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Here are some of the latest news and highlights in the social gaming industry that took place this week:
The San Francisco Business Times today published a story on hi5's transition into the social games industry. Patrick Hoge interviewed hi5 President and CTO Alex St. John last week, discussing the current state of the industry, key players in the space, current challenges that developers face, and the opportunities that hi5 sees. Patrick quotes Alex discussing hi5's approach to building an online social environment centered around games: "St. John said hi5's strategy is to become the 'playground' where people using both real and assumed identities can socialize around games. While not developing its own games, it will use 'addictive' gaming features like 3D avatars in Flash programming, a store for virtual goods and gifting, he said. Last week, for example, hi5 started selling 'prank' gifts in which a user's avatar can be dispatched to do mischief on other users' homepages -- like smashing what appear to be holes in their computer screens with a baseball bat." To read the full article, visit the San Francisco Business Times.
Google has been headlining in the news over the last couple weeks with their recent acquisition of social app developer Slide for a reported $228 million, and rumored developments of a social network for games called Google Me. This week, TechCrunch reported that Google purchased Jambool, creators of the payments platform Social Gold, for $55 million with another $15-$20 million in an earnout. Social Gold enables developers to monetize their social applications through direct payments, and was founded by Amazon veterans Vikas Gupta and Reza Hussein. Additionally, it was reported that Google Ventures, the venture capital arm of Google, supposedly made an estimated $3-5 million investment in popular iPhone games developer ngmoco. The investment reportedly valued ngmoco above $100 million, and this comes on top of a $25 million Series C round ngmoco closed in February this year.
Zynga pulled Farmville from MSN Games portal this week. Just this past February, in the midst of a fairly public battle with Facebook, Zynga announced that is would be bringing Farmville to MSN in an effort to diversify away from Facebook platform. According to figures from AppData, FarmVille has lost more than 20 million users in the past four months since Facebook enacted changes to its app notification system. Although Zynga hasn't yet explained why the game was pulled from MSN, this isn't the first time one of the studio's popular titles has disappeared from a site. Three months ago, it announced the removal of YoVille from teen-targeted social network Tagged. Zynga also announced earlier that they would be partnering with Yahoo! Games, and Farmville is still not available on the portal, so it's unclear if it is still coming to Yahoo! and whether Zynga will continue to bring the title to networks outside Facebook.
eMarketer expects that marketers will spend $220 million worldwide to advertise in social games and social applications in 2010, supposedly increasing 60% in 2011. In the US alone, those numbers total $142 million in 2010, and an estimated $192 in 2011. While the dominant revenue stream for many social games has been the sale of virtual goods, it's clear that there is a lot of opportunity with advertisers as well.
Just a reminder that next week (August 16-18), hi5 representatives will be attending GDC Europe in Cologne. If you're interested in meeting with our team during the conference, please contact us to request a meeting: http://developer.hi5.com/php/contact.php
The San Francisco Business Times today published a story on hi5's transition into the social games industry. Patrick Hoge interviewed hi5 President and CTO Alex St. John last week, discussing the current state of the industry, key players in the space, current challenges that developers face, and the opportunities that hi5 sees. Patrick quotes Alex discussing hi5's approach to building an online social environment centered around games: "St. John said hi5's strategy is to become the 'playground' where people using both real and assumed identities can socialize around games. While not developing its own games, it will use 'addictive' gaming features like 3D avatars in Flash programming, a store for virtual goods and gifting, he said. Last week, for example, hi5 started selling 'prank' gifts in which a user's avatar can be dispatched to do mischief on other users' homepages -- like smashing what appear to be holes in their computer screens with a baseball bat." To read the full article, visit the San Francisco Business Times.Google has been headlining in the news over the last couple weeks with their recent acquisition of social app developer Slide for a reported $228 million, and rumored developments of a social network for games called Google Me. This week, TechCrunch reported that Google purchased Jambool, creators of the payments platform Social Gold, for $55 million with another $15-$20 million in an earnout. Social Gold enables developers to monetize their social applications through direct payments, and was founded by Amazon veterans Vikas Gupta and Reza Hussein. Additionally, it was reported that Google Ventures, the venture capital arm of Google, supposedly made an estimated $3-5 million investment in popular iPhone games developer ngmoco. The investment reportedly valued ngmoco above $100 million, and this comes on top of a $25 million Series C round ngmoco closed in February this year. Zynga pulled Farmville from MSN Games portal this week. Just this past February, in the midst of a fairly public battle with Facebook, Zynga announced that is would be bringing Farmville to MSN in an effort to diversify away from Facebook platform. According to figures from AppData, FarmVille has lost more than 20 million users in the past four months since Facebook enacted changes to its app notification system. Although Zynga hasn't yet explained why the game was pulled from MSN, this isn't the first time one of the studio's popular titles has disappeared from a site. Three months ago, it announced the removal of YoVille from teen-targeted social network Tagged. Zynga also announced earlier that they would be partnering with Yahoo! Games, and Farmville is still not available on the portal, so it's unclear if it is still coming to Yahoo! and whether Zynga will continue to bring the title to networks outside Facebook.
