you believe in efficient market they're certainly going to be some shifting. Of ad dollars over. Again. In the ad space as well same, as Mike over at xfire, IJ. Is witnessing, that as well I mean that's what our company is based on is in-game advertising so. His game has become much more community, based a, lot more people are playing Nielsen, comes out with a report saying, the 18 and 34 year old males are, not watching TV, a large portion of them are playing games so, that's helped advertising, dollars come in one, thing that we found at, iga is, that, games, exists. At your. Console, or on your pc but. Experience. As well and gaming. Sort of transcend, the time that you're actually playing, the game but, all of your experiences around such, as the, trailers, the downloads, the, the. Cheat codes that are on a website the, unlockables. The magazines, and we. Found some good, traction. In the market where we can sort of bundle, in-game. Advertising with. Sort of the experience. Of the video game as well I know. For us it's been call to monetize, community, directly, banner. Forums. You know there's a really low click-through rate for those advertisers, sort of shy away from that so, we had to do is find sort of alternative ways to gain, money and, things like that from our community and, what we found is we have a user movie interface where people can submit their own user movies and personally. Did it you know it's great we can't really roll run pre-rolls, before the user movies but, what we found is that the game publishers, have come to us and asked us to do user movie contest, based upon their games so, they, come to us with a game they're like this is our game we want we have an idea for a user movie content we, sort of set it up on a site run banner ads across mtv, networks we.
Get All the submissions and then we sort of a voting process with our community to decide who wins now. How that works for us is we're, sponsored, by these publishers to use these user movie contest so while we're, not getting a lot of revenue from the banner ads in our forums or pre-rolls, from the actual user movies we can monetize it in other ways by getting the publishers to actually sponsor, these user maybe contests, I think. One thing to to, understand, about the, video gaming industry, is that it's really a very, non sophistic, industry. In terms of business models, today I mean. Publisher. That publishes a game and put it out in retail in walmart, or bestbuy or, IBO. Wherever. Actually. Universe, a single release window of distributing. That game in retail that release window typically, lasts between 14, and 16 weeks if the game doesn't perform that well, you're. 15 to 20 million, dollar of investment, in higher end game went down, the drains so the. The, figure. Gaming market is essentially, you, know despite the fact that as a as first. Release we enjoyed the 12 billion dollar market in 2006. Which is larger than the box, office. Revenues. In the US last, year which were around, the 9 billion dollar market it's non sophisticated. And the video gaming market is looking for additional business. Models, and really you, know 2006. Also, in 2007. Is still, in some sort of an experimental mode. To, try and find what business model will prevail so we hear about no. In-game advertising which. Is still, to certain extent a nascent industry we. Also hear about digital distribution we, see a companies, like Turner, and, CBS, moving into that space we've had the conquest and Verizon and that for a while we're. Sitting with seeing episodic, el gaming you know Turner's, that put together, a. Series. Of episodic, of gaming around Sam and Max brand. So. We're seeing a lot of experience, in the market the whole idea is to try and expand, those this, single release window that currently exists for video games to. Create recurring. Prepared, some. Kind of a recurring, revenue, models for video games to. A certain extent in a similar way to our massively, multiplayer games, have been able to create, a subscription, model. Around, the collaborative, forms, of gaming.
