Aiming For ‘World Zombination’

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Starting a game company is always a leap of faith into the unknown. You have a vision, a need to create a certain game, the right combination of people and talent and determination. The market for games today makes it both easier and harder to launch a new game and a new game company. Easier, because you don’t need massive amounts of money to get a game distributed. Harder, because there are thousands of new games appearing every week.

Proletariat is tackling those challenges in an ambitious step into the difficult genre of multi-player strategy games with World Zombination, designed for iOS and Android tablets (and also for PC and Mac). The [a]list daily spoke with Seth Sivak, CEO of Proletariat, about the game and how the company will find a market for it.

Proletariat is composed of game industry veterans from companies like Zynga, Insomniac, and Turbine, who decided to start their own company and move in a new direction. “The stuff that’s on tablet right now is just scratching the surface as far as multiplayer goes,” said Sivak. “We tried to figure out how we could make something more team-based, real-time strategy gameplayer in a shared world. It sounds like a lot when you think about it altogether, but we thought ‘what was the one game we wish we could play on tablet’ and this is what came out of that.”

Finding the audience is the real challenge when you don’t already have an audience of millions of players. “It’s certainly the thing that keeps me up at night,” admitted Sivak. “The core team here has experience making AAA games, but it’s really this part that scares me the most. That’s why we’re announcing the game now and we don’t plan to release it until Q1 of next year. The goal is to build excitement and let people know and get them involved. One of the things we really wanted to do with Proletariat was to build and cultivate a community of players that enjoy the same type of team-based multi-player games, and to grow that over time.”

We plan to have a good, extended beta, and whether or not that will be geolocked, we’ll see. There is no easy way to do it, especially with mobile right now,” said Sivak. “When you’re dealing with a lot of very deep-pocketed developers who are able to get lots of ads, it can be challenging. We’re hoping that it will grow in a grass-roots way. They’ll see the game, they’ll see the trailers, what we’re trying to do and what we’re trying to buld and they’ll get excited about it.”The game will be at PAX Prime, where Sivak hopes to get gamers excited with some hands-on time with the game. “We have a demo that shows both sides, the Human gameplay and the Zombie gameplay, and the goal is just to see if players are excited about that,” said Sivak. “Is there something you’d like to see more of Would you join an early beta on this To get a read on what people think, it’s a great show for that.”

Proletariat plans to have the iOS and Android versions come out first, with the PC and Mac versions following later. Sivak believes the game will appeal to PC players, but the teams’ focus will be on mobile first. “A lot of mobile games are OK with in-app purchases, but with PC games that’s less the case,” noted Sivak. “How do you balance that It can be tough. These are competitive games, so we have to make sure there’s no imbalance there.”

The massive growth of the tablet market and the increasing power of the platform led Proletariat to focus development there initially. “You can actually do some really high end stuff, you can have really great graphics,” said Sivak. “The ecosystem hasn’t fully evolved there yet, you still see a lot of games that aren’t that hot in terms of overall quality, but that will change.”

You need a large audience to make a free-to-play game profitable, but there are many paths to monetization. “The jury’s still out on the exact monetization scheme we’ll go with,” said Sivak. “There’s some interesting experimental things going on, especially with PC titles, paying to get into the early alpha that would certainly be awesome. Whenever you’re talking free-to-play you need a massive audience to support that sort of thing. Free-to-play is tough because you need to have players coming back all the time to build up that investment. So you’re constantly working to keep them involved and interested. It’s not easy to do a niche title with free-to-play.”

 

 

End Times For Walled Gardens

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Traditionally game consoles have been walled gardens, where users could wander freely amongst the delights of the games provided. You were never allowed to play with gamers who dwelt in other gardens – in fact, you couldn’t even see them or be made aware of their existence. Now, that reality is changing.

We’re seeing glimmers of this on Nintendo Wii U. Australian indie developers Nnooo are releasing Cubemen 2 later this year on the Wii U, joining the PC and iOS versions in allowing cross-platform multiplayer and sharing of content.

“I’m really proud to be able to announce this,” said Nic Watt, creative director at Nnooo. “We’ve spent the last few months working with both Nintendo and 3 Sprockets, the game’s developer, to make this a reality. Cubemen 2 is an amazing game and a great fit for Nintendo players. We can’t wait to see how creative they are, whether in tactical multiplayer online or in the new levels they build.”

There are 4,000 user-created levels available, which Wii U users can access. The game is playable across the Wii U, PC and iOS.