eMarketer expects that marketers will spend $220 million worldwide to advertise in social games and social applications in 2010, supposedly increasing 60% in 2011. In the US alone, those numbers total $142 million in 2010, and an estimated $192 in 2011. While the dominant revenue stream for many social games has been the sale of virtual goods, it's clear that there is a lot of opportunity with advertisers as well.Just a reminder that next week (August 16-18), hi5 representatives will be attending GDC Europe in Cologne. If you're interested in meeting with our team during the conference, please contact us to request a meeting: http://developer.hi5.com/php/contact.php
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Here are some of the latest news and highlights in the social gaming industry that took place this week:
According to a report from VentureBeat last week, Facebook is shuttering its virtual goods store after three years and is focusing on building out its Credits online payments system. hi5's President and CTO, Alex St. John, wrote an opinion piece on this news for Industry Gamers. In this piece, St. John states that Facebook is clearly not dedicated to e-commerce as a result of shutting their own virtual gifts store, so developers should take a harder look at whether Facebook is the right platform to increase audience acquisition and monetize their games and apps. To read the full piece, visit Industry Gamers.
Early in the week, TechCrunch revealed that Google had quietly invested between $100 million to $200 million in FarmVille developer Zynga as part of its preparation to launch a new Google Games platform later this year. Digg founder Kevin Rose and a former Facebook chief technical officer, have suggested in recent weeks that the search-engine giant is working on a social network called Google Me geared toward rivaling Facebook. This social network is intended to build off of Google Buzz, which has been widely criticized by tech pundits.
Offerpal Media announced that they were laying off an unspecified number of staff, in part because it lost out to rival TrialPay in the race to provide alternative payments with Facebook's new virtual currency system, Facebook Credits. Once apps are switched to Facebook Credits, Offerpal will no longer provide offers for those apps. As a result, Offerpal has to lay off its staff and re-focus its resources on growth areas that include providing offers for other game platforms such as the open web, new internet vertical sites, and mobile apps.
On Tuesday, July 20, we will by celebrating the official launch of our new Developer Portal with an event in Seattle. If you're headed to Casual Connect Seattle, we invite you to watch hi5's Alex St. John face off against none other than the Facebook behemoth itself in the sumo wrestling battle of the decade. Come watch the live action at this can't-miss event! Doors open at 9:00pm, fight begins at 11:00pm. For more details on the event, please visit: http://hi5casualconnect.eventbrite.com.
According to a report from VentureBeat last week, Facebook is shuttering its virtual goods store after three years and is focusing on building out its Credits online payments system. hi5's President and CTO, Alex St. John, wrote an opinion piece on this news for Industry Gamers. In this piece, St. John states that Facebook is clearly not dedicated to e-commerce as a result of shutting their own virtual gifts store, so developers should take a harder look at whether Facebook is the right platform to increase audience acquisition and monetize their games and apps. To read the full piece, visit Industry Gamers.
Early in the week, TechCrunch revealed that Google had quietly invested between $100 million to $200 million in FarmVille developer Zynga as part of its preparation to launch a new Google Games platform later this year. Digg founder Kevin Rose and a former Facebook chief technical officer, have suggested in recent weeks that the search-engine giant is working on a social network called Google Me geared toward rivaling Facebook. This social network is intended to build off of Google Buzz, which has been widely criticized by tech pundits.Offerpal Media announced that they were laying off an unspecified number of staff, in part because it lost out to rival TrialPay in the race to provide alternative payments with Facebook's new virtual currency system, Facebook Credits. Once apps are switched to Facebook Credits, Offerpal will no longer provide offers for those apps. As a result, Offerpal has to lay off its staff and re-focus its resources on growth areas that include providing offers for other game platforms such as the open web, new internet vertical sites, and mobile apps.