You. Know we also saw in. In. Other, types of games. Item. Based trading, so we're seeing their people you, know selling on the internet there. Are swords, or there are magical items, or they're closes, or their designs, online this. Is by. Over. A billion dollar industry in. 2006. So, we're really seeing a lot of different. Business. Models that come. To. Fruition from, our perspective from. Access perspective, it's about, still, about premium. This. Is where most of our customers do, today so this is where Turner is this is where Congress and Verizon is and we. Also truly, believe in ingham advertising, but we see it more or less, as a demand. Generation. To. Prevent. A way to generate significant. Revenues, in the next. Couple of years at. The same time I think you know there's, it's. A slippery slope to walk down with episodic content what, you're seeing now with a lot of gamers, is they're. Looking at episodic content is, something that should have been putting the game in the first place so. Now gamers are really paranoid that the publishers, are actually cutting content, out of their games that they would have originally put in it because they, could release it a couple months after the game's release and milk, another ten dollars out of their game so get, really smart, they're very tech savvy and, I. Think publishers need to be really careful about how they sort of handle this otherwise there could be a huge backlash, from the players I absolutely agree on that but on the episode achill gaming we actually I think that you represent. The general, notion in the market but I think it's some, sort of a vocal, minority. Point. Of view because. We actually did a test we took some we, have the capability, to measure the use of certain. Features levels, and, inside, the game we did a test for some we solve them polar, games that just put it out in the market. To see you, know which features people use how many hours do, they really play a popular, game now, so the numbers were really you know they play about between 15 to 20 hours these. Are hardcore, gamers right for a game and I, really don't reach in a lot of games number of users, percentage-wise. That, reach the. Advanced. Stages of the game is not that high and yet they paid 50 or 60 bucks for the game and at the same time you, know publisher might have saved a lot of money pick, the features that people actually don't use and never reach in the game so episodic. Al gaming is a way I think Mort. For, the publisher to reduce the risk in investing. Up front in the features and in the elements, of the game that in a. Lot of cases, people want to use and people that are hooked up on the game will, go and spend more money actually when we would have spent in the initial 50 bucks to, purchase, additional episode. And additional. Items. Or whatever it is levels. Racetracks whatever it is that because. They want to play the game not because the publisher force them to pay 50 bucks for the game yeah, and I think there's no question that, I. Know. Just from all the work we've done with the publishers, they've really been. Extremely. Concerned, you, know with the cost of development going up, but. The price points are not doubling I mean it's you know 20, to 30 million plus to do to, get out a triple a title. And. You. Know how do you do that it, what it means is you got to sell more units, it increases. Associated. To development, I would actually argue it's. Also stifled. Some innovation, that people, are less likely to take chances so, maybe new models around that so I think that's actually a good transition I actually talked a little bit about the console set of the business. You. Know I remember when microsoft, launched and, i was talking with brian lee about this i was. Amazed you know they were gearing up for the Xbox launch and. The Xbox Live division was largest, division within the, Xbox unit and it was clear that it was a real folk and. It kind of made sense they had msn they had the backbone they had the infrastructure, to do this and I think they looked at it and said this is, a real way for us to differentiate, ourselves if, we can do it and. I think you know xbox, live. On, the original, xbox platform, was really kind of approving, model. And it really, kind of launched, on xbox, 360. What. Do you guys think was at the right strategy, for Microsoft. Maybe. Well. I'll just I'll take it to one, of you guys will. Go to another question. Whoever. Well. I think, sort of the success of Xbox Live has been a bit a little bit overblown, while. It did sort of differentiate, the Xbox in the last generation of, consoles, at the same time if you actually look at the numbers there, are more people playing the playstation 2, online and there were the, xbox because it was completely free and while I didn't have the same features the matchmaking, that you got with Xbox Live a lot of people were willing to overlook that to, not have to pay the fifty dollars a month just to play so, you, know while, I think is sort of a croissant.
As A player in the console industry I don't, think it's a differentiator, that obviously, they didn't win last generation. And I don't think it's going to help them win this generation. Either it's going to come down to what games they have for their system I, agree. With Shane on that, over salvation, over i think that when microsoft, looks at xbox live I don't look at xbox live I look at life and, life. Is not just an xbox experience it's, a set of i, would, say. User-oriented. Features. Community. Messaging. Communications. Digital. Distribution of content not, just games by the way also movies and music and such that. Will. Be. A theme, across there are different devices and of course they're a different operating. System it's not just an xbox live it's Windows Live and next. Thing that they will be unhandled live. Environment, and they want. To tie all of that together niche. After niche in the market and essentially, if I look at xbox live is yet another group. Of users that we can pull into this live, environment. And. Create, that overall community, which is larger than just xbox live as a standalone so I think that certainly, on as, a gaming. Xbox. Live is a nice, service. And it has nice features, it's not the biggest in, terms of number of users I think that if an xfire has more users when Xbox Live overall. But. But. I. Think, that from, a community. Perspective it's. Not xbox live it's Microsoft Live and the, various aspect of it is not a standalone. Do. You want I loved you but I yeah no that's fine ok, Shane together. Where's. Brother sister companies I think, actually Microsoft, nailed, it with xbox live there right on the right track. This. Guy Ralph, Rivera from AOL some people might know had this this, story used to tell would he's. To go do, pickup basketball games in New. York streets and you know he'd say he went he was only one there he'd shoot baskets for 15 minutes and he'd go home if he went and there, were some people he didn't know there he'd shoot around for an hour go, home if he went in his friends were there he play all day and, I think that's the way it is with with. With games you know online multiplayer games with with Xbox Live and I'm not a fan, of Microsoft, people you know not necessarily fan of Microsoft but I think they really got it right people can play online with her friends, they have a great experience you, know I think you.