This is newsworthy because it’s so rare. World of Tanks on the Xbox 360 has its own servers, and there will not be cross-platform play with World of Tanks on the PC. Certainly Wargaming would love to see that happen. Activision would be happy if Call of Duty players on Xbox could play with PlayStation players; likewise EA would be excited to have FIFA players competing across all platforms. Yet the console makers generally don’t allow this.

Uniqueness is one of the key selling points of consoles. Exclusive titles sell hardware, and that’s been true for decades. If you really want to play a particular title that’s only the PS3, that’s why you’ll choose a PS3 over an Xbox 360. Hardware makers want to have exclusive titles in order to sell hardware… yet an exclusive title is limiting the audience by its very nature. Yes, Halo sells Xboxes. But Halo could sell many more units if it was also available on PlayStation. If the profits in the business are really from software sales and not from hardware, is this limiting potential profitability

Look at it another way. Xbox Live has some 50 million members, PlayStation Network over 90 million members. Those are impressive numbers… until you start looking at the size of other networks. World of Tanks has 60 million members. Apple’s Game Center has over 65 million members. Zynga has 187 million monthly active users. Facebook has over 1 billion members.

The potential audience for gaming is far larger than any one network – well, maybe not larger than Facebook’s network, but certainly larger than any console’s network. The power of gaming platforms is rising, making it easier for games to be cross-platform (especially more casual games). The vast majority of the gaming audience would prefer that a game is available on multiple platforms.

Second-screen gaming is a way to keep players involved in a game when they aren’t able to get to their console. Publishers want people to engage deeply with game brands, and that means making the game available to the player wherever and whenever possible. Allowing players to use a tablet or a smartphone to check into a game may not be full cross-platform gaming, but it’s still time spent with your game and not some other game.

King has had a huge hit with Candy Crush Saga, partly because the game is playable on multiple platforms – and your progress is synced across those platforms. Play on your phone in the morning, then grab a session on your lunch break via Facebook on your computer, then play on your tablet when you get home – and your progress is saved and tracked through each platform, so you never have to repeat a level unless you want to.The trend is obvious – more and more, games are allowing cross-platform communication at a minimum. Asynchronous play is relatively easy and undemanding compared to synchronous multiplayer, so that is already being done. The difficult feat is to take a game like Call of Duty and make it playable seamlessly across consoles. Activision would solve that problem handily if given the chance by the platform makers.

What may in fact happen ultimately is that the console market will look more like the mobile market, with hardware makers generating profits through sales of hardware and a cut of all software sales. Hardware pricing is kept low for consumers by network providers that subsidize the hardware in order to lock in subscribers for two years. There have been rumors of such an arrangement for the Xbox One, which would reduce the hardware price if you sign a contract for Internet service with a provider like Comcast.

Game publishers will continue to push for more cross-platform game play and connectivity, while platform makers will continue to resist. It might be a big competitive advantage if your console offered cross-platform gaming… or by reducing the value of exclusives it might give your competition a boost. No one knows, so there is great reluctance to be the first to try it out. What we’re likely to see are more careful moves in that direction with continued gauging of consumer response. Console makers will need to decide, ultimately, where the profits are located in the overall business and optimize the business for that. The equation is different now than it was in times past, and the variables are changing.

You can bet that Wargaming will continue to argue for connecting World of Tanks on the Xbox 360 to the World of Tanks audience on PC. A bigger audience will make all the players happier, because there will be more people to play against. And you needn’t worry if your friend has the right hardware to play a game. Hardware is becoming less important, and the game and its network of players is becoming more important. Game makers, platform holders and marketers are all adjusting to this, some more rapidly than others. It’s happening, and the only question is how each company adapts to it.

 

 

The Mobile Game Market Today

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Tablets are over 300 million this year. Smartphones are hitting the 1 billion unit mark. The mobile device market has put substantial computing power — and game-playing capability — in the hands of over 1 billion people in just a few short years, and rapid growth continues. Tablet sales grew 60 percent worldwide in the last quarter versus the previous year, according to IDC. Smartphone shipments grew by 50 percent worldwide in the last quarter, according to Canalys. Given the size of the market already, that’s amazing.

Almost 50 percent of U.S. households with broadband access have at least one tablet, and that number is growing fast. Apple has lost some its market share in the tablet market (down 14 percent in the last quarter), but new product releases may erase that decline. Android is gaining share worldwide due to its array of lower-cost options. India, for instance, has overtaken Japan to become the third-largest smartphone market, and those are all Android-powered phones.