On Tuesday, July 20, we will by celebrating the official launch of our new Developer Portal with an event in Seattle. If you're headed to Casual Connect Seattle, we invite you to watch hi5's Alex St. John face off against none other than the Facebook behemoth itself in the sumo wrestling battle of the decade. Come watch the live action at this can't-miss event! Doors open at 9:00pm, fight begins at 11:00pm. For more details on the event, please visit: http://hi5casualconnect.eventbrite.com.
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In a meeting with Chris Nuttall of the Financial Times, hi5 president and CTO Alex St. John discussed the evolution and current competitive landscape of the social games industry. As both leading social networks and game developers look to rise above the noise and become the market leader, they will face some big challenges. Alex discussed how commerce will play a significant role in the potential success of social game companies, and was quoted as saying: "The Zynga and Facebook guys are just scratching the most naive edge of online commerce models. The commerce platform that I built at WildTangent and that Big Six has built are decades ahead in sophistication and capability. It's rolling out now and we're going to show the social media industry what it means to really make money from these games."
Additionally, Alex and Chris discussed why hi5 is uniquely positioned to become the leading social gaming platform, and Chris sums up this point best here: "Facebook will make missteps because it wants to be a general-purpose social network and will not focus properly on gaming, leaving it to more specialised companies like his own Hi5 to produce winning models."
Read the full article: http://blogs.ft.com/techblog/2010/07/facebook-will-fail-at-social-gaming-hi5/
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Here is a summary of the latest news and
highlights in the social gaming industry that
took place this
week:
The week kicked off with an announcement from
Social Gaming Network (SGN), game publishers for iOS devices like iPhone and
iPad as well as the PC. SGN announced that they had raised $2 million from
Tomorrow Ventures and Xing founder Lars Hinrichs. While their focus has
primarily been on iOS devices, founder and executive chairman Shervin Pishevar
says SGN plans to start releasing titles for Android
smartphones.
Boston-based MocoSpace announced the launch of a mobile, browser-based social games platform. The company said it is focusing on games on mobile browsers so that it can reach the widest possible audiences. Rivals include MySpace Mobile, Facebook, Aurora Feint, Ngcomo, Scoreloop, and PapayaMobile.
It's been a busy week for Playdom, one of the industry's leading social game developers and one of our partners here at hi5. On Tuesday, Playdom closed $33 million in a third round of funding from Bessemer Venture Partners, Steamboat Ventures, and New World Ventures (Playdom has raised $76 million to date). This morning, Playdom announced the acquisition of Hive7.com, a Facebook developer whose biggest game is Knighthood.
According to a new study from Frank N. Magid Associates, American consumers spent $168
million on mobile virtual
goods in the last year, and they're expected to do so again in the year ahead.
Per the report, over 70 million Americans own smartphones and 45% of those
owners play games, while 16% of them are buying in-game goods. The average
amount spent? $41 per person! Magid Advisors president Mike Vorhaus weighed in
on the results of the study and said, "Everybody knows free-to-play social
gaming models on PC platforms have been making a killing but mobile virtual
goods aren't as well understood. With almost 20 percent of smartphone gamers
already making purchases, there's a lot of room for the market to keep taking
off as smartphones continue to increase in popularity."
Wednesday was another big day for funding announcements as well - both HeyZap and PapayaMobile announced funding rounds. Online gaming platform HeyZap announced the closing of a $3 million round of venture funding led by Union Square Ventures, joined by Naval Ravikant and Chris Dixon for Founder Collective. The company's aim is to make social games more like YouTube videos, so that publishers can embed them on any web page. HeyZap stated that they will be using the funds to grow the company over the next few weeks. Beijing-based PapayaMobile raised $4 million for the launch of its new mobile social networking platform on Android devices. The platform has attracted 3.5 million global users in the past year by launching its own social games on mobile phones. Now it's opening up the platform to third-party developers who can integrate the social platform into their own games.
million on mobile virtual
goods in the last year, and they're expected to do so again in the year ahead.
Per the report, over 70 million Americans own smartphones and 45% of those
owners play games, while 16% of them are buying in-game goods. The average
amount spent? $41 per person! Magid Advisors president Mike Vorhaus weighed in
on the results of the study and said, "Everybody knows free-to-play social
gaming models on PC platforms have been making a killing but mobile virtual
goods aren't as well understood. With almost 20 percent of smartphone gamers
already making purchases, there's a lot of room for the market to keep taking
off as smartphones continue to increase in popularity."Wednesday was another big day for funding announcements as well - both HeyZap and PapayaMobile announced funding rounds. Online gaming platform HeyZap announced the closing of a $3 million round of venture funding led by Union Square Ventures, joined by Naval Ravikant and Chris Dixon for Founder Collective. The company's aim is to make social games more like YouTube videos, so that publishers can embed them on any web page. HeyZap stated that they will be using the funds to grow the company over the next few weeks. Beijing-based PapayaMobile raised $4 million for the launch of its new mobile social networking platform on Android devices. The platform has attracted 3.5 million global users in the past year by launching its own social games on mobile phones. Now it's opening up the platform to third-party developers who can integrate the social platform into their own games.
