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Shanti Bergel is a social gaming entrepreneur based in San Francisco.

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One…Gazillion Dollars!

The upside of the MMO business needs no introduction.  It is personified in the multi-billion dollar form of the World of Warcraft franchise.  While attempts to be the next WOW have not fared well thus far, it certainly hasn’t stopped folks from trying (Hellgate, Age of Conan, Tabula Rasa, Gods & Heroes, etc.).  Gazillion would appear to be the latest contender for the crown and they are bringing the might of the Marvel universe with them.  It is an ambitious play to be sure and, as a long-time Marvel comics collector, I hope Gazillion does well with the license.  That said, it will be exceptionally expensive to find out if they’re the next Blizzard or the next Brash.

While few specifics of the Marvel-Gazillion licensing deal have been released, the multi-year nature of the arrangement reminds me of EA’s recent multi-year lock on the NFL license for Madden.  In EA’s case, this makes vast amounts of sense as Madden is a proven franchise with known audience and revenue characteristics.  While I can see Gazillion wanting the runway to build a long-term business, I think it is safe to assume that they’re paying for the privilege in the form of yearly minimum commitments.  Marvel is white hot right now and not about to do a back-end only deal with a brand new company that has no track record.  So, in addition to the multi-million dollar cost of developing a AAA MMO, Gazillion also has the licensing fee to contend with.  Should their first product not be a hit, the company’s cost structure will begin to look rather scary depending on how much investor money they have in the tank.  They are making a very large, very speculative bet.

There are some significant design and resourcing challenges in getting a hit right out of the gate using a media license as well.  Adapting a beloved linear story and/or characters to an open, interactive environment is hard.  Making it highly replayable - MMO grind fest style - is very hard.  For example, players will want to be Spiderman, Iron Man, and The Hulk while nobody will want to be Ant Man.  Some games resolve this issue by letting players create a new character within the license’s universe but not play as the characters they are familiar with – Godfather for example.  Quest and mission design is exceptionally tricky in this case as the dreaded ‘kill ten rats’ approach is pretty much at odds with our preconceived ideas of a licensed story arc and characters - especially heroes.  In other words, even a generic hero (let alone Wolverine or Doctor Strange) isn’t really supposed to be killing the same ten baddies over and over again.  They’re supposed to be up to something more meaningful and grandiose than that - somthing more heroic.

Building out custom, low-replayability but gratifyingly heroic missions can get very expensive as the developer struggles to keep ahead of the content consumption curve of its player base.  NCsoft’s recent innovation in this regard is an interesting solve to this problem as it leverages user generated content to scale mission content for a large MMO in much the same way that we at Three Rings use it scale content for our in-browser virtual world, virtual item shop, and Flash game catalog.  If Gazillion were to manage to solve the resulting exploits, they might have a shot at creating  a compelling enough arrangement to entice the player to come back again and again to level up their hero.  Still…I wanna be Moon Knight and not some player-created approximation.  Getting around the character fixation is going to be tough.

One of the other big licensed IP projects reportedly underway at Gazillion is Lego Universe.  Legos - the original build your own story toy - are an excellent IP upon which to build on MMO in my opinion.  Where the Marvel license contrains design choices and possibilities, Lego opens them up.  The success the license has already had in being translated to game titles as diverse as the Lego Star Wars and Lego Indiana Jones hits to the very promising upcoming Lego Rock Band, speaks to its amazing adaptability.  The modular nature of the blocks themselves also lends itself well to the long-term play that is the MMO life cycle.  Lastly, the longevity of the beloved Lego brand could make for an extremely broad appeal depending on how tightly Gazillion aims the demographic focus beam.

Perhaps one day, years from now, Gazillion will stand toe to toe with Blizzard atop cash mountain.  Until then however, it will be an interesting journey and company to watch.

-Shanti

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Posted at 9:38 AM (3 years ago) | Permalink

Gaming On Cloud Nine

Cumulonimbus clouds are the highest-flying clouds around – the ninth highest to be exact.  Cloud computing is flying high again these days as well.  The seeds sown by the Application Service Providers (ASP) of the dot com boom have blossomed into the Software as a Service (SaaS) companies of today led by powerful, cheap core service offerings from companies like Amazon and Google.  The entire industry is hard at work jockeying for position in the next hype cycle for what the IDC has dubbed a $42B market.