Know Online gameplay is not as big in Japan obviously you know and i think that's that's, one of reason why i think sony and nintendo I've been slower out of the out of the chute. And you, point out that the quality games is important I agree i think, but, to some extent having, the multi play is into. The quality of the games I mean I mean I complain. Beres, myself a red alert against. A computer I can beat it you know even the highest level all the time but once you play against other people you know it's much more I win. Half the time I lose half the time so I think they're on the right track I'm, not denying xbox live is a great service you'll see me on there every night planning as my friends, my point was that it's not going to be what ultimately, decides. To console, or it wasn't last generation, and it's not going to be this generation, because Sony does have an online service and it's free my, point was a lot, of people prefer, to free, with smaller. Amount of feet versus, painted the the amount every year to, play with those features, even right now the xbox, 360, only. Sixty to seventy percent of its user base actually, use Xbox, Live so even, in the xbox 360, community, not, everybody, is paying the fifty dollars a year to play on xbox live. What. About I, think the one that was absent, and someone did a loo do it but Nintendo, it has a fairly. Basic online offering. And. Maybe it's just finally. The, way that they view their box in their market, but what. Do you think about Nintendo. And what they're doing. Sorry. I can hear you just, with Nintendo, because that's you obviously have you know the battle, is, Microsoft. And Sony, but. I, think probably the surprise. For, a lot of people is how strong Nintendo, is actually showing right. Now when, I mean we. Worked with most of the publishers, we used to I mean I remember just you know in financing, stuff you look through the pipeline when. It started in the last transition, when it was gamecube, xbox, and ps2, everybody. Was doing you know they put out the game they they put it to one import to the other two whatever when it was but it was definitely a three platform, you, know game and, about. Halfway through, people started dropping nintendo. And. It wasn't just a few I mean it was staggering, and we looked at that saying there's you know it's, all going to be first part of development, but. I know last, year at the last III. Out. Of excitement, i would say kind of by old-timers on. Just, what nintendo was doing and how was something different but. You know obviously their community, it's it's quite. Frankly was the easiest for me to set up playstation. Was, the hardest, in. Microsoft was kind of in between after. Crashing a few times so. What. Do you what do you think i mean do you think they're going. To expand, on this or is it just kind of this is what it's going to be I think. Nintendo. Is smart and the fact that they let Microsoft and, Sony for. High graphics high intensity gaming, and then, Tendo sort of SAT back and said hey we're still a console, but we're going to go after the casual, market with, no competition, by the way so.
I Think, Nintendo's. Came out of the gate pretty, strong will. They be able to keep up the sales that's, left to be debated a lot of people would say no but. They have a forthcoming, online. Community. That will be released fairly, soon. Which. Is left to be seen as well but I think Nintendo. Is definitely, a contender now. Electronic. Arts has said that they're going to start making their catalog available, for nintendo, wii and start developing specifically. For the week so. You've got one the largest public, the largest publisher out there saying hey this is a serious platform, we're going to start putting dollars, to it so. Nintendo's, definitely can a contender, I don't foresee, them being. A high, graphics contender. That's not what the wii is built for. Figured. For nintendo. The. Wii their, new console, is more of a winner dire. Situation. And. They. Essentially bet the. House on on. Innovative. Gameplay with, the new controller, and, they. Are trying and vacant, it and we also can't come complete, with the likes of Mark assistance, only on the marketing door that will go into. Promoting. The game console, throughout its life cycle. And. What, we're trying to do is to win early, and wing loyal. Crowd and we do it for, a variety of means if, they employ that either you really, like it or you really hate it, through. Games. That appeal to a wider audience and, what the xbox and playstation games, appeal, to and also, through a. Self. Identification. Of, the user with, the game place of a launch the nintendo. Me. Porto. Which is about creating your avatar, and being. Able to play games with, your avatar, inside