While iOS still generates twice as much app revenue as Android, that gap is narrowing. Fragmentation and market addressability continues to be an issue for Android, but every large mobile developer is creating games for both iOS and Android, and usually optimizing for both tablets and smartphones. It just doesn’t make sense to pass up the opportunity to make good money on both platforms. Sadly, Blackberry and Windows Phone continue to be a non-factor for games, since their market shares are hovering around 2 or 3 percent apiece. They need to reach double digits to even begin to be a consideration for large game developers.

Smartphone and tablet games have become some of the best moneymakers in the game industry. Puzzle & Dragons is generating some $4.5 million per day, and has brought in $763 million in revenue during the first six months of the year. Supercell is on pace to bring in over $900 million this year from two tablet games. Those are numbers approaching the revenues of the best AAA console and PC games, but with roughly twice the profit margins. Only the top games can expect to clear $1 billion in revenue in a calendar year. With the continued strong growth of mobile devices, we should expect $1 billion in revenue from the top mobile games to be achieved in the next year.

It’s no wonder that all game publishers are taking mobile into consideration, and many are shifting some or even all of their development efforts in that direction. The market is still in many ways very young. Hardware adoption seems set to continue strongly for at least several years. However, most of the games that have generated the highest revenue have been casual games. We are starting to see deeper games (like Supercell’s Clash of Clans) generating substantial revenue, but there is great potential ahead for genres that have proven successful on consoles and PCs but have not yet been big winners on mobile.

First-person shooters are a huge revenue engine for consoles and PCs, but have very little presence on mobile. DeNA’s The Drowning hopes to change that with an innovative control scheme. Strategy games are starting to gain traction on mobile, as Kabam has ably shown. Sports games, RPGs, MMO’s and other sectors are just beginning to find a home on mobile. It’s not clear if any or all of these genres can reach the same popularity on the broad mobile audience that they have achieved with hardcore console and PC gamers.

The business models of mobile games are an issue. Console games are just beginning to experiment with free-to-play and virtual goods, while free-to-play has become 90 percent of the revenue generated for mobile games. Certain genres don’t really lend themselves to that model, such as story-centered games like The Walking Dead. Some observers predict we’ll see a regular premium price category of games emerge on tablets and perhaps even on smartphones. The premium price in this case might be only $6.99 or $9.99 for tablets, and $2.99 or $4.99 for smartphones.

There’s no set formula for success yet on mobile. As John Riccitiello pointed out, we have no idea yet if mobile hits can be successfully followed with a sequel, or if the whole concept is obsolete since mobile games are usually in a continual state of evolution. What is the lifespan on a mobile hit Is the vast audience of mobile gamers really possible to sell to if your game is not entirely casual How will the tablet gaming audience change and grow over time Does traditional publishing have a role in the future of mobile games The answers to these questions are being created now by the developers and publishers who are building games now.

Game marketers are finding even more pressure put upon them as discoverability, and hence marketing, is seen as the key barrier to becoming a hit mobile game. Sure, ultimately you need a great game that stands out from the crowd, but marketing should be able to help merely good games do their best. There’s no set formula for marketing success on mobile, but marketers are trying ad networks, cross-promotion, PR and whatever else they can think of to get some visibility. It’s quite probable there will never be an easy, set formula for finding an audience for your game — and getting them to install it, play it, and spend money on it. We can dream about that, but the hard reality of today is that marketing mobile games is demanding creativity, analytic excellence, and lots of hard work.

The mobile market may well grow to be the largest segment of the game industry in a few years, which is why every game creator and marketer needs to strategize on mobile. The future is rushing towards us, and we need to create it together.

Ultra HDTV: Gaming’s Next Frontier

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Television programming is undergoing a revolution, with Netflix being nominated for Emmys and even Amazon preparing original programming. Apple and Google are continuing attempts at changing the way people view TV, even while digital media is poised to see more viewer time than TV. Meanwhile, the last great innovation that would sell zillions of TVs — 3D — has crashed and burned as consumers decide they don’t care to pay extra for it. Sony alone has lost over $8.5 billion in television manufacturing over the past decade, and other TV makers aren’t doing great, either.

All of this may be about to change, as the next great innovation in TV looks like it may arrive far faster than anyone suspected. Unlike 3D, this innovation actually has a good chance of getting adopted, and in a big way. It’s 4K TV, also known as Ultra HDTV — a TV picture with a resolution double that of current HDTV in both directions resulting in 3840 x 2160 pixels.  As we all know, more pixels means more eye-melting goodness.