At this year’s Game Developer Conference, cloud computing took center stage in the form of an announcement from OnLive that they would be bringing to market a revolutionary on-demand video game service by the end of the year.  Analysts immediately began predicting that the long-heralded demise of retail was at a quickening.  Technologists and online game experts I spoke with during the conference scoffed at the feasibility and even the utility of OnLive’s claims.

Even the more bullish analysts don’t think OnLive will rewrite the rules of gaming overnight.  But leaving aside the fickle realities of packet travel and consumer adoption for moment to contemplate the ifs, what are the potential implications in the short to mid term if OnLive does live up to the hype?

The landscape of the AAA title market in Asia will change.  The server-based, microtransaction-driven FreeToPlay model that grew up in South Korea and now dominates most of the rest of Asia as well was a response both to high piracy and low (AAA game-capable) PC penetration rates.  By housing the game on a metered server and players in net cafes, the model gained traction and widespread adoption.  In markets under served by the console players, FreeToPlay was literally the only AAA game in town.  Enter OnLive with its cheap hardware playable via a TV or low spec PC.  In places like South Korea where home broadband is affordable and lightening fast, the ability to play AAA titles in the home could very well impact the net cafe set.  Ripple effects to downstream players like payment providers seem likely as well as OnLive will doubtlessly handle billing.  Japan, traditionally a very console-centric market, also has wicked fast Internet to the home as well as extremely high penetration of notebook computers.  While content appropriateness and localization would continue to be a challenge, OnLive would address some structural issues and make it much more addressable market by PC game publishers.  China’s high wireless broadband adoption rates paired with cheap hardware and a TV would also augur for higher rates of home gaming.  SE Asia and India are not there yet from an infrastructure perspective but with the three major markets in position, if I were OnLive, I’d be looking to put some product marketing boots on the ground in Asia.

Game operating will further displace game publishing.  Online gaming experiences (MMOs, FreeToPlay, social gaming, and to some degree Steam and XBLA) have SaaS running in their veins.  Were it to be successful, OnLive would accelerate the considerable momentum that pure play online gaming already has.  Streaming packaged product off a server is only the first step after all.  In Asia in particular, there’s limited consumer value in streaming that which can be pirated for free.  The longer term win in both product differentiation and margins will be in converting AAA franchises to long-standing, loyal global communities organized around a service model.  This is a big deal as online game operating maps to a very different set of business realities that affect how product is built, delivered, and supported.  Ever since I left EA several years back to join FreeToPlay innovator Three Rings, I have consistently been impressed at how these business model differences play out in product design, organizational structure, and personnel/skills.  Our first game at Three Rings, Puzzle Pirates, recently celebrated its five year anniversary and is still going strong with a healthy community, ongoing updates, and item refreshes.  The multi-year slow build and retain curve of an online service stands in stark contrast to the big first week sales spike of most packaged products.  Launches, the life blood of packaged, are different beasts entirely in online.  Depending on the community offerings surrounding the core technology, OnLive will catalyze traditional publishers to greater expermentation with the operator model.

The casual/hardcore line will blur but not disappear. Part of the broadbased appeal of casual games is their approachable, pick up and play nature.  But, another part of it is that they’re available for trial or flat out free via digital download.  How many “casual” players would spend more time on AAA games if they were more readily available?  In the flavor of the future where OnLive comes as an option bundle with your cable subscription like a DVR, AAA title play would likely expand as casual players sample from the buffet.  However, given that packaged games often require upfront time investments to learn complex controls, my sense is that a majority of casual players will continue to play lighter fare even in the face of universal availability.

This is all just wild premature speculation of course - it may yet turn out to be Phantom 2.0.  Still, whatever happens with OnLive, there are strong winds blowing behind cloud gaming…

-Shanti

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Posted at 11:34 AM (3 years ago) | Permalink

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