GamesBeat 2014: The View From EA And Nexon

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The GamesBeat show in San Francisco brought together some of the key executives and thought leaders in the industry, with a series of sessions that explored the intersections of art, science, and business in the gaming industry. The [a]listdaily was there, and here’s some of the highlights if you missed it.

Dean Takahashi lead writer for GamesBeat, led off with some thoughts on the game industry, noting that while investments in gaming companies exceeded half a billion dollars in the last year, exits (when companies were sold or acquired) were valued at several times that — which means there’s not enough being invested in games.

Electronic Arts CEO Andrew Wilson sat down with Magid and Associates head Mike Vorhaus to talk about Wilson’s first year at the helm of EA. Wilson noted three key things in his agenda for EA: “Establish the player-first culture back in the company,” said Wilson, was his first goal. Shepherding EA through its continuing transition to a digital company was his second goal. “Third was no more silos,” said Wilson. “We have to work together as one team.”

Andrew Wilson, EA CEO

This is not something that will happen right away, but Wilson feels progress is being made. “Three years in this industry is like a full epoch,” Wilson said. “I would never profess to know what’s going to happen beyond three years with any certainty.” Despite that statement, Wilson did make one prediction: “In three years we will be almost entirely a digital company.”

Vorhaus asked Wilson about creating quality and value, and Wilson had an interesting reply. “Quality is a weird thing,” said Wilson. “As gamemakers we create fun, it’s the emotional value calculation of enjoyment over time. We think about it in two vectors: Innovation, doing something completely new or doing something old in a completely new way. The second thing is polish. The absence of defects that would detract from the experience. When you look at Metacritic, the top games get both those things right.”

Wilson gave examples of how EA has instituted that policy. “We moved Battlefield Hardline because we thought there was more innovation possible,” Wilson noted, referring to the game’s move into 2015. “When we moved Dragon Age: Inquisition, we thought we needed more time to get rid of the bugs. Two decisions, both around the idea of quality.”

The question of value is a very important one for Wilson. “How much more value do you want to give players ,” Wilson asked rhetorically. “You want to give as much value as you can while still maintaining a profitable company. Russell Simmons once told me ‘humans have an inherent need to steal.’ What he was really saying was that human beings have an inherent need to get value. When they give you $20 for something, they do so expecting that what you’re going to give them is going to be worth more than that $20. Otherwise they keep the $20 in their pocket. That’s how we should be thinking about games, whether it’s a premium business model or a subscription business model or a free-to-play business model, every time someone gives you money — whatever amount that might be — always get to a point where they feel like what they get in return is greater than what they put in. When you get that, you satisfy people’s inherent need to steal on a daily basis.”

Owen Mahoney, the relatively new CEO of Korean company Nexon, was interviewed next. Nexon is an interesting company, having been founded in South Korea, gone public in Tokyo, Japan, and now having hired a Western executive as its CEO. Nexon’s success is undeniable as the inventor of the free-to-play business model and creator of many extremely successful MMORPGs. Nexon today does $1.6 billion in revenue with 35 percent operating revenues, and generates $400 million in free cash flow every year, Mahoney noted.

Owen Mahoney, Nexon CEO

“Free to play is actually a very robust business model,” Mahoney pointed out, contrary to what some critics have said. “It’s hard to believe that when you look at Western companies that started on Facebook,” Mahoney acknowledged with a grin.

Nexon has many partners in various areas, and continues to engage in new partnerships and funding new ventures. “We’ve been approached by a lot of people who think the games are going to free-to-play,” explained Mahoney. “But it’s very hard to do, the way it’s done in Asia. They look at us because we’ve been doing it longer than anybody.”

Mahoney gave some insight into what Nexon looks for in a game. “We think the game industry lives or dies by the fun factor in the game,” Mahoney said. If you graph out ‘fun’ on one axis and ‘innovative’ on the other axis, “We want to be in the upper right hand corner, so we look for people like that. We haven’t made any major acquisitions lately, but we’ve done a lot of development agreements.” This includes agreements with people like Gears of War designer Cliff Blezsinski and veteran designer Brian Reynolds.

With Nexon’s relatively long history in the games business (dating back into the 1990’s), Mahoney offers some perspective. He wasn’t particularly pleased by what was happening in the industry the last few years. “From 2009 to a period six months ago, our industry got taken over by the business of games,” Mahoney said. “Not the business of game making or what games are fun. People were talking about MAU growth or monetization at company X. Those topics are interesting, but they are derivative of game quality.” Mahoney is much happier seeing that the emphasis has been changing more to finding or creating games that are fun, rather than squeezing out more revenue from games by using analytic techniques.

When asked about acquisitions like Mojang orTwitch, Mahoney urged caution. “I used to run M&A at EA,” Mahoney noted. “The problem is when you buy a game company, it hasn’t ended, it’s just started. You have to think long and hard about what’s going to happen afterwards. Rollups in the game industry don’t really work.” This sense of caution informs Nexon’s strategy about where and how to invest. “My sense is we’re careful, we have $2 billion in cash, but we think long and hard about how the companies are going to fit together,” Mahoney said.