Boston-based MocoSpace announced the launch of a mobile, browser-based social games platform. The company said it is focusing on games on mobile browsers so that it can reach the widest possible audiences. Rivals include MySpace Mobile, Facebook, Aurora Feint, Ngcomo, Scoreloop, and PapayaMobile.
It's been a busy week for Playdom, one of the industry's leading social game developers and one of our partners here at hi5. On Tuesday, Playdom closed $33 million in a third round of funding from Bessemer Venture Partners, Steamboat Ventures, and New World Ventures (Playdom has raised $76 million to date). This morning, Playdom announced the acquisition of Hive7.com, a Facebook developer whose biggest game is Knighthood.
Coming up next week, we'll be attending the
first-ever Social
Developer Summit, hosted by mediabistro.com and All Facebook founder Nick
O'Neill. We anticipate that it will be an interesting event for developers,
focused on social news, games, discovery, search, and other solutions. Notable
speakers include Jason Oberfest of ngmoco:), Luke Rajlich of Zynga's Farmville,
John Smart of Zoosk, Jia Shen of Rock You, Arin Sarkissian of Digg, and Immad
Akhund of HeyZap. If you're interested in meeting with us at the event, please
drop us a
line.
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Fantasy Sports Game 2010 World Futbol Challenge Launches on hi5.com in Time for the 2010 World Cup
We are pleased to announce our partnership with RotoHog, one of the fastest-growing fantasy game developers for major entertainment brands and professional sports. Through this strategic partnership, we've launched the first-ever fantasy sports game to be published on our website, 2010 World Futbol Challenge.
"RotoHog has quickly built a reputation in sports and entertainment of being able to create and maintain high quality, smooth functioning game applications, especially in the fantasy space, and we are very proud to partner with them," said Kevin Gliner, SVP of production at hi5. "Soccer's following around the world is second to none, and we are very excited to give our millions of monthly users an opportunity to play along with their favorite countries during next month's landmark event in South Africa."
"On a global basis there is no sport that has more potential for fantasy gaming than soccer does," said RotoHog CEO Kelly Perdew. "We are very pleased to be able to partner with hi5 to create their first-ever fantasy sports game, as fans shift their focus to all the excitement and international pride that will be on display as the world's greatest sporting event begins in June in South Africa."
2010 World Futbol Challenge gives players the ability to participate in a country-by-country fantasy soccer game in time for the 2010 FIFA World Cup. The game is currently available on hi5.com and will be a featured game on our website for the weeks leading up to the start of the games in South Africa on June 11. In this bracket-style, confidence pick 'em game, players select their favorite countries and then assign them extra virtual goods called "confidence points," which provide weighted returns on those selections. Each participant is given 1,000 points to start, with the opportunity to purchase more points through the hi5 virtual goods store.
To play 2010 World Futbol Challenge, visit www.hi5.com.
To learn more about the hi5 Game Developer Program, please visit http://hi5networks.com/partners/gdp.html.
About hi5 Networks
Founded in 2003, hi5 today is among the top 20 largest web sites in the world and the leading destination site focused on social entertainment and gaming. Combining a robust social platform with premium content and game mechanics, hi5 delivers a fun, expressive, and interactive entertainment experience to millions of users around the world. Available in over 50 languages, the site features localized games, virtual goods and other content that is monetized through hi5 Coins, a global virtual currency supporting over 60 payment methods and 30 currencies worldwide. For more information on hi5, visit http://www.hi5.com.
About RotoHog
RotoHog builds powerful, award-winning games around any set of structured data (statistics, website activity, appearances on magazine covers, ticket sales, song downloads, etc.) for media partners such as BloombergSports, Sports Illustrated, NBA.com, NASCAR.COM, Turner Digital, Military.com, The Los Angeles Times, Pro Football Weekly, AVP, Fox Sports International, UsWeekly and MySpace. Their gaming platform allows major brands and media companies to engage and monetize their audiences via a Games as a Service model. RotoHog is privately held, and based in Los Angeles, CA. Investors include Allen & Co, Mission Ventures, DFJ Dragon and Sports Capital Partners Worldwide.
