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Rock, Paper, Shotgun interview

January 17th, 2008 (Visited 10965 times) Tags:

I did an inteview with Rock, Paper, Shotgun a short while back.

It’s funny, because tidbits from the interview have been picked up as news stories by various sources. And they all led with a different take on it! Over at GamesIndustry.biz, it was how the industry needs new inspiration. But over at Virtual Worlds News, it’s all about “players will touch Metaplace soon!” About which more shortly.

One of the things is that our influences in the game industry are fairly narrow. Bioshock is one of the big hits of the year, and everyone is impressed by its core narrative influences. It’s a critique of Ayn Rand and Objectivism and all of that stuff. But if you think about it, Objectivism is common currency for game developers, it’s a nerd kind of thing. So we’re not referencing anything too far afield there, a little further afield, but not a lot. A lot of the common cultural currency is not all that diverse, and that was really hammered home for me by watching the Xbox Live trailers for the new year. I sat with my wife and she said that if she hadn’t been told that they were all different games, she would not have been able to tell them apart. They were all so similar.

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Morgan Ramsay said on January 17th, 2008 at 10:56 am:

Raph wrote:

The subscription model is an incredibly good model – it makes a lot of money. But there’s a kind of expected level of polish, service, maintenance and so on. So we’re seeing a split between high end MMOs choosing subscription, and lower end choosing free-to-play models.

The publishing industry (i.e., magazines, journals) has actually been talking about how the subscription model is on the way out. Even in 2001, the subscription model was said to be increasingly abandoned by Web businesses. Major publishers were last year looking at transitioning to a purely microtransaction model powered by digital distribution. We’ll probably see more movement on that front this year.

Microtransactions are not really the wave of the future, given that casinos have been using that model for a long, long time, but that’s the model that works really well. Another micro example: You can subscribe to Harvard Business Review, or you can purchase individual articles. Yet another micro example: Muhammad Yunus won the Nobel Peace Prize for micro-credit banking.

Eventually everyone will have to give their game away for free and the question will become: what are they selling? Access to tiers of service, items, what?

So true. Professionals in the music industry are even saying this about music. Digital distribution has made such a huge impact on our lives that as consumers we can now completely personalize our shopping experiences.

One of these days, brick-and-mortar retailers might have to follow suit. Bill Gates at CES demonstrated some sort of technology for retailers that was loaded with snowboard customization software. The touch-powered table recognized the cell phone he laid down and allowed him to send a digital photo preview of the custom snowboard to his friends via MMS.

Combine that with Big Stage’s instant 3D avatar technology, make the technology affordable to retailers everywhere, and we’ll be able to completely personalize our offline shopping experiences, too. No more dressing rooms. No more interior designers, at least how we currently think of them. We’ll just be able to visualize our material acquisitions on-the-spot and share those visualizations before we make any decisions to purchase.

Woop said on January 18th, 2008 at 4:15 am:

I wouldn’t be at all surprised to see free to play games have an upsurge. I’m currently on the Mythos beta and was explaining to someone how it would be a free to play game. Their initial reaction was utter surprise, until I used an example of a well known browser based game that must rake in vast amounts in advertising revenue because of the numbers it attracts being free to play.

It will be interesting to see in five years time how much the balance point has shifted between single game purchases (.ie. a boxed product from the shop or a one off download), single game subscriptions (.eg. WOW), free to play, and the monthly subscription to a ‘catalogue’.

Morgan Ramsay said on January 18th, 2008 at 9:09 am:

Woop wrote:

… that must rake in vast amounts in advertising revenue because of the numbers it attracts being free to play.

The problem with the ad-supported model is that advertising is generally ineffective. Ad agencies love to convince their clients that they’re getting their money’s worth from “eyeballs,” but the actual ROI is nothing to jump around about. Whenever I see some company out there talking about how their product is 100% supported by advertising revenue, I cringe. That’s just bad business, ladies and gentlemen. You should never put all of your eggs in one basket.

Eolirin said on January 18th, 2008 at 6:38 pm:

Well, the advertising paradigm has worked for TV thus far hasn’t it? And Radio before that… Hell, it works on the net too, as long as it’s targeted properly. There are some numbers floating around about TV Studios drawing in half a billion on ads for streaming shows, which is part of what lead to the WGA strike.