Mobile Video For Brand And Entertainment Marketers

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The smartphone represents freedom, evolution and opportunity. For consumers this device is the freedom to go anywhere and consume content everywhere. With faster data speeds and more robust tech packed into smaller spaces people are watching increasing amounts of video across their favorite sites. For the media business the mobile device becomes a way to generate more demand for great content, and it also represents a competitive threat to the entrenched media companies like the Big TV ecosystem. The mobile device is an opportunity for anyone to become their own media company, to create their own unique voice and to become a celebrated voice to within their community. For marketers too the smartphone is an opportunity to compete with Big TV for the viewing time of interesting and smartly crafted content. Instead of being the intrusive, interruptive and confined content people are forced to watch marketers create the content smartphone users want to watch.

Creators are monitoring the world in real time and creating relevant connections to their audience. These influencers shoot video on their smartphone, edit in-app, and post to their audience. Consumers have the insatiable demand for content as they have the ability to watch video while they wait in line, sit on a phone call and commute.

Mobile video consumption is fueled by young people. People aged 50-64 watch only 19 minutes of video per day, while people 18-34 watch 35 minutes of video per day, and people 35-49 watch 26 minutes per day. It is clear that children, those under 18, are heavy consumers of online video as properties like Netflix, Amazon and YouTube have substantial children’s content available. Combined with a flood of influencers who speak to children’s interests and speak to their point of view it is clear that mobile viewing is a trend that is picking up steam across age groups, but that will blossom as children of the native mobile generation age up. Key points around authenticity, transparency and interactivity will all evolve as today’s children grow into adults.

According to Business Insider, next year almost half of all video ad views will be served to mobile devices; smartphones and tablets.

Short content is key. According to Netflix 90 percent of their mobile viewing happens in increments of 10 minutes or less. According to FreeWheel 60 percent of mobile video ads are served to videos less than 20 minutes long.

As the entire digital ecosystem evolves into a mobile ecosystem, content becomes shorter. Influencer creators become more important as they maintain deep and authentic connections to their audiences and branded integrations more prevalent as marketers partner with influencers to reach audiences.

As such, marketers act more like media companies by creating their own high quality content and cultivating owned audiences, rather than renting them from media companies. Marketers also own more direct influencer relationships rather than renting them from agents.

More native ad units proliferate as banners are proven to be blunt force and largely ineffective tools to engage audiences. However, banners become valuable to activate on sophisticated geo-location data from companies like Foursquare, Twitter and others. Application of this tech involves ad-serving based on where the phone’s owner has physically been recently, where they go a lot, or the place they currently are in. Content stream ad units become part of the viewing experiences. Users will scroll through content, see ads, and continue scrolling through their curated content.

The sum of these changes show that marketing in mobile platforms becomes like a hybrid of public relations and media. Marketers will continue to seek control of their marketing investment, but they will partner with influencers to reach their audiences. Paid media becomes less about intrusion and more about participation. PR, publicity and social media work in tandem to become part of the users’ experience in authentic and transparent ways.

Key to marketers’ success will be enabling consumers to consume and re-tell the marketer’s story through the user’s own viewpoint, experiences and voice. The mobile device provides more opportunities for marketers to be part of the consumer’s endless stream of content consumption. As marketers we must do this by creating great content, working with great content creators, or helping to facilitate the content journey.

eSports Reaches Tipping Point

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This year will be remembered as the year the eSports phenomenon reached a tipping point in how it is viewed by the Western world. The once niche past-time has finally secured its place in the mainstream media, with more and more brands realizing the endless opportunities it presents, both for those inside and outside the games industry.

Today, Newzoo launches a series of country reports, sizing and profiling the eSports audience in great detail for 18 countries across the globe: Sizing and Profiling eSports’ Popularity in Germany, Korea, Russia etc. More information, including a dummy version of the report, pricing and all variables available in the data component, is here: www.newzoo.com/esports

The League of Legends world championship event, which occurred late last year at the Staples Center in Los Angeles, triggered the interest of American mainstream press. Following this, the rise of the eSports phenomenon, and the press attention that it receives, has accelerated rapidly. Valve’s DOTA 2 championship in July, The International, showed that viewership, prize money and press coverage have all doubled or tripled during the past year. The acquisition of Twitch by Amazon reflects the fact that eSports sits at the epicenter of a much larger trend in digital media: facilitating the consumers desire to not only experience, but also to actively create and share content. It is not surprising that all media and advertising-related companies, are evaluating the opportunities for and . . . possible threats to their business. Newzoo’s eSports Country Reports and Data aim to support smart decision making with a deep understanding of the consumers that are ultimately driving this trend.

One year ago, an eSports event in Madison Square Garden would have been unthinkable. In three weeks from now, the holy New York entertainment ground will host an ESL One DOTA 2 event organized by Turtle Entertainment. And this week, the same company announced they will fill the 18,000 seat SAP Center in San Jose, in the centre of Silicon Valley, for the Intel Extreme Masters featuring League of Legends and StarCraft. The rise of eSports continues.

Half of eSports viewers does not play

Based on our analysis of our consumer research results from the majority of eighteen countries, a surprising insight surfaces: approximately half of all eSports viewers does not play any of the well-known eSports franchises such as DOTA 2, StarCraft, League of Legends, World of Tanks and Call of Duty. Two reasons could explain this: first of all, there is a large group of gamers that prefer playing one of the smaller competitive game titles. Secondly, gamers that have started a family suddenly lack the time to spend playing the games but still enjoy the suspense provided by watching other gamers play on the highest level.