We are pleased to announce our partnership with RotoHog, one of the fastest-growing fantasy game developers for major entertainment brands and professional sports. Through this strategic partnership, we've launched the first-ever fantasy sports game to be published on our website, 2010 World Futbol Challenge.
"RotoHog has quickly built a reputation in sports and entertainment of being able to create and maintain high quality, smooth functioning game applications, especially in the fantasy space, and we are very proud to partner with them," said Kevin Gliner, SVP of production at hi5. "Soccer's following around the world is second to none, and we are very excited to give our millions of monthly users an opportunity to play along with their favorite countries during next month's landmark event in South Africa."
"On a global basis there is no sport that has more potential for fantasy gaming than soccer does," said RotoHog CEO Kelly Perdew. "We are very pleased to be able to partner with hi5 to create their first-ever fantasy sports game, as fans shift their focus to all the excitement and international pride that will be on display as the world's greatest sporting event begins in June in South Africa."
2010 World Futbol Challenge gives players the ability to participate in a country-by-country fantasy soccer game in time for the 2010 FIFA World Cup. The game is currently available on hi5.com and will be a featured game on our website for the weeks leading up to the start of the games in South Africa on June 11. In this bracket-style, confidence pick 'em game, players select their favorite countries and then assign them extra virtual goods called "confidence points," which provide weighted returns on those selections. Each participant is given 1,000 points to start, with the opportunity to purchase more points through the hi5 virtual goods store.
To play 2010 World Futbol Challenge, visit www.hi5.com.
To learn more about the hi5 Game Developer Program, please visit http://hi5networks.com/partners/gdp.html.
About hi5 Networks
Founded in 2003, hi5 today is among the top 20 largest web sites in the world and the leading destination site focused on social entertainment and gaming. Combining a robust social platform with premium content and game mechanics, hi5 delivers a fun, expressive, and interactive entertainment experience to millions of users around the world. Available in over 50 languages, the site features localized games, virtual goods and other content that is monetized through hi5 Coins, a global virtual currency supporting over 60 payment methods and 30 currencies worldwide. For more information on hi5, visit http://www.hi5.com.
About RotoHog
RotoHog builds powerful, award-winning games around any set of structured data (statistics, website activity, appearances on magazine covers, ticket sales, song downloads, etc.) for media partners such as BloombergSports, Sports Illustrated, NBA.com, NASCAR.COM, Turner Digital, Military.com, The Los Angeles Times, Pro Football Weekly, AVP, Fox Sports International, UsWeekly and MySpace. Their gaming platform allows major brands and media companies to engage and monetize their audiences via a Games as a Service model. RotoHog is privately held, and based in Los Angeles, CA. Investors include Allen & Co, Mission Ventures, DFJ Dragon and Sports Capital Partners Worldwide.
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hi5 was profiled in an extensive article on social gaming that appeared in GameSpot. The piece, titled "Social Ties: Are online social games the future of interactive entertainment?" focused on overall trends in the category and the companies that have emerged as leaders in the space.
The section highlighting hi5, from an interview with hi5 president and CTO Alex St. John, starts on page 5. The article mentioned the recent launch of hi5's Game Developer Program, initially announced at the GDC conference in March, 2010. "We're looking for start-up developers that need a home. Almost all developers making games for Facebook feel that the window has closed, so we'd like to take them on," St. John was quoted as saying in the article.
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Interesting week...
Price of Facebook Privacy? Start Clicking, New York Times
Facebook Privacy: A Bewildering Tangle of Options, New York Times
Facebook Executive Answers Reader Questions, New York Times
Facebook's open disdain for privacy, Financial Times
Facebook Backlash Keeps Growing, MediaPost
Dear Mark Zuckerberg:, Scobleizer
Facebook's Eroding Privacy Policy: A Timeline, Electronic Frontier Foundation
The Evolution of Privacy on Facebook, Visual Communication Lab
Analysis: Some Facebook Privacy Issues Are Real, Some Are Not, Inside Facebook
Facebook Calls All Hands Meeting On Privacy, All Facebook
Well, These New Zuckerberg IMs Won't Help Facebook's Privacy Problems, Business Insider
How To Put Facebook On A Privacy Lockdown, Business Insider
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[NOTE: This blog post initially appeared on Industry Gamers.]
By Alex St. John, President & CTO, hi5
GDC was exciting this year. It was completely clear that the era of online gaming has fully arrived and that the massive wave of interest at the event is no longer focused on consoles but on online gaming opportunities. The two major themes of the show revolved around social gaming and on-demand gaming, specifically a new service launching from a company called OnLive which purports to enable people to play traditional PC games as streaming video over the web without installing them. What's exciting to me about this year is that this is the first time in many years that the game industry's future has been so wide open that it's difficult to predict.