Ultra HDTV’s were all over this year’s CES show, but mostly they were very large (84″ and above) and extremely expensive ($10,000 to more than $20,000). Now, rapid manufacturing advances is driving down the cost of Ultra HDTV to the point where a Chinese manufacturer is bringing a 55″ Ultra HDTV to market this holiday season for only $999. Tablets and PCs are already moving towards Ultra HD resolution, with Apple’s MacBook Pros sporting 2880 x 1800 resolution to critical acclaim.

So why will it succeed where 3D TV hasn’t No glasses are needed, for one thing. The difference is easily communicated, readily understandable and can be demonstrated in a store without any special effort. The big drawbacks right now are the price and the content — both lack of 4K content and the distribution of it.

The lack of content isn’t that big of an issue since current films are mostly shot in 4K resolution or better. Current movie content could be re-mastered for Ultra HDTV, and content created for HDTV could be upscaled. Yes 4K movies will take up a lot more space, but higher-capacity Blu-Ray drives are already in the works. Codecs have already been demonstrated that will compress 4K video streams to a manageable level for distribution, not much greater than HDTV streams.

How does the advent of Ultra HDTV impact gaming Sony is getting ready for Ultra HDTV in a big way, hoping it will revive the profits of Sony’s TV business. The PS4 is said to be ready to handle 4K output, bringing gaming to Ultra HD quality (although at a lower frame rate than is possible on HDTV). Sony’s hoping that when Ultra HDTV becomes a significant market segment in a couple of years (or three), the PS4 will be ready to game right along with it.

Games created in 3D (which describes most console and high-end PC titles these days) are mostly resolution-independent. Interface elements might have to be revised, but that’s relatively easy. The vast expanse of the battlefield will just get bigger; you’ll see a much larger field of action. Many high-end PC games already let you spread a game across several monitors, though usually you’ll need a pretty beefy graphics card or two to handle that with all of the graphics options turned up to maximum. Overall, the transition for gaming to Ultra HDTV will be simpler than most technology transitions.

Games could also be shown in a somewhat smaller window that allows for multi-tasking alongside, the way Microsoft showed in its Xbox One demos. Imagine playing a full HD game, or maybe larger than yet, along with your friends in HD video chat windows along side. That’s truly social gaming, with your friends’ virtual presence giving you the next best thing to them being in the same room with you.

Here’s where it starts to get really interesting: Apple’s rumored iTV may actually get real, and have a real chance to sell. It never made much sense in the original iTV rumors, which had an Apple-labeled HDTV that would sell for $2000. Most people have an HDTV, so would they really buy an Apple HDTV just to get some features they could already get by buying an Apple TV Now, though, stir in the rumors that Apple is sourcing Ultra HD screens. Suddenly the idea could make sense. Apple’s incredible manufacturing power would give it an edge on pricing and availability, just the sort of edge Apple loves to have.

Picture this scenario: Apple goes to an Ultra HDTV screen maker and dumps billions of dollars in cash on them, buying up all the factory capacity for the next two years. This locks in Apple’s supply at a great price, and prevents other manufacturers from getting any Ultra HDTV screens at any price. This is exactly how Apple started the iPad, which gave Apple a market share lead in tablets that still hasn’t been overcome.

So Apple sells an iTV for under $2000 that features Ultra HDTV resolution in a 60†screen, and voice/gesture control, and perhaps finally some breakthrough deals with content providers to make it easy to find and display any content you want. At the same time, Apple opens up an App Store for iTV, and offers a new Apple TV that brings these capabilities to your current HDTV (sans Ultra HD resolution, of course). Throw in cloud-based DVR features to boot. Add a slew of Ultra-HDTV games that start flowing from game publishers eager to be in on the ground floor of the next gaming revolution. Result: The entire landscape of TV changes, with a massive impact on gaming as the App Store finally arrives in the family room.

It’s a good time for game developers, marketers and publishers to be flexible, creative, and ready to move as the market changes.

Activision Earnings Analyzed

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Activision announced its earnings yesterday and mostly met expectations, with a few surprises. As Activision had warned, sales were somewhat below last year’s, but profits beat expectations handily, at least by generally accepted accounting practices (GAAP). Looking at GAAP results, Activision had $1.05 billion in revenue versus $1.075 billion in the same quarter last year, but net income was $324 million versus $185 million.

The non-GAAP numbers don’t look anywhere near as good. Activision’s non-GAAP revenue was $608 million, compared to revenue in the same quarter last year of $1.054 billion. Net income was $119 million, versus $300 million. What’s going on The difference, of course, was Diablo III. There’s just something about releasing new software, especially when it’s a long-awaited title. Blizzard does have some new titles in the works including the free-to-play online game Blizzard All-Stars (its offering in the hot multiplayer online battle arena (MOBA) category) and its free-to-play tablet game Hearthstone, as well as a new content update for World of Warcraft, followed by Diablo III for Xbox 360 and PS3.