Thus, eSports viewers aren’t so different to the millions who tune in to Premier League & World Cup matches.. despite having retired or never picked up their football boots. When you consider the majority of this audience is young males, a demographic that is hard to reach through traditional marketing, it’s easy to see why brands such as Coca-Cola, RedBull Intel and T-Mobile are investing in this space.

Below are two examples how our eSports Reports and Data can be used with a special focus on TV and digital media subscriptions.

CNN viewers are the most likely to be eSports enthusiasts

When we look at the popularity of eSports amongst viewers of US TV channels, CNN comes out on top. Of all CNN viewers in the US, an impressive 23 percent either watch or participate in eSports: 5.5 million people. MTV & Cartoon Network have the second and third highest share of viewers that are involved in eSports with 21 percent and 18 percent respectively. ESPN, who recently discarded eSports as being irrelevant, ranks fourth.

eSports enthusiasts are twice as likely to have a paid Spotify account

It is not only important for big brands to realize that they can target a mass audience through eSports, but also to understand just how valuable this audience is in terms of willingness to spend on their (digital) products.

Through our research, we can quantify the eSports audience that currently owns a subscription to a number of services. In this case we examined Spotify, Netflix & HBO subscribers in the US, UK, Germany and France. Clearly, the eSports audience is more likely to have subscriptions to all three services than the general gamer population. For example, 22 percent of them are currently have a paid Spotify subscription compared to 11 percent of all gamers, this is 46 percent vs. 34 percent for Netflix and 35 percent vs. 21 percent for HBO. This group not only consumes more digital media than any other, but they are also willing to pay for it.

More information, including a dummy version of the report, pricing and all variables available in the data component, is here: www.newzoo.com/esports

Why eSports Will Rise On Mobile Devices

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With eSports continuing to grow exponentially in the PC gaming space and more activity in the console space, mobile is the newest platform for game developers to connect with eSports fans.

Skillz is the first company to bring eSports to mobile games by allowing players to compete against each other for real money. The company has partnered with over 350 Android and iOS game studios, ranging from mobile publishers like Glu Mobile to small indie operations, and facilitates eSports competitions in hundreds of mobile games. Andrew Paradise, founder and CEO of Skillz, explains why mobile could evolve as the largest eSports platform in the world in this exclusive interview.

Andrew Paradise

How have you seen traditional eSports grow over the past few years?

The entire industry is growing by leaps and bounds. Last year the U.S. government started recognizing eSports competitors as professional athletes by granting them visas, which was really a landmark event for an industry that has been battling questions of legitimacy for years. In terms of the sport itself, we have seen prize pools balloon from basically hundreds of dollars to hundreds of thousands dollars, and now millions.

This year we saw the biggest eSports prize pool in history for the International DOTA 2 Championships. The $10 million payout was more than the prizes awarded at the 2014 Masters Golf Tournament and the Tour de France. Even more remarkable is that the competition was watched by more than 20 million people. With prizes and audiences of this size, I don’t think the legitimacy of eSports can be questioned or ignored anymore. We are looking at a future where multimillion dollar prizes will soon be the norm and the number of people watching and competing in eSports will exceed participation in many popular offline sports.

What opportunities does mobile open up for eSports?

Mobile is the most accessible gaming platform ever invented. The player population for mobile games is almost 2 billion people worldwide, whereas the population for traditional hardcore games is somewhere below 100 million.

The accessibility of mobile games is transforming gaming from a hardcore, niche activity into a mainstream phenomenon. In many ways, mobile is actually bringing gaming back to its roots. Video gaming started with traditional arcade machines, which were very much a part of mainstream culture. Gaming narrowed into a hardcore audience over time due to the price points of home consoles (or high end graphics cards for computers) as well as the price points of the titles, which now often exceed $50 apiece. Up until very recently, being a gamer had a very high barrier to entry.

Now with mobile, games are available at very low price points, many of them even free, and nearly everyone in the world has a device to play them. This means the potential size of eSports audiences and players will jump from millions to billions.

How have advances in smartphones and the proliferation of tablets opened up new opportunities for mobile eSports?

Technological advances and larger displays on mobile devices have given game developers even more creative flexibility in recent years. For the first time, the graphics processors of mobile devices are approaching the capabilities of traditional consoles. In fact, we’re nearing the point where your smartphone or tablet will be the most powerful device you own. Without question, the recent technological advances have evolved mobile into a legitimate gaming platform. Now, nearly everyone has a powerful gaming device in their pocket with hundreds of thousands of games to choose from. For eSports, this means that mobile will bring in a much greater variety of content with a much more larger and diverse audience.

What role do you see livestreaming, given Twitch and Youtube are on mobile devices, playing in this new mobile eSports territory?

For something to transcend from game to sport, you need a large audience. One of the factors that continually stifles the development of new offline sports is the challenge of attracting sufficient crowds to early competitions. Up until very recently, viewership has been a major problem for eSports, too. However, livestreaming through channels such as Twitch and YouTube, have created a solution, allowing eSports to rapidly build crowds around the world by overcoming the limits of geographic proximity and circumventing the need for a physical arena.