the games and having your own sort, of avatar. Page and profilin, and this. Is really about. Strengthening. The affinity, of the, user with, the nintendo, brand and with the nintendo console and allowing, that. Very. Strong, very initial. Strong. Winning. Of, users to really take it further, for them because they will never be able to compete with sony and microsoft, and then they essentially, to. A certain extent, in my opinion, better howson on, on the, console, and, they. Are continue to doing and. Innovative. Trying to strengthen. Really, strongly. That affinity, between. The. Council and the user something, which the others are not. Doing, that strong. Maybe. Just. A question for Guerin and I'd, be curious me one of the things that you. Know in talking a lot of folks I mean again, I think there is a fundamental. Concern. In, the console industry, that the costs are skyrocketing but. That you know your. Own charge. Consumers so much for a game and you know, we're at sixty bucks now a game one of the things that you. Know obviously are going to do I think you know the console, manufacturers, are going to continue to invest in tools and other things to speed up time to delivery and also just try, to reduce some of the costs around that clearly, the other way in Microsoft, buying. Massive. You, know but really trying to encourage this online, gaming, I, mean, online ad. Model. But, but I can tell you if I spend sixty dollars for a game and I bunch, of ads throughout. The game I might be a little annoyed maybe, Madden football it's, okay but you, know if I'm if it's on Splinter Cell I mean I watched the bond movie and it, was just it, was so blatant. It was annoying to me just. In a movie theater and I just don't know how it would be that's, a ten dollar ticket or a fifteen dollar ticket as opposed to sixty. Dollar game, thoughts. So. Game, cars are rising that's. Inevitable, if you bought a game in the last couple of years because. This next generation is expensive, David. Mentioned before 30. Million dollars for a triple a title, so. There's different ways to monetize a game now not just the price you pay at best buy or walmart to, purchase that game. One. Of the ways is in-game advertising is, it, the end all and be all know but, it is one way that it's going to help the video game industry there's.
Also RMT's. Or real money transactions. You'll, have talked about this with purchasing. Virtual items or virtual, goods those, are all done in a sort, of a virtual transaction. And. There's some other alternative. Ways to monetize. The video games in terms. Of delivering. Ads within a game are all games created equal now or all advertisers, want to be in every no so. There are some games can fully contextually, relevant for, games which are the sports games the automotive, games any, game that sort of takes place in a virtual world a, world in which that we would look at our, games built in the 1700s, or, built around a fantasy, land or an, old castle, probably. Know you probably can never imagine seeing, an ipod poster, on the wall or an, apple computer on the side that does, much sense and so it doesn't make sense for the advertiser but, most importantly. It doesn't make sense to the gamer and that, is the first and foremost, thing here is that if it makes sense for the gamer the advertiser will have a better campaign, and if it makes sense for the advertiser and the gamers hate it and it can be blogged about and talked about all over the net and it's, not going to transpire as a very good advertising campaign, so. We. Sort of cherry-pick the titles that we're bringing in within iga, to, bring our advertisers, into but. That also opens. Up an opportunity where round, the game environment, as i alluded to earlier you, can deliver advertising, campaigns and those advertising campaigns, and will trickle back into, the publishers and developers and, hopefully drive, down the cost of that particular game, but if it doesn't drive down the cost of the game they, can then use those dollars that have gone straight to their Abbott uh and fund. New games or new other games out there yeah. I forgive. Me I question. Whether or not advertising, in, you know these fifty, dollar sixty dollar games is really. Going to have a long-term or, really significant, it just. Simply because you, know you're spending this money you don't want to see advertising in your games and the reason why we're why, we're all able to get away with it at, this point is because there really isn't, a, viable, free. High-quality, alternative. To it having. Something and obviously. I'm speaking about us something, that feels like television, something, that is free makes, it much more difficult for the guys who are charging, dollars who are movies.