I must confess that I'm a little hesitant to make sweeping predictions about future changes to the game market in these times. I'm sure, for example, that ultimately games will become a broadcast media that are predominantly monetized via micro-currency and advertising. I'm sure that consoles as we know them will fade into the history books within a very few years. These insights however lack the depth, vision and specificity I would prefer to convey because the market has simply become so turbulent that there are any number of ways it may unfold.
Take the much anticipated launch of OnLive for example. It's a great sounding idea - streaming games that require no installation, can be played anywhere, and are stored in the cloud with support for spectating! Sounds great; it's too bad that it's doomed. Is anybody out there aware that Valve is doing a 9-figure downloadable gaming business for premium titles already? Although Valve is so wildly profitable that they have little need to hype the company to investors, I suspect that Gabe Newell is smiling to himself and thinking the same thing I am. This is going to be a fun show. Does anybody remember how many failed companies there are who have had the same idea and perfectly workable technology solutions for delivering premium games over the Internet?
I do, I also built a successful downloadable service that includes premium games and here's where the idea always breaks down for everybody who tries it:
False assumption #1: There is real value in solving the delivery problems for retail games online
Delivery has been solved adequately many times over to no great regard. Yahoo's download on demand service was a major failure generating a tenth of the revenue from popular retail titles as unbranded casual games were generating for them. GameTap crashed and burned. IGN's download on demand service after many years of promotion and a huge gaming audience never amounted to more than an eight-figure business. Try-and-buy, subscription and rent-to-own business models have all failed. Valve is the most successful download-on-demand service for retail games and game delivery is a well solved problem for them. Online delivery obstacles have not been the barrier to Yahoo's, IGN's, GameTap's, Valve's or WildTangent's growth in this area.
False assumption #2: Traditional game publishers want your help
No, they do not. They are slaves to the retail channel and public markets. Although they always have enterprising and exuberant new people who see the future and value of online publishing, the companies they work for can never overcome their desperate attachment to the retail channels that completely dictate their world. No matter how much they want to explore online opportunities they cannot afford to risk their channel relationships or most valuable new titles on unproven new online distribution channels without enormous revenue guarantees and strict restrictions on pricing, business models and market availability. The result has always been the same; you can get a hit new game from a publisher only with a huge revenue guarantee and strict limits on how it can be sold OR you can get a dusty old game that has run its course in retail on flexible terms. These companies cannot afford to change or gamble their best games on new online channels that are not already larger than their proven retail relationships. You can hide that problem with VC dollars for a while but eventually they run out.
False assumption #3: The games can be adapted to more flexible online business models
No they can't. Even if the publishers were inclined to allow it, there are two pervasive problems. The first is that the DRM technologies used to protect retail games make it nearly impossible to adapt these games to better online models. Second, many traditional game publishers don't even own or control the source code to the games they publish. They couldn't modify them to work in new ways if they wanted to. Even if these statements weren't true they would still fail for another reason, which is that the very formulation of retail games is contrary to how all content MUST be sold online: with a "free" trial in some form. Retail games are not designed to sell themselves via free trials. They rely on huge marketing budgets, big brands and the promise of being great games to get consumers to buy them sight unseen. Unlike online games which rely entirely on their pure play value and addictiveness to sell themselves, retail games rely on strong marketing to sell.
Conclusion
The hard to accept reality is that traditional games designed for retail distribution are simply dead in an online world and frankly the publishers of these games will ultimately die with them because they can't afford to adapt. Streaming the same content "on-demand" won't save them. The exciting part of this change is that it's a brave new world for new companies to step in and create the next-generation EAs and Take-Twos. I'd list Activision as well but they've already effectively been bought by World Of Warcraft. I would not be surprised to see successful future games that are designed to be delivered as streaming video, but a new streaming delivery technology will not create a new online second life for this dying genre of content.
By Alex St. John, President & CTO, hi5
GDC was exciting this year. It was completely clear that the era of online gaming has fully arrived and that the massive wave of interest at the event is no longer focused on consoles but on online gaming opportunities. The two major themes of the show revolved around social gaming and on-demand gaming, specifically a new service launching from a company called OnLive which purports to enable people to play traditional PC games as streaming video over the web without installing them. What's exciting to me about this year is that this is the first time in many years that the game industry's future has been so wide open that it's difficult to predict.