For mobile eSports, live streaming will play the same critical role that it has played in establishing the larger eSports industry, especially when it comes to building awareness and excitement around mobile eSports titles. Recognizing the giant opportunity mobile eSports presents, Twitch recently enabled mobile streaming, and we are already seeing users amass giant followings by streaming games like Clash of Clans. This is a trend we fully expect to continue as eSports become more and more popular.

What’s going to be key in creating games for the mobile audience?

Historically, game developers have been forced to build content that caters to existing monetization tools. For example, turn-based games have evolved as developers identified an opportunity to show ads during natural game breaks. As another example, resource gathering games have evolved as a means of driving in-app purchases, which is something they do very effectively. However, the consumer expectation that games will be free to download on mobile has largely enslaved mobile developers, rendering them beholden to monetization tools like advertising which disrupt the gaming experience.

With mobile eSports tournaments rapidly gaining popularity, developers are free to focus on gameplay rather than monetization. Competitive eSports are an incredibly effective way to monetize mobile games, but competition is also intrinsic to gaming itself. This means there is no longer a conflict between content that monetizes and content that is fun.

The key to the future on mobile will be effectively leveraging this new creative freedom to invent game mechanics and core loops that haven’t been done before. There are many things that mobile devices can do that PCs and consoles cannot, and developers who are best able to take advantage of these differences are the ones who will be most successful.

How will publishers be able to compete with huge games like League of Legends and DOTA 2 in the never-ending eSports season structure?

While games like League of Legends and DOTA 2 have become huge eSports titles, they are dwarfed in size by many of today’s popular mobile games. Last month, DOTA 2 had 9.5 million active users. Compare that to Angry Birds which had 200 million or more, and it becomes very easy to see how disruptive mobile can be to the traditional eSports hierarchy.

With the ability of many new phones and tablets to stream to big screen HD and even 4K TVs, what role do you see PC screens playing in how people watch mobile eSports?

Mobile eSports will be huge with or without live events, so video quality was never going to stop the rise of mobile eSports. However, with HD streaming capabilities, the final piece of the puzzle is now in place as there are no longer any limits to the size or scale of events that can bring eSports fans together.

What kind of live venue opportunities are there for mobile, or does mobile even need this?

Live opportunities for mobile will largely be similar to what we are already seeing with traditional eSports. There is no reason to believe that mobile will follow a different pattern or path. At the end of the day, video gaming is video gaming. Whether it’s hardcore content or casual content, people are interested in seeing how the best of the best perform. For mobile games, people will do that both by watching online and by attending live events both large and small.

One key differentiator for mobile eSports is accessibility. Because phones and tablets are highly portable, mobile eSports events can happen anytime, anywhere. While there will certainly be mobile eSports events in sold-out stadiums, there will also be events at local bars and on college campuses across the world. Some of these events will be scheduled and others will happen organically on an ad hoc basis. This accessibility is part of the reason we believe that mobile is going to be the platform that lifts eSports to unprecedented levels of popularity.

How does the mobile eSports audience differ from the core gamers who watch PC and console eSports competitions?

The audience for mobile eSports is much broader than the audience for PC and console because the player base for mobile games is so much bigger and more diverse. This audience includes core gamers who are playing games like Hearthstone as well as people playing more casual games like Angry Birds. And this is why mobile eSports are so exciting for the industry. Mobile brings a variety of competitive content to the table, and varied content will be critical in ensuring eSports mainstream success.

What opportunities are there for the mainstream sponsors that have gravitated to traditional eSports in recent years?

Existing sponsors only stand to benefit from the rise of mobile eSports, as the massive influx of players and viewers will bring greater exposure to their brands. The new opportunity is for sponsors who have previously remained on the sidelines because, prior to mobile, eSports hadn’t connected with their key demographics. Mobile is changing that by bringing in a hugely diverse audience whose demographic is attractive to a much wider range of sponsors. Whereas traditional eSports have been largely male dominated, on the skillz platform, we have competitive titles where almost all of the best players are women. With this in mind, it’s easy to envision a future where traditional eSports sponsors like Red Bull and Coca Cola are joined by mainstream brands like Johnson & Johnson and Dove.

Playing Hard At GameStop Expo

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GameStop held its annual conference for managers last week in Anaheim, California at the Anaheim Convention Center, and in conjunction with that allowed thousands of consumers in for a very special day to see the hottest upcoming games and gaming related products.

GameStop managers had a lengthy series of presentations from all the major companies in the game business, laying out the upcoming titles and what exactly GameStop employees should be doing to sell them when eager gamers descend on GameStop stores this fall. It’s a terrific training opportunity for GameStop and for the game publishers, who are all well aware of the critical role retail employees play in the sales of games and DLC. A good GameStop employee can make a significant difference in pre-orders, sales and sales of DLC. Multiply that by thousands and you can see why GameStop is getting an increasing share of the retail game business, helping to offset the decline in retail game sales.

The Expo also featured a number of competitions for gamers eager to try their skills against each other at games like Titanfall and Halo: The Master Chief Collection. It’s pretty clear that Microsoft will be doing very well with Halo: The Master Chief Collection, as the game will be irresistible to the millions of Halo fans out there.