Morhaime also talked a bit about Blizzard’s Titan project. “I want to say a few words about our unannounced project, codename Titan,” Morhaime said. “We’re in the process of selecting a new direction for the project and re-envisioning what we want the game to be. And while we can’t talk about the details yet, it is unlikely to be a subscription-based MMORPG. I also want to reiterate that there has not been an official announced or projected release date.”

This statement is also a pretty clear indication that World of Warcraft will become a free-to-play game when it becomes expedient to make itso. Morhaime knows that’s inevitable, and that’s why Blizzard is testing and rolling out the ability to make in-game purchases of virtual goods. Once that’s in place game-wide, Blizzard can shift to a fully free-to-play game whenever it seems expedient. At a guess, that’s likely to happen next year sometime.

Activision is expecting a tough fight this holiday for Skylanders and Call of Duty. “We expect that marketing costs might well be up year-over-year,” said Activision Publishing CEO Eric Hirshberg. “That said, we do have extremely strong plans already in place. And I think we’ve shown best-in-class marketing efforts in our ability to make our launches into real cultural events and make them unignorable. And that’s what we plan on doing this year.”

As far as Skylanders goes, Activision will be fighting an aggressive ground war of retail shelf space against Disney Infinity. “Just when we thought we couldn’t get any bigger after last year’s retail presence, we’ve increased it by 25% again this year,” said Hirshberg. Of course, the Skylanders product line will be bigger than Disney’s lineup, especially if you include previous Skylanders releases and not just the latest one. Don’t underestimate the value of sheer square footage in retail stores for generating sales. The visual impact of Skylanders when you walk into a Toys R Us should be undeniable.

Activision looks set to finish out the year strongly, though the company is still expecting to end up below last year’s revenue. The outlook for 2014 depends in part on some factors beyond Activision’s control, in particular how well the PS4 and Xbox One sell. Activision Blizzard’s CEO Bobby Kotick expressed guarded optimism. “If you look back in history, what you’ve seen is that every new cycle has been larger than the prior cycle. I don’t know that we’ve had the same number of competing platforms or opportunities to deliver interactive entertainment,” said Kotick. “But I will say this, I think, that most manufacturers are delivering on the promise of excellent hardware. We have much more visibility today than we even did 3 months ago. And I think they both made great progress. I think they’re going to put more marketing money against the launches than ever before.”

John Riccitiello On Game Marketing

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In his first interview since leaving Electronic Arts, John Riccitiello sat down with the [a]list daily for this exclusive article. Riccitiello’s background was in product marketing, working as brand manager for Clorox, then group marketing director for PepsiCo, before executive roles at Haagen Dasz, Wilson Sporting Goods and Sara Lee. Riccitiello joined EA in 1997 as president and COO, leaving in 2004 to join venture firm Elevation Partners, then returning to EA in 2007 as CEO.

Riccitiello left EA in March of this year after a series of disappointing quarters. EA’s executive chairman Larry Probst is serving as interim CEO while the company searches for a new person for that role. Meanwhile, Riccitiello has been engaged in the industry, advising and investing, and now offering his thoughts on where marketing has been in the game industry and where it needs to go.

“I think marketing has been through all sorts of stages relative to gaming,” Riccitiello said. “I would say that when I joined EA in 1997 for the most part we only put games on television, and the first PC game that ever went on television was The Sims. It was just like we don’t put PC games on television because there’s not a big enough audience for them. Console was getting the TV, but only relatively rarely, the top five properties.”

“What we started to do in the mid-nineties was to bring more and richer consumer insight into the way we brought our products to market. We embedded more deeply product marketing inside the products so there was a feedback loop between the research we were doing, the games we were developing and the marketing that supported their launch. It stopped being so much kind of throw it over the wall and give it to the promotion department and deeply integrated product marketing system that separated EA from the rest, we had 36 per cent compound growth between 1997 and 2003, really the lion’s share of the entire growth of the industry. That was a pretty cool time.”

The game marketing of today is a different situation, Riccitiello believes. “Now fast forward and marketing is very different today,” Riccitiello said. “I think there’s been some tendencies in marketing that I don’t think have been all that good and others which have been pretty much really great.” The difference is in the data. “There was a time in marketing that you could sort of be like Mad Men, you know, the big idea. And it still needs the big idea, but what’s been introduced into marketing in an increasing way has been the science of marketing. How to use the ad marketplaces that are representative of mobile, how to use acquisition marketing around what you pay for an install, understanding the lifetime revenue of your user. It’s sifting through and incorporating massive amounts of data, and so the days of the marketer coming out and just being a big idea guy, those days are largely gone.”