Essentially. To, be able to put in product placements and we know there's going to be a limit to the amount of, product. Placement, that I'm going to see. In a, film that I said nine. Dollars for and so, there's a level to it but it, ends up being. Incremental. Revenue it, doesn't really drive that, part of the business and then if you look at the second question which. Is you know will the costs of these high quality games. Go, up or will they come down over time I mean I think it's very obvious that the cost of game development is going to continue to go up you. Know you just have to as a as a. Retail, game publisher, or as a console, game you. Always have to be delivering, brand. New. Experiences. In, enabling. The consumer to see things that they'd never seen before and it is again exactly. Like big-budget. Motion, pictures every. Year it's got to be something new you know I would certainly if. I'm going to see a Star Wars 10, I certainly. Expect it to be a lot better than Star Wars for, and, I think that that's all going to continue to drive up costs particularly as we start to see other kinds of competition, I, want. To just switch to the PC business. And. It's again it's interesting, though, I've. Always had a saying in tech it's kind of everything. Moves in cycles and the minute you think there. Aren't cycles, really at the top of the bottom and I just remember in. Two thousand, we were going through the transition, and, consoles, were all the rage and you. Could not a, good. Pc developer, could not. Could. Not beg, for money or give away their their products I mean, there was no interest from an investor perspective it, was a dying, market. And I, think the double whammy was with the internet meltdown it, also had this impact so one obviously, that. Meant it was probably a great time to be putting money to work and I'm sure the folks that did made some good money but. But. The interesting thing and someone alluded this you, know with Microsoft. And Sony I think Nintendo. You. Know maybe crazy, like a fox on this because they. Make money on their boxes, where microsoft, and sony are hemorrhaging. And it. It's. Only again, that's. A concern, when you look at this it's it's getting more expensive to make games so. The threshold, for breakeven is much higher it's no longer hey we'll sell a couple hundred thousand units will make our money and it was worth a bet you, no longer can kind of do these gut checks and that does take away from some of the innovation, I think, from the, console, side these boxes, are only becoming more, and more sophisticated, more expensive. And i, think you know to. Me if anybody, should be able to pry something, right it's sony one of the largest, consumer. Companies. In the consumer. Electronics. Companies. In world and the fact that they had. The channels as they did in Japan probably, one of the sophisticated. Consumer. Electronic markets in the world I just, shows you how much pain they're actually taking on each box or selling so, this. Actually goes in the next thing is this going to be the last round, of. Pc. And console, and you know maybe in years. We'll be talking about panels will be combining the two I notice. Microsoft, just made the announcement. That you, know xbox will, be rolled out in November, I mean in May. And. You'll be able to interact you know pc, to console. You. Know is that, news, or a non-event and, and what's the thoughts and I'll start, with you Mike sins, okay. So on the first topic you, know is it is a pc, game industry dying I, think everyone here knows some, of the statistics on a site but maybe some people in audience don't know. Absolutely, not, you. Know it's, some. Of the tracking agencies, are notorious for not putting. Some of the key revenue. Sources you know they don't they do box sales at retail they don't include you know online subscription, fees you know World of Warcraft has, eight million users paying.
Fifteen Dollars a month in the Western world so, your your north of five hundred million dollars closing. In on a billion dollars a year in revenue that's not included, in the pc game you. Know you got a, cart, writer one of these. Games. From nexon, and korea that's, generated a hundred million dollars in revenue on these virtual item things that's not included in the pc. Game statistics you've, got digital, like. Steam our. Estimate, is they made, ten million dollars alone three, digit distribution of half-life two and that's not including the MPD figures so you, know the demise of the pc industry is is you know way overblown and. The second question is on you know microsoft's, move, from xbox live and a pc. You. Know it's certainly. You. Know bears, would be you know watch watched. I mean one of their models is you may have to pay Xbox. Side, and how does that translate on the pc world you have to pay and the gold and silver models and what, do you get out of that it's. It's it's a tough road in the PC world because everyone is used to having a free service in the PC world so we'll have to see what happens there I think. World of Warcraft has been sort of an anomaly, I mean there really is no other pc, game that could even come close to the, numbers that they put up I think the issue with pc gaming is it it's it's, not a standardized, platform, well everyone has a PC and it's the most popular platform, not, a lot of people understand, how to install a brand new video card, into their pc not, a lot of people know how to put more ram into their pc to make a game more came. Out i think, because you have that close platform, with the console, that's why the consoles have grown so popular, not, to mention that the technology but, the consoles is completely, caught up in some ways even surpassed, the pc so, the pc is really good for shooters is really good for strategy, games and mmos. Like, what a warcraft but. I really, don't see you're ever going to see the pc rise up and challenge