First of all, Halo: The Master Chief Collection will include every Halo map ever sold, including all the maps from the Halo versions for the PC. When you add them all up, that’s over 100 maps, which is a terrific deal for $60. The technical aspects of the game are also going to delight Halo fans: For one thing, all of the games are hosted on Microsoft’s servers instead of on individual Xboxes, which means those frequent game interruptions looking for a new server are a thing of the past. And searching for games will have new options, allowing you to search for desired game types across all versions of the game. It all means you’ll be able to play the type of game you want far more easily. Plus you get six Halo 2 maps remastered in full HD, and a beta key for Halo 5 in December. This game will definitely sell some Xbox Ones.

There were other impressive games on display at GameStop’s Expo, and one of the most impressive was Middle-Earth: Shadow of Mordor coming at the end of September from Warner Bros. Interactive, developed by Monolith. The game is an open-world sandbox set in the world of Middle-Earth, with a painstaking attention to the lore and a wide range of combat skills. The combat is reminiscent of the Batman series, translated into a gritty fantasy combat in the grim region of Mordor.

The most impressive thing about the game is the Nemesis system, where the game tracks a cadre of nasty Uruk-hai that you encounter as you kill them — or they kill you. Since your character is already dead and re-animated through magic, you keep coming back — but the nasty orc brutes keep getting better, and they remember their encounters with you. The system ratchets up the drama as well as the difficulty and you must get increasingly crafty with all of your abilities to ultimately succeed. This title looks like it will really grab you and keep you engaged for a good long time. Judging from the lines waiting to play, it looks like a winner.

There were plenty of gamers crowding around titles like Evolve, Destiny, and more. Many of the elaborate booths and set pieces had been used earlier at E3 or at PAX Prime, and were once again put to good use. It’s all about generating more excitement among the players, giving them some hands-on time with new games and sparking more social media mentions.

GameStop will probably hold this Expo again next year, and perhaps move it once again to a new venue in order to bring in a different audience. It’s a great way to defray the cost of the manager’s conference — no doubt the ticket sales go a good way towards offsetting the venue costs. For publishers, it provides an added reason to be there. The publishers get to train and excite the managers, and then get a chance to get thousands of consumers pumped up for a very low additional cost. Everybody wins.

It is important for GameStop to keep pushing the boundaries with new initiatives and events like the Expo. The underlying fact that everyone knows is that retail sales of games are in decline, and will only continue to decline as bandwidth improves around the country and publishers work ever harder to sell games digitally, thus reaping all of the revenue without having to give up a share to GameStop. GameStop isn’t taking it easy, though — the company is investing in mobile and other electronics stores, experiencing strong growth in game publishing through Kongregate, and continuing to push DLC sales and preorders and accessories. The company surprised many analysts with a better-than-expected quarter last time, and hopes to keep up that sort of surprise.

Game retailing may be slowly dwindling, but GameStop is not going to do the same without a fight. It’s an interesting battle to watch — and don’t be too quick to bet against GameStop. So far, they’ve been pretty good at swimming against the tide.

[a]list Summit: Mobile Marketing Comes to The W Hollywood Hotel December 3rd

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We’re exploring each conference panel with in-depth analyses. Get the rundown on the mobile video landscape here. 

Today, [a]listdaily, [ion] and Ayzenberg are announcing that the next [a]list summit will be held at the W Hollywood Hotel on December 3rd. We will celebrate that this year we’ve officially entered the mobile era of marketing with our 10th summit.

It’s exciting times as what has been in the horizon for so many years now is now a reality as the mobile revolution is unlocking new markets and revenue-streams for entertainment companies and brands alike.

The days of desktop dominance are over. Mobile has swiftly risen to become the leading digital platform, with total activity on smartphones and tablets accounting for an astounding 60 percent of digital media time spent in the U.S., according to ComScore.

Here are some more interesting numbers illustrating what happened in 2014:

  • The average American spends 151 minutes daily on smartphones compared to 147 minutes watching TV
  • Facebook is making more than half their revenues from mobile ads.
  • Kim Kardashian: Hollywood app has been valued at $200 million.

What does this mean on strategic and practical levels for brand marketers and entertainment companies  Get ready for a day packed with inspiring stories and hands-on practical advice from leaders at some of the hottest mobile media and entertainment companies.

Learn new skills while making powerful connections in the entertainment capital of the world. Check out the official website and register here. (Don’t wait, our last summit sold out with over 375 people signed up!)

Are you a brand marketer You may qualify for a free pass! Just fill out the form here.

For more information about the summit, including speaking and sponsorship opportunities, please contact Joakim “Jay” Baage, Executive Director, [a]listdaily / Ayzenberg, email jbaage@ayzenberg.com and phone 626-584-4070 x 570.

The Secret Of PAX

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The PAX Prime show took place in Seattle two weeks ago, and it was a major event for the game industry — both for fans and for game companies. The show was a tremendous success for all, but there’s some lessons to draw from the show for game marketers that may not be so obvious.

But first, a recap of the show itself. PAX Prime is held at the Washington Convention Center in Seattle, and draws about 70,000 people. The show is at maximum capacity for the facility, and as a consequence this year the show sold out in little more than an hour after the registration was opened up.