Riccitiello continued, “What we’ve now gotten to as a very, very important part of marketing is the quantitative skills, sitting at your computer monitor and working with sometimes two or three or four dozen different players around the world. Figuring out how you’re going to allocate your resources to drive installs, and then what you’re going to do with the consumers that are playing your product on a day to day, minute to minute basis to optimize lifetime revenue by optimizing a great experience for them.”

The dark side of modern-day game marketing appears when the balance between data and creativity is wrong, Riccitiello believes. “Where I think it gets lost — and I think famously Zynga was sort of in this space and I think hiring Don Mattrick is going to counter this — some people think more about the data than the game. There’s always one of those pendulum swings when you’re in the game business because you think you’re in the data business and the game is sort of secondary. I tend to think that loses heart pretty quick. It certainly loses the allegiance of the people building it but I think it also pretty quickly loses its sense of soul relative to the player. And they see through that.”

Riccitiello believes the creativity of a game’s design, not data, should be central. “While there was a huge need for an injection of quantitative skills, I believe in the craft,” Riccitiello said. “I’m looking for a big idea, that never went away. And now what we’ve got is sort of a left brain, right brain marketing, I think for the longest time we had no-brain marketing, sort of like pitch it over the top and it’s a promotion job, really. Then it became a sort of big idea business, and I’d say that characterizes the mid-nineties and a lot of companies caught up to where EA was. Ubisoft and Activision, Take Two, all got great at those big, gigantic launches but none of them were as informed by as deep an understanding of the customer base as we are today.”

The key to success with games is ultimately the game itself, not the marketing, Riccitiello believes. “Most of the data is not understood well and I think the pendulum for some has swung too far to where they think that what they’re marketing is a commodity,” Riccitiello said. “As far as I’m concerned it’s not a happenstance that products like Candy Crush are doing well or Clash Of Clans are doing well. They’re doing really well executed products. They have integrity in their design and it works. And those are radically different games. They’re very different things but what they share in common is a deep respect for the craft. They respect their user. And their products get better every day.”

Read more of what John Riccitiello had to say on GamesIndustry International

Are There ‘Gotchas’ In Indie Publishing On Consoles?

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Microsoft’s latest Xbox 180 is a change to its indie publishing policy. Game Informer broke the news last week, saying that Microsoft will reverse its prior decision and allow independent developers to self-publish their games on Xbox Live. Microsoft is even planning to make certification similar to iTunes, with a 14-day time frame from submission to approval. Allowing indies to self-publish may even spread to the Xbox 360, according to one developer.

After the news broke, Microsoft VP Marc Whitten had this statement: “Our vision is that every person can be a creator. That every Xbox One can be used for development. That every game and experience can take advantage of all of the features of Xbox One and Xbox Live. This means self-publishing. This means Kinect, the cloud, achievements. This means great discoverability on Xbox Live. We’ll have more details on the program and the timeline at Gamescom in August.”

Predictably, the announcement has been widely lauded by fans and developers alike. Sony had announced at E3 that indies would be welcomed on the PS4, and this was a sharp contrast to Microsoft’s stance at the time. Now both Sony and Microsoft are on the same page, and it should be easy for developers to put games onto next-gen consoles, right

Not so fast. The devil really does lurk inside the details, and the details have not yet been made clear. It may not be as easy as putting a game in the App Store or Google Play. What procedures will you have to follow What are the content restrictions How easy or expensive is it to put out updates These are all important questions. Still, it’s certainly a big stride in the right direction, but this doesn’t mean that publishing games on consoles will be easy.

Let’s assume that Microsoft, Sony and Nintendo all end up with much more liberal policies and procedures that allow developers to create games for current or next-gen consoles without expensive development systems or lengthy bureaucratic procedures. Let’s even assume that business models are wide open as well, allowing free-to-play games, virtual goods, any price point for a game that a developer wants to set. Will games be easy to publish

Sure, but that doesn’t mean that games will make money. Look at the situation on mobile — only a small percentage of developers make significant money. Consoles will be harder to develop for, and the audience will be more demanding. It’s not going to be a walk in the park for developers.