For games though, part of the problem is in implementation. Ads need to be targeted and not obtrusive. And they to be integrated in such a way that you can’t easily just ignore them entirely. That’s why banner ads don’t work so well; they’ve become so ubiquitous that everyone just ignores them and doesn’t even *see* them anymore.

And of course, you’re right that they should never rely *soley* on ad revenue, especially since micro-transactions are so easy to add to games too. But more money is always a good thing no?

As a slight tangent: The MS demonstration, you’re talking about Surface right? That thing is *neat*, and I want one! It can do a lot more than just send stuff to cell phones, and as a way to interface with programs it may be the biggest revolution we’ve seen since the invention of the mouse. Really, when you think about it, the mouse is an attempt to simulate the ability for us to reach out and touch the interface elements. But with a mouse you can only get a single point of contact. Surface is built on technology that lets you get dozens. If they figure out a good way to implement context menus, the equivelent of our right mouse button, and it shouldn’t be too hard, the uses for general computing are awe inspiring. Doesn’t necessarily work as well for certain types of games though. Gameplay involving movement through a 3d space would be hard to do without either a mouse/keyboard like setup or a thumbstick, especially if you can control camera angles. RTS games on the other hand could benefit a lot.

Morgan Ramsay said on January 18th, 2008 at 9:25 pm:

Eolirin wrote:

You have to realize that I’m not talking about the distribution channel side of the equation. Sure, as a distributor of ads, you can partly subsidize your business with advertising revenue, but how long will that last?

A third-party agency, or in-house advertising department, is buying advertising space from you, the distributor. They are buying that space to place ads that were created for a reason. The people to whom the agency or department is responsible want to see a solid return on their investment in that advertising.

When the advertising doesn’t perform well, as the distributor, you’re not the whipping boy. The agency or department might come back and blame you, but at least you’re not being held responsible for a bad decision. Your budget stays intact and you probably keep your job, so you’re not really hurt when the account decides to walk. Yet, you still lose the revenue that account was generating.

Advertising is cursed precisely because advertising can’t maintain high performance for very long. Advertising is really only effective in short bursts with extremely specific campaign goals and objectives. Since advertising can’t maintain high performance for very long, there’s no reason why in-game ad placements would prove valuable to a client or a client’s client for very long either. They will eventually retire their account and when they do, you’ll lose that revenue that was going toward subsidizing your business.

While distribution channels for advertising appear to be doing well, there is account turnover, and the distributor is constantly spending resources on ad sales to make up for that turnover. If you think that a game, program, or show can be 100% subsidized by advertising revenue in an affordable and profitable way, you’re either operating a nonprofit (which is legally mandated to have other sources of revenue, too) or you’re living in a dream world.

As for the WGA strikes, I walk down the middle of the debate. Both sides have good points. They just both need to make compromises to settle the matter. I don’t think those numbers to which you refer are as strong a case for advertising as they might seem. I’d recommend you two books, if you haven’t read them. “Entertainment Industry Economics: A Guide for Financial Analysis” by Harold L. Vogel and “The Fall of Advertising and the Rise of PR” by Al Ries.

But more money is always a good thing no?

Not always. Sometimes the best strategy is to slow growth or not to grow at all. As operating revenue, sure.

If they figure out a good way to implement context menus …

I’d hope they figure out a way to go beyond context menus… I don’t think menus of any kind are optimal. I think we, speaking generally, have just become complacent with that form of interaction. Is the next step brain-computer interfacing? Or is there something between here and there?

Rik said on January 19th, 2008 at 3:00 am:

T-shirts and movie rights.

Eolirin said on January 20th, 2008 at 1:19 am:

Well, I don’t really want to get into the WGA stuff too much, since it’s really off topic, but judging at how the Studios handled stuff like VHS royalties… and then DVD royalties, I don’t think that the WGA really has much room to compromise too much. Anything they let slide won’t be re-addressed, and the net is becoming a much larger portion of all entertainment. I don’t think 6-8 cents for a 20-40 dollar DVD sale is too much to ask either. When a studio CEO gets more money as part of a severance package than the *entire* WGA sees in a year on DVD royalties… something’s wrong.

That being said, you’ve got a strong point about advertising “churn”. That would be a big problem. And if I implied that 100% advertising was a good idea, I didn’t really mean to… just that it was potentially valid as a major source of income. Even TV shows have DVD releases to help offset costs. Microtransactions + advertising would probably get you all the way there if your operating costs aren’t obscene.

Rock, Paper, Shotgun interview

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