The PAX show is not just about console games, or even electronic games — PAX deals with all kinds of games, from tabletop roleplaying to miniatures to board games, card games, vintage videogames, mobile games and more. The show illustrates how gamer culture is platform independent. Gamers like to play games, and exactly what medium the game is expressed in is less important than the game itself.

The game companies exhibiting at PAX brought all the fancy displays, and were busy showing off key titles for the fall. The exhibit hall was far from the only attraction, as a League of Legends event was being held in one of the halls, cosplayers roamed the multi-level convention center, and countless rooms held all kinds of gaming, sessions and even concerts, spread out into neighboring hotels. Swarms of gamers clogged the sidewalks for blocks in all directions, and the costumes displayed on eager fans ranged across all genres and media.

As an example of the sort of lengths companies went to, S2 Games put on an interesting display for its upcoming MOBA Strife. One of the characters from the game was built onto a mechanical bull, where eager attendees could line up to try and ride the creature. Over the top Perhaps, but like many of the events it attracted a long line.

It wasn’t just elaborate booth displays attracting people, though. There were plenty of events and game playing, and eager gamers swarmed the card games, board games and roleplaying games on display and being demoed. As an example of the cross-platform appeal of PAX, contestants selected from among the attendees competed in a multi-game challenge spread across the entire show, playing games of all types in an effort to see who was the best all-around gamer.

The attraction of PAX Prime for game marketers should be obvious: This show attracts dedicated gaming fans, the sort who tend to influence and inform dozens of other gamers. When a show sells out 70,000 tickets in an hour, those aren’t casual buyers picking up the tickets. Those are dedicated fans who waited eagerly in front of the keyboard for registration to open.

An interesting side note here: PAX Prime, unlike many other conventions, does not issue badges with names on them. Your badge is not unique, and in fact you are free to sell it to someone else (whether or not PAX officially approves of this, they have no way of knowing). Scalpers could be found outside the convention center every day of the show, offering to buy badges from attendees or sell them to eager fans looking for a way in to the show. The result of this process, official or not, is that only the most dedicated fans end up attending the show.

This, then is the secret of PAX: the show attracts a goodly number of the most dedicated gamers, and these gamers are the key to the success of game companies. The game industry used to really target a handful of retail buyers for large chains, and the gamers really didn’t matter that much. The gamers could only buy what was being offered on the shelves. Companies spent most of their sales efforts influencing retail buyers, and marketing had to split its attention between generating consumer demand and doing things to impress retailers.

Now, though, retailers are increasingly less and less important as targets for marketing. Word spreads quickly about games on social media, and great games get great traction. Companies that are responsive to fans over time generate loyalty, especially if games are good and continue to improve. Profits are no longer found just on the week of the game’s launch at retail, but increasingly are spread over months and years of the game’s lifetime (as DLC becomes more and more important).

The most successful game companies are ones that can develop and maintain a great audience for their games. Sure, you have to have good games, but you also have to have a continuous effort to create and maintain a community around those games. That sort of effort means, in part, creating a strong presence at shows like PAX Prime, where the key game influencers can be found.

PAX will continue to expand by adding new shows in different regions, which will mean reaching more key gamers. Game marketers need to factor this into marketing plans, and find other shows where such core gamers lurk. This is where you can learn a great deal from the fans about what they like and don’t like about your game, and see firsthand how they respond to new titles. You can also follow the buzz around other games, and get a sense of what will be hot in the near future.

Yes, PAX Prime is crowded and difficult to navigate and exhausting to exhibit at. But the secret of PAX Prime is that it’s a great venue for game companies to market their products, and to build and strengthen the relationship with gamers.

GamesBeat 2014 Preview

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VentureBeat’s annual GamesBeat show will be in San Francisco this Monday and Tuesday, and as usual it will be packed with interesting and informative sessions delivering critical info to a broad cross-section of the gaming industry. The [a]listdaily will be at GamesBeat to fill you in on some of these events, and bring you some of the insights being shared at the show. Let’s look at some of the key sessions you should be sure to catch if you can.

The show opens Monday with a series of Fireside Chats for all attendees, and the lineup is impressive. Beginning Monday at 9:00 to 9:30 is a Fireside Chat with EA CEO Andrew Wilson, followed by a chat with Nexon CEO Owen Mahoney. Wilson will talk about EA’s transition in navigating the vast changes under way in the game industry, while Mahoney will discuss how to make strategic partenrships work (something Nexon has been doing a lot of lately).

Then David Helgason, CEO of Unity, takes the stage to talk about the future of game platforms an indie gaming. Given how broadly Unity is being adopted by indie developers, Helgason should have a great deal of insight into this topic. Finally, Peter Molyneux, veteran designer and head of 22cans, will be up to talk about what he’s learned from his newest title Godus, the free-to-play mobile “god game.”

After the morning break, everyone continues to hear from key industry figures as the discussion turns to moving Hollywood IP to mobile platforms, with Peter Levin of Lionsgate and Chris Petrovic of Kabam discussing that moderated by Wedbush Securities managing director Michael Pachter. Then Bob Meese from Google Play takes the stage to talk about mobile momentum and the Google Play store. Former EA CEO John Riccitiello is up after that to discuss who’s winning the console war and the gaming industry in general with VentureBeat’s Dean Takahashi, and finally CEO Simon Khalaf of Flurry will be up to talk about how mobile games cross borders.

