Games Industry 3.0: event writeup

Thanks to Waiming Mok for this writeup.
The games industry is fast evolving. In the last 12 months, games have become fun again for the casual non hardcore game players, and the next 5 years is not very predictable, except that opportunities abound. These are the highlights discussed by five industry experts on this topic at the CSPA meeting on May 29. 84 people attended this event at the law offices of Pillsbury Winthrop in Palo Alto.

The five industry experts have extensive experiences in the games industry:

  • The moderator, James Hursthouse, is the CEO of Online Game Services Inc. a San Jose-based company that has been refining its Game Service Provider business model since its inception in June 2004.
  • Jeff Yates is Vice President Product Management of Havok Inc.
  • Don Daglow, President and CEO of Stormfront Studios and his experiences on games dates back to the 1970’s, had also been at Mattel and EA
  • Tom DuBois is Lead Producer of the Global Online Studio at Electronic Arts, and also had been at Trimedia
  • Gus Tai, General Partner at Trinity Ventures, has invested extensively in games.

In the 90-minute panel, these experts conveyed an industry that is fast evolving. The changes include expanded audience with casual games, changing business models with social networking and other internet technologies, and new opportunities on new platforms.

When asked what the 3 significant trends in the last 12 months are, the 4 panelists came up with 12 trends:

Gus Tai:

 Persistence of content — think about social network, Limewriter, portals

Broadband that enables games/content distribution for startups) – this poses a challenge to game distributors like EA,

People pay real money for virtual goods — forming of Playfirst – payment for games for virtual goods — predict $B IPO on games companies (disruptive opportunities)

Tom DuBois:

New game controllers

John Riccitiello coming back to EA as CEO

Launch of Windows Live and combination with Xbox 360 — threat to close platform

Don Daglow:

Closed console becoming open will lead to audience expansion, as seen in new games like Flow

Nintendo WII has defeated negativism and removed reservation on game consoles being hard-core, hard-to-win

Time Warner / Comcast and game partners could turn out to be (1+1 = 3)

Jeff Yates:

Kids exchanging games — kids in backseat playing, adult never steps in

Hours spent on TV is moving to interactive side (e.g. search on Google, instead)

New development in middle tier of console, with more potential to do things meaningfully, a lot of low hanging fruits (such as immersive feeling)

When asked to predict what’s going to happen to games in the next 5 years, the panelists have a general consensus that it’s hard to predict, as the current changes in the games industry foretell that many possibilities could happen in the near future and there could also be signs of market disruptions. The general sense is that the following would be likely:

Convergence with TV and/or the internet

Social networking grows faster than virtual worlds (e.g. PhotoBuckets)

Stigma of games for kids going away

Games is global media

Some initial signs of standards for games

When asked what the opportunities for entrepreneurs are, the panel suggested these ideas:

Find ways to reduce cost of development of games, which costs from $40M-$50M to develop a major game

How could scenes and other elements of games be auto-generated?

Could physics-based animation be deployed?

Find sticky consumers to monetize with easy-to-make casual games, ala Penguin Club; how do you attract or entertain audience and keep them on the web site

Incorporate social networking

In all the discussions, there is a sense that the trends are going toward easier games, maybe even casual games, which would expand the target audience and thus get more customers. That’s part of the reason why the Nintendo WII has been successful with its new game controller. So when a member of the audience asked if there would be opportunities with a ultra real simulation of flying airplanes, the panelists all said no. The number of customers who want such real simulation would be very small. Most people do not know how to fly an airplane, and they would fail quickly in such a simulator and would give up on the game. Thus the market would be very niche and small in size. The general wisdom is that to have a big market, make the game easy to win, even when it’s positioned to be a real simulation.

This was a great panel session, with many insights on how the games industry is changing and where entrepreneurs could find opportunities.

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