The worst problem of all will be discoverability, just as it is on mobile. This means marketing is going to be extremely important, and unfortunately that’s usually the thing indie developers aren’t very good at. That’s going to have to change as more and more games are produced, and the opening of consoles to the broadest possible range of developers only underscores the problem.

At least mobile platforms have a number of tools for discovering new games, and there a large numbers of ad networks to tap into. That sort of ecosystem doesn’t exist on consoles, and it may never appear, making discovery a much more difficult prospect on consoles than it is on mobile or online platforms. Some discovery can happen through the Internet, but without a direct download connection, that will not be terribly useful. It remains to be seen what tools platform holders will provide to help gamers find new games on consoles.

Certainly it’s great for developers to have easier access to markets. If you’re a developer with a game that sells pretty well on one platform, you’re probably going to do well by putting it on every platform you can. The loosening of console publishing restrictions is a good step forward for the entire industry, but it’s not going to be easy.

Activision’s Deal Analyzed

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The financial transaction involving Activision last week was massive and complex, which led to confusion in the media reporting on the event. ‘Activision goes independent’ was part of many headlines, perhaps leading to an impression that Activision is no longer a public company. The exact opposite is true — Activision is more of a public company than before. The deal leaves Activision in control of its own future at the cost of adding a sizable amount of debt. How exactly has Activison changed, and how might this affect the future of the company

The deal itself has been under negotiation for months, and in the offing since the merger of Activision with Vivendi’s games unit (most importantly Blizzard Entertainment) back in 2008. The merger at that time left Vivendi with 61 percent ownership of Activision-Blizzard, with the remaining 39 percent of shares held by the public. The catalyst for the current buyout was the expiration of a clause in the merger agreement that required Activison directors to approve any debt greater than $400 million, preventing Vivendi from taking Activision’s cash or borrowing against the company.

Vivendi is seeking cash because it a massive debt problem, owing more than $15 billion, and it wants to reduce that debt. Unable to find a buyer for Activision in the last year, Vivendi has accepted the deal put forth by an investment group led by Activision CEO Bobby Kotick and chairman Brian Kelly. Here’s how the deal works: Activision is borrowing $4.75 billion from banks and using $1.2 billion of its own cash, along with $2.3 billion from an investment group, to reduce Viviendi’s share of Activision to 12 percent. The investment group will own 24.9 percent of Activision, while 63.1 percent will now be owned by the public.

The investment group included $50 million each from Kotick and Kelly, along with investments from Fidelity Investments and others including Chinese game giant Tencent. The deal has increased the value of shares held by the public, which is why Activision stock jumped more than 15 percent to its highest point since 2008.

There are several good things about the deal, especially from the view of Activision’s leadership. The deal puts the complete control of Activision in the hands of its board of directors. Shareholders have seen a good increase in the value of their shares. Importantly, the deal still left Activision with substantial cash, and a manageable debt load that’s roughly equal to about four years of profits (at the current profit levels). On the negative side, the cash on hand is mostly overseas (some $2.6 billion out of about $3 billion) which would incur substantial taxes were Activision to repatriate it. The company will only have about $400 million in US cash handy when the deal closes.

Activision has already committed extra resources to marketing this fall, and the lesser amount of cash available shouldn’t be an issue in funding those efforts. The company should be raking in substantial amounts of cash in the latter half of this year. As long as Activision maintains its current profitability, the new debt load should not affect operations. Business should proceed as normal this year and the next.

It’s the longer term picture for Activision that’s murkier. The deal weakens Activision’s ability to acquire new companies or to substantially invest in major new areas. A deal for TakeTwo, say, would be more difficult now. The debt service shouldn’t be a problem if Activision continues to generate the same sort of profits it has for the past several years, but there are signs that may be changing.

The most important dark cloud for Activision concerns Blizzard, the source of most of Activision’s profits. Activision announced that subscribers to World of Warcraft had fallen by 600,000 in the last quarter, down to 7.7 million overall. The game reached its high point in 2010 with 12 million subscribers. Blizzard is taking steps to move the game to free-to-play, but it’s unknown when and if that might happen and whether it would revive the game’s ability to generate profits. Moreover, Blizzard just junked its new MMO in development (codenamed Titan) and will start over. Don’t expect something to come out of that project for several years.

The Activision deal is great for Activision’s leadership and good for current investors, but it really has no great impact on the company’s business for the near future. Longer term, Activision will be fine if it can continue to produce hits like Skylanders. Bungie’s Destiny looks like it has a fair shot at being such a blockbuster. If Blizzard can maintain profits on World of Warcraft long enough to create a new game of similar scale, that will be a key to Activision’s success. The new consoles arriving soon need to sell well, because while Blizzard’s revenue is almost all from PCs, Activision’s business is mostly console-based. Expect Activision to buckle down and continue pressing ahead with no particular change, except perhaps a greater sense of urgency. The consequences for Activision of a major product stumble, if one ever occurs, just became greater.