After lunch there are several more plenary sessions, including a talk with EA’s Lucy Bradshaw and Rachel Franklin about Playing with Life, one on investing in the game industry with veteran investor Rick Thompson, and then the ESA’s Mike Gallagher talks about the challenges for the game industry as it becomes global.

Breakout sessions follow, where attendees can choose between panles on game technology, monetization, or partnering with Asian giants. Returning to Fireside Chats after a break, all the attendees will get to find out about the next billion-dollar gaming opportunity with ace investors Tim Chang and Kristian Segerstrale. Then Clive Downie, COO of Zynga, talks about building franchises, and Amazon’s Mike Frazzini talks about what Amazon is doing in games.

The second day of GamesBeat is structured similarly, with an array of speakers addressing everyone most of the day. Tapjoy’s Steve Wadsworth talks monetization, Jeff Lyndon of iDreamSky talks about China’s game market, and Mitch Lasky of Benchmark Capital provides insights into investing. Then Wooga’s CEO Jens Begemann speaks about Wooga’s hits and misses and Dan Brody of Tencent gives insights from the world’s largest game company.

Breakout sessions then let you choose betweem finding out more about customer acquisition strategies, how eSports have already arrived, or taking games from other lands into the West. After lunch are plenary sessions once again, with topics like Storytelling in Games, Why Livestreaming and Video are transforming games, Mobile Gaming’s All-Stars, and Data Science.

The day concludes with a Game Innovation Showdown, a talk on Made in China — Played Worldwide, a session on knowing the warning signs of trouble in your studio, and then a closing reception followed by an after party.

The GamesBeat program is packed with an all-star lineup of speakers, and it’s going to be interesting, educational, and a great networking opportunity. We look forward to seeing you there!

NPD August 2014: Consoles Stay Strong

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Now that we’re nearly one year into the latest generation of consoles, some trends are becoming apparent from US retail sales. Buyers are still ready to drop $400 on a new console, but they are not buying software as rapidly as they were last year. Once again, hardware sales were more than double last year (up 116 percent, from $90.8 million to $196.2 million) while console software dropped 21 percent versus August 2013 ($231.6 million versus $293.4 million). Accessories dropped off only slightly, hitting $133.5 million versus last August’s $136.8 million (about a 2 percent drop).

“In August 2014, overall hardware sales doubled from August 2013 caused by an over 200 percent increase in console hardware sales with continued strong sales of eighth generation hardware (which includes Wii U, PS4, and Xbox One),” said NPD’s Liam Callahan. “Eighth generation hardware represented close to 70 percent of August 2014 hardware sales, which is the highest percentage share since the release of the Xbox One and PS4 back in November 2013.”

Callahan noted the latest generation of consoles is selling much better than the last generation. “When lining up sales of PS4 and Xbox One after ten months on the market, the combined PS4 and Xbox One hardware sales are greater by over 70 percent compared to their predecessors,” said Callahan.

As is usually the case after NPD releases its numbers, console manufacturers have weighed in. Sony was happy to confirm that once again, the PlayStation 4 was the sales leader. “PlayStation 4 was No. 1 in hardware sales for the eighth consecutive month,” PlayStation senior vice president of marketing Guy Longworth said. “And it remains the cumulative leader for new-generation game consoles.”

Microsoft had to work a little harder in its remarks, but there’s still plenty of upside to point out. “Xbox One sales are on a positive trajectory, nearly doubling sales in August in the U.S. compared to July due in part to strong demand for the Xbox One Madden NFL 15 bundle. We’re looking forward to bringing the best value bundles, incredible offers like the ‘Buy a Console, Get a Game Free’ promotion running now, and more great games as we gear up for the launches of Halo: The Master Chief Collection, Sunset Overdrive, Forza Horizon 2, Destiny, Grand Theft Auto V, and Call of Duty: Advanced Warfare.”

And, as usual lately, Nintendo didn’t make any statement. If you’re looking for numbers, you have to go to analyst estimates. Michael Pachter of Wedbush Morgan estimated that Sony sold around 175,000 PS4sin the US, with Microsoft was closing the gap with 150,000 Xbox Ones sold. The Wii U is still a distant third by all accounts, even with its lower price point.

The picture for software is, alas, not anything like what’s happening with hardware. “Deep declines in seventh generation software of 57 percent were not offset by growth in eighth generation software, leading to a net decrease of console software sales of $47 million,” Callahan pointed out. “New launches in August 2014 declined 41 percent compared to new launch performance in August 2013 due to poor comparisons to August 2013 launches like Saints Row IV, Disney Infinity, and Tom Clancy’s Splinter Cell: Blacklist. Eight out of the top ten games in August were new launches compared to only 3 in August 2014.”

Still, the latest generation of consoles started outperforming the last generation for software sales. “Madden NFL 15 was the number one game this month with consumers adopting eighth generation software over seventh generation, leading to growth over last August’s Madden NFL 25 – a trend which will hopefully become widespread and lead to software growth as we move towards the holidays,” said Callahan.