I must confess that I'm a little hesitant to make sweeping predictions about future changes to the game market in these times. I'm sure, for example, that ultimately games will become a broadcast media that are predominantly monetized via micro-currency and advertising. I'm sure that consoles as we know them will fade into the history books within a very few years. These insights however lack the depth, vision and specificity I would prefer to convey because the market has simply become so turbulent that there are any number of ways it may unfold.
Take the much anticipated launch of OnLive for example. It's a great sounding idea - streaming games that require no installation, can be played anywhere, and are stored in the cloud with support for spectating! Sounds great; it's too bad that it's doomed. Is anybody out there aware that Valve is doing a 9-figure downloadable gaming business for premium titles already? Although Valve is so wildly profitable that they have little need to hype the company to investors, I suspect that Gabe Newell is smiling to himself and thinking the same thing I am. This is going to be a fun show. Does anybody remember how many failed companies there are who have had the same idea and perfectly workable technology solutions for delivering premium games over the Internet?
I do, I also built a successful downloadable service that includes premium games and here's where the idea always breaks down for everybody who tries it:
False assumption #1: There is real value in solving the delivery problems for retail games online
Delivery has been solved adequately many times over to no great regard. Yahoo's download on demand service was a major failure generating a tenth of the revenue from popular retail titles as unbranded casual games were generating for them. GameTap crashed and burned. IGN's download on demand service after many years of promotion and a huge gaming audience never amounted to more than an eight-figure business. Try-and-buy, subscription and rent-to-own business models have all failed. Valve is the most successful download-on-demand service for retail games and game delivery is a well solved problem for them. Online delivery obstacles have not been the barrier to Yahoo's, IGN's, GameTap's, Valve's or WildTangent's growth in this area.
False assumption #2: Traditional game publishers want your help
No, they do not. They are slaves to the retail channel and public markets. Although they always have enterprising and exuberant new people who see the future and value of online publishing, the companies they work for can never overcome their desperate attachment to the retail channels that completely dictate their world. No matter how much they want to explore online opportunities they cannot afford to risk their channel relationships or most valuable new titles on unproven new online distribution channels without enormous revenue guarantees and strict restrictions on pricing, business models and market availability. The result has always been the same; you can get a hit new game from a publisher only with a huge revenue guarantee and strict limits on how it can be sold OR you can get a dusty old game that has run its course in retail on flexible terms. These companies cannot afford to change or gamble their best games on new online channels that are not already larger than their proven retail relationships. You can hide that problem with VC dollars for a while but eventually they run out.
False assumption #3: The games can be adapted to more flexible online business models
No they can't. Even if the publishers were inclined to allow it, there are two pervasive problems. The first is that the DRM technologies used to protect retail games make it nearly impossible to adapt these games to better online models. Second, many traditional game publishers don't even own or control the source code to the games they publish. They couldn't modify them to work in new ways if they wanted to. Even if these statements weren't true they would still fail for another reason, which is that the very formulation of retail games is contrary to how all content MUST be sold online: with a "free" trial in some form. Retail games are not designed to sell themselves via free trials. They rely on huge marketing budgets, big brands and the promise of being great games to get consumers to buy them sight unseen. Unlike online games which rely entirely on their pure play value and addictiveness to sell themselves, retail games rely on strong marketing to sell.
Conclusion
The hard to accept reality is that traditional games designed for retail distribution are simply dead in an online world and frankly the publishers of these games will ultimately die with them because they can't afford to adapt. Streaming the same content "on-demand" won't save them. The exciting part of this change is that it's a brave new world for new companies to step in and create the next-generation EAs and Take-Twos. I'd list Activision as well but they've already effectively been bought by World Of Warcraft. I would not be surprised to see successful future games that are designed to be delivered as streaming video, but a new streaming delivery technology will not create a new online second life for this dying genre of content.
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hi5 concluded a week of high-profile and heavily attended activities at the 2010 Game Developers Conference this week. Our presence at the show kicked off with a mixer event on Tuesday, March 9 to end the first day of the Social & Online Games Summit. The event was attended by over 400 show goers in the North hall lower lobby.
Apart from running out of beer (GDC conference organizers only expected 200 people), the event was a huge success. In addition to a progression of retro video games from different eras, we raffled off some fun prizes, including a Pac-Man joystick USB game, an Atari Flashback2, and DJ Hero.The reception was a great start to the conference, and demonstrated how much excitement there is in the community around the development of social games.