the consoles ever again i just don't see that it's feasible at this point I just, want to ask an open-ended, question to anybody up here or anybody in the audience is two. Or three years what's the difference between a pc in a console because, the hardware is virtually the same thing the 360, basically is a pc at this point i mean the xbox were pc parts off the shelf just putting xbox, to dev kits they were sending our pcs, and it was an emulation yeah no absolutely but. I but i will tell you that the, closed system, you know and it ends, up being the xbox live on the pc is, xbox. Live you know one of the problems with a closed system is that. You know as a developer, you, have to go through microsoft's. A princess. You know they gotta want you in they, have lots of risk to having that there, is a, an. Incentive, for them to have less titles, you, know in these things you, want to have enough titles but not too many and the pc world you have many many many, many choices so there's a lot of there's. A lot of strength and what we've seen is being traditional, PC. And certainly as these you, know because I would say you say that even things like the box that i got from comcast, last, month is starting, to look like a console, and like a pc, you, know i think that there's still many for. That you. Know this blending to open up new opportunities i. Think. That if anything the. Pc gaming is water, is actually winning, it's. Waiting for several reasons one, is that I. Don't agree with channels over the observation. That the console. Is. Caught. Up with pc in terms of hardware I think, that maybe, ps3, is better than the average pc today. But in terms of graphic processing and such but in a year's time the, pc will surpass it by far i will, have a core. Quad core in every house will have GPUs. That are far better than the GPU on the Sony device. I don't. Think that the closed. Environments, such as a ps3 or next box 360, can. Even. Compete, with the pc in two. Or three years so that's one thing the second thing is, that as mentioned that the console, road, for the form a developer perspective is. A tall road so if you have a highway on the pc with a much larger install base why should you go on the toll road where. You have to pay a place. That Ian. Marcus of the very high fee for, every unit, of shape, into the market and the, first thing that was never that, we never mentioned on this panel is the fact that for my install, base a user base this, a gaming is by far larger, than any. Number. Of consoles, that were ever distributed. We, don't count here the casual, users but if you look at where. Publishers. Are going what Marcus. Often sony and nintendo trying, to have actually trying to shift the web it from the core user and trying, to shift to the cancer.
Because. They did they install base, and the free income. There and the amount of spending that they'd spend both in terms of hours. Of gameplay and, hopefully. We'll be able to be. Able to convert that into our revenues. Whether advertising, based or premium based, is, right by far more attractive and just sticking to the same old core, audience and trying to sell them game after game after game which at the end of the day there's only a limited number of dollars. That a typical core, user allocated. To this type of, spending. Right. What. I want to do now because, I want to have a little time or for a couple questions. Why. Don't we just. Briefly. Move over in a mobile I think that's probably. Another platform that people. Talk about it's, still very early but. You. Know when we do talk about gaming, and communities, and and the, interaction, of you know the ability, with the, phone to to, really have a really. Immersive, community. You. Know do you, think then there are companies out there getting funded and and the question that I have is it, a standalone. Business. Or, is it really you, know better serve just to be an add-on service. To you. Know what's going on in the pc and console, business, so. I'd love to get your thoughts maybe start with you i think. It is a standalone business personally. We don't review mobile games on our website even over your view games from every other platform, that exists basically, i mean. Basically, the, mobile, market is, for the ultimate casual. Player they're the people who ride the train to work and have ten minutes to play bowling or, want, to go online with their mobile phone and play somebody in chess it's a different type of market, it's a different type of person, and their, forget to tailor the games that you create to those people and to the handset, I mean the, handsets, currently. You can't input two, buttons at once it have a how to connect it's basically have one button on or off its binary so. That's sort of limits the game design as far as what you can create for the system also you have to create your games to make sure you can play them for five or ten minutes and, get something out of them and feel like they're rewarded, they don't have the three hours to sit down and get through four. Levels and really sort of get that instant gratification from, the game so it's. A completely different perspective from, design. Distribution. And, everything, and I think it's a completely different market as well. Ok. I was. Going to say that. If. You look at mobile as not being you, know a platform, for games but rather a place to extend your community, than they're all sorts of interesting opportunities. For going, to be building, mobile. Elements. For. Our franchises, ok. Well, then it's, interesting I mean and you have glue I think out of the road right now I. Do. Agree i think that, you know and part of what i was asking is just as a community, expand, it seems natural, and technologies. Continue to evolve, on. The, mobile side and, we're still very early i mean the quality, of the games relative, to. What. You get in other areas you. Know it's going to improve the.