August 2014 Top 10 Games (New Physical Retail only)
1. Madden NFL 15 (PS4, XBO, 360, PS3)** Electronic Arts
2. Diablo III: Reaper of Souls (PS4, XBO, 360, PS3, PC)** Activision Blizzard
3. Minecraft (360, PS3) Microsoft/Sony
4. The Last of Us (PS4, PS3)**Sony
5. Call Of Duty: Ghosts (360, XBO, PS4, PS3, PC, NWU)** Activision Blizzard
6. Lego Marvel Super Heroes (360, PS3, NWU, PS4, 3DS, NDS, XBO, PSV, PC) Warner Bros. Interactive
7. Plants vs Zombies: Garden Warfare (360, PS3, PS4, XBO) Electronic Arts
8. Watch Dogs (PS4, 360, PS3, XBO, PC)** Ubisoft
9. Battlefield 4 (360, PS3, PS4, XBO, PC) Electronic Arts
10. The LEGO Movie Videogame (360, 3DS, PS3, NWU, PS4, XBO, PSV) Warner Bros. Interactive
**(includes CE, GOTY editions, bundles, etc. but not those bundled with hardware)

Samsung Gear VR Heads to Hollywood

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VR seems like the new buzzword in Hollywood, replacing some of the excitement lost as 3D turned out to be much less important than many originally hoped. Filmmakers are beginning to experiment with the possibilities inherent in immersing people entirely in a world, but the technical issues are vast.

More than technology, though, filmmakers must wrestle with the basic concepts of story and character and plot, and how those should change when put into the context of a complete virtual environment. Should the person experiencing VR have any interaction with the environment beyond selecting where to look How does VR change the emotions experienced by the viewer The entire vocabulary of filmmaking, so painstakingly established over more than a century, will need to be re-examined. Big companies are already beginning this process.

Samsung is the latest huge company to commit to virtual reality. Oculus VR has spent the past 12 months working with Samsung on the just-announced Gear VR. But Hollywood studios like DreamWorks Animation has also been experimenting with the Oculus Rift DK2 technology. In Berlin last week Samsung, Oculus and DreamWorks unveiled new mobile VR experiences that will be available this fall.

Shiraz Akmal

Shiraz Akmal was in Berlin to showcase what DreamWorks Animation Studios’ new DreamLab has been up to. Akmal spent 25 years developing games, including nine years at publisher THQ as vice president of operations in product development. He was also a founding member of Heavy Iron Studios, which THQ acquired in 1999. These days, Akmal is the head of business and product development for DreamLab, the new division at DreamWorks Animation that creates mobile, immersive and interactive experiences. He talks about the opportunities mobile VR opens up for Hollywood and game creators in this exclusive interview.

What excites you about the potential of the mobile Oculus applications for Hollywood?

As part of DreamLab at DreamWorks, we create mobile, immersive and interactive experiences combining cutting edge technologies with DreamWorks storytelling expertise to create new and exciting ways to entertain our fans. VR is a unique medium that allows our audience to interact and laugh with DreamWorks characters and content in a whole new way.

What are your thoughts on the virtual movie theater?

We’ve taken a unique and creative approach to the idea of a virtual movie theater. In DreamWorks VR, we feature a unique Penguins of Madagascar Movie Trailer where people are able to watch the trailer on the actual Penguins set and interact with the cast of Penguins in a fully immersive VR environment.

What opportunities do you see with DreamWorks properties with Oculus given the recent How to Train Your Dragon demo you developed?

We continue to build on our extensive experience creating and operating location based VR experiences. As part of our How to Train Your Dragon 2 promotional campaign, thousands of people have flown Toothless through the world of Berk as part of our Dragon Flight VR Experience.

As a former game developer, what do you see mobile Oculus opening up for video games?

Like any new entertainment platform, a whole new set of games will be launched for VR. Based on 25 years game development experience, I believe the most successful games will be those that are designed for VR platform rather than just ported to the platform.

How easy is it to develop for the Oculus system?

The real challenge lies in understanding what type of experiences work well in VR. Working in VR is completely different than any other interactive medium before it — with many new considerations that traditional game development has not faced. We’ve spent almost two years learning what works well and what things to avoid — our goal is to make sure that everyone has a really great and memorable first-time VR experience.

What impact do you feel Samsung’s mainstream reach will have on getting VR out to the masses?

Samsung is launching the first modern day consumer friendly VR device. Most consumers outside of the game and film industry don’t really know anything about VR — so we’re happy to see Samsung taking the first major step in introducing people to what VR is in a very consumer friendly manner .

Hollywood embraced Oculus at Comic Con, how are you seeing studios utilize VR for promotion and fan interactions?

DreamWorks has explored and developed for VR for a couple years now. As the novelty of VR wears off, users will seek out more immersive and unique experiences — such as our Dragon Flight VR Experience or DreamWorks VR experience that recently was announced for Gear VR.

What opportunities do you see with Oculus for theme parks and attractions?

We’re optimistic about location-based VR entertainment, considering we have researched and developed extensively for the space. While VR hardware is good enough for personal use, it’s not quite ready anytime soon to survive the tough demands needed to operate in theme parks.