The festivities continued on Wednesday, with Alex St. John's appearance
in a panel at the GamesBeat@GDC conference. The topic of the panel was "Disruptive Game Platforms" and was moderated by Dean Takahashi, Lead Writer at GamesBeat and VentureBeat. Alex's fellow panelists included Jack Buser, U.S. Head of Sony's Home Virtual World, Gareth Davis, Games Platform Manager for Facebook, and Peter Relan, Founder and
Chairman of Aurora Feint and CrowdStar. The panel 
sparked some spirited exchanges, several of which were captured on video.
Alex St. John's remarks prompted several articles in major tech blogs, including:
For the many meetings during the week, hi5's huge lightbox display in the entrance to the Social & Online Games Summit area was a popular meeting spot to connect with potential partners and press throughout the event.
hi5's GDC run culminated with a dedicated speaking session on Wednesday, March 10 at 4:15. By 4:00, a long line had already formed outside room 122 where Alex St. John was to speak. The room filled to capacity and spilled out into the hallway, where hi5 employees did spontaneous Q&A with those who were unable to get into the session.
For the over 200 people who made it inside, they were treated to an entertaining presentation by Alex St. John, who went through the details of hi5's new Game Developer Program. In addition to Alex's remarks, three early partners in the program spoke about their experiences developing games for hi5 and why they chose to launch their games exclusively on hi5.com. The speakers included:
shots of the standing-room-only crowd.
Also on Wednesday, hi5 issued a press release announcing the Game Developer Program. The news was the latest in a series of announcements by hi5 leading up to GDC, including the acquisition of Austin-based social developer Big Six and support for a new set of Facebook compatible APIs.
sparked some spirited exchanges, several of which were captured on video.Alex St. John's remarks prompted several articles in major tech blogs, including:
- Them's fightin' words: Hi5 prez calls Zynga games 'mediocre', Games.com
- hi5 CTO: Zynga Is Mediocre. It Isn't Social, It Just Discovered An Opening For Spam, TechCrunch
- GamesBeat in Pictures: Part 1, VentureBeat
- hi5 CEO: Facebook's game strategy is schizophrenic, VentureBeat
For the many meetings during the week, hi5's huge lightbox display in the entrance to the Social & Online Games Summit area was a popular meeting spot to connect with potential partners and press throughout the event.hi5's GDC run culminated with a dedicated speaking session on Wednesday, March 10 at 4:15. By 4:00, a long line had already formed outside room 122 where Alex St. John was to speak. The room filled to capacity and spilled out into the hallway, where hi5 employees did spontaneous Q&A with those who were unable to get into the session.
For the over 200 people who made it inside, they were treated to an entertaining presentation by Alex St. John, who went through the details of hi5's new Game Developer Program. In addition to Alex's remarks, three early partners in the program spoke about their experiences developing games for hi5 and why they chose to launch their games exclusively on hi5.com. The speakers included:- Matt Wilson, Founder & Director of Development, Detonator Games
- Steve Victorino, President & COO, Immortal Games
- Dave Long, CEO & Co-founder, Exponential Entertainment
shots of the standing-room-only crowd.Also on Wednesday, hi5 issued a press release announcing the Game Developer Program. The news was the latest in a series of announcements by hi5 leading up to GDC, including the acquisition of Austin-based social developer Big Six and support for a new set of Facebook compatible APIs.
The announcement garnered widespread media coverage, including the following articles:
- Social Network Hi5 Gets Its Game On, BusinessWeek
Social network hi5 launches program to court game developers, VentureBeat- hi5 Launches Game Developer Program, DevWebPro
- hi5 Launches Game Dev Program To Attract Studios, Exclusive Titles, Gamasutra
- hi5 Launches Game Developer Program Offers Special Access to Users and Monetization, Inside Social Games
- Hi5 Launches New Game Dev Program, Virtual Goods News
Thanks to everyone from hi5 and all our partners who made this year's GDC a huge success! We'll see you again next year.
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hi5 president and CTO, Alex St. John, presented hi5's new Game Developer Program to a standing-room-only audience at the Game Developer Conference (GDC) in San Francisco yesterday. Over 200 social game developers packed the room and spilled into the hallway to learn more about this exciting new program.
For those who weren't able to attend GDC (or for the many who were turned away at the door by Moscone staff and fire marshals), the complete session was captured on video. More information about hi5's Game Developer Program and technology platform is available on our corporate site.
View hi5's Game Developer Program Session at GDC.
View crowd shots.
For those who weren't able to attend GDC (or for the many who were turned away at the door by Moscone staff and fire marshals), the complete session was captured on video. More information about hi5's Game Developer Program and technology platform is available on our corporate site.
View hi5's Game Developer Program Session at GDC.
View crowd shots.
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