Years And i think one of the big mistakes a lot of people say oh i like i like mobile you, know because you hear some of the kind of from the larger on the media, so we like this because you don't have to put a lot of money into the games and i always say yeah. Do you think it's going anywhere but up you know in a big way because it's going to and I think that's certainly, going to be something. Why. Don't we just. To wrap it up maybe have each of you as, briefly, as you can. Just. Maybe, say you, know kind of what's the biggest challenge you've seen your. Companies today. And then, I'll turn it over to a couple questions from the audience. Mr.. I'm up when. You talk about you know challenges, within a company I think that we could all make a list of the various things you're trying to do as a person who's operating the company but so I'll just stick, to the community and social aspects, of it there. Is this, interesting, conundrum. As. Games, become more social, people, become more engaged and, they're spending more online more. Time online and for us the more episodes, that they download of course that increases, our cost structure it, becomes more expensive for, us to support these better users, and so, to a certain degree you, know we all need the ad market to catch up to where we are that's really the best way to monetize these. Highly engaged users and so you. Know getting our message out there that we do have a new ad medium, bringing, that to the advertisers, you can benefit from that is. Really a much bigger challenge, for us than getting to consumers. Erin. Keith, nailed it when he said educating, the advertising, market it's something that I GA set out three years ago an. Entire year holding gaming 101, at ad agencies, and at brands, literally, spending an entire day explaining. What video games really are from. Tecmo bowl back, in the day all the way up to today's, Madden, 2007. So, in, educating, the world it's not just your 17, year old pimple, popper teenager, sitting in the back of the class wearing, black and playing. Dungeons, and Dragons it's, not that anymore it's, actually the average age of a gamer is 29. Some people say 30 it's. It's educating, the mark gamers. Really are I think that's the number, one obstacle that I GA faces, and, once people can understand, and can, wrap their heads around who a gamer really is i think the ad dollars will then follow. Shane. I think the biggest challenge, for the industry right now is sort of breaking the stigma, of the typical gamer who is sort of like you said the 17 year old pimple popper the guy who sits in his basement the guy who's 35 and, it still living with his parents I, think. The Nintendo's, Wii has. Really, sort of started to break down those boundaries for instance my fiance just starting video games for the first ever thank, you God, because. Of the we I brought the way home we had some people over we, had some drinks we started playing tennis next thing you know it turned into a wii party so, you. Know while Nintendo sort of gone against the grain they're, not trying to one-up people with technology, they're not they don't really have a robust, online user, interface, it's, all about sort, of going back to the old school and bringing people together again, in person to play video games and I think that sort of we're really help in breaking down those boundaries, and getting the the mass more except. Gaming and sort of a brace it again like it did back in the 80s with the arcade scene. So. Agree. With all these comments, for us personally. Our, struggles. Are more, along lines of dealing with a game publisher, infrastructure. A. Lot. Of the publishers, are sort, of made up of 10. Or 15, different developers, that they sort, of publish their work and when. We try to work with a single publisher a lot, of times we ended having to work with each developer, and it's. Hard, because the developers disagree. With corporate, or they do something different than the other developer, that's all part of the same corporate does so, we spent a lot of time sort, of struggling with those issues and I guess that's just the nature of the industry great.
I Definitely, agree with the advertisers but, what does tossing perspective, and we having to educate the market about who is the gamer really, but. Another issue, that we, face is. The, vicious circle that, exists between the stranglehold. That retailers, have on the market, the. Cost of developing, a game and the, condition. Into big publishers, which today actually. Limited. Innovation, limits, their publisher, acceptance, to really, embark, in new business models in to take risks, and, from. Our perspective it's. Really limiting, the potential of expanding. Beyond the core audience. All. Right well thank you very much maybe. We have a few minutes maybe we can take just a question, from the audience if, anybody. Has any otherwise. We'll wrap this up any. Questions, for. The panel. Alright. Well thank. You for oh, oh. Alright. Well good luck in traffic. You.