Analyzing Zynga: ‘Volatility’ And Change Ahead

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Zynga’s earnings call revealed that the company is still struggling to regain its mojo. Revenue dropped 31 percent for the quarter compared to last year, from $332.5 million to $231 million, with a net loss of $15.8 million. New CEO Don Mattrick was straightforward. “We have a lot of hard work in front of us and as we reset, we expect to see more volatility in our business than we would like over the next two to four quarters.” In other words, make sure your seat belts are fastened. It’s going to be a bumpy ride. The challenges ahead for Zynga include execution, products and even marketing.

First, a look at the numbers defining Zynga’s position. The non-GAAP numbers (which Zynga uses to give a clearer picture of the business) show bookings at only $187.6 million, compared to $301.6 million last year. The non-GAAP numbers show a loss of $6.1 million for the quarter, versus a profit last year of $4.6 million, an almost $11 million swing in the wrong direction. Perhaps more disturbing is the drop in Daily Active Users (DAU): from 72 million last year to 39 million this year, down 45 percent. Monthly Unique Payers (MUP) decreased from 4.1 million to 1.9 million, a 53 percent drop. Those are the people who keep the cash flowing in, remember.

There are some positives among all the negatives. Combined bookings for FarmVille and FarmVille 2 grew 29 percent over last year, showing that new life is possible in old franchises. Zynga’s new games Solstice Arena and Running With Friends received Apple’s ‘Editor’s Choice’ awards, the first time that’s happened. Importantly, Facebook was down to contributing only 68 percent of total revenue, reducing Zynga’s reliance on that channel. It would be better if that was due more to rising mobile revenue than to falling Facebook revenue, though. The company has $1.5 billion in cash, so there’s plenty to keep it going through a few lean quarters.

Mattrick plans to spend the next 90 days “under the hood” going through the product pipeline and trying to improve the slate of upcoming products. An analyst raised the question of whether Zynga had too big a staff, noting that King has higher revenues with 400 people than Zynga does with 2300. “Imagine if we can start getting the leverage out of our 2,300 people that Kings is getting out of their 400 people,” Mattrick replied. Given that mobile is where Zynga is focused, and the market for mobile games is growing rapidly, this is a wise choice. Adding good staff is one of the toughest tasks for game companies, and it would be foolish to cut massive numbers of staff now only to try and hire them back next year. There’s plenty of time to cut staff further if new products don’t perform well enough. Zynga’s got an enormous cash cushion, and this is a good use of it.

One key decision has already been made by Mattrick and Pincus. Zynga is not moving forward with real-money gaming in the US, deciding its focus is better spent on mobile and social games. That’s probably a good choice given that real-money gaming in the US would be a state-by-state slog through legal barriers.

Mattrick is looking to improve Zynga’s performance from its existing games and ensure that new games get into the top ten. Zynga Poker was called out as an example of one of Zynga’s hits that needs help, and Mattrick is already putting some of Zynga’s best talent on the job. We’ll probably see more shifting of resources in the next few months.

The biggest challenge of all for Mattrick may be marketing. Shrinking audience numbers can be revived to some extent, and perhaps completely, by coming out with the right games (or making the right improvements to existing games). Viral hits are the magic potion that has powered Zynga’s growth, and once Zynga had a large audience it could produce new games to serve up to that audience without having to worry about marketing.

That all made sense when Zynga’s games were all casual, and generally appealed to the same audience. Things are starting to change with Zynga putting more effort into mid-core games like Solstice Arena, a fast multiplayer online battle arena (MOBA) that’s aimed squarely at fans of League of Legends. That’s not going to be interesting to a large segment of the Words With Friends audience. The smaller, more dedicated gamers that Zynga is targeting with some of its games will need some marketing attention in order to reach them effectively. Those gamers tend to monetize much better, but Zynga’s going to have to make a marketing effort to build that audience rapidly.

For future success, Zynga has to change the basics of what made it big. The company grew rapidly because Facebook allowed unlimited game messaging, giving Zynga games a boost in a brand-new marketing channel for free. Rapid introduction of new games, often by doing versions of whatever was popular in the market, was the appropriate strategy. Zynga grew rapidly tracking with Facebook’s rapid growth, until Facebook slowed down, started taking 30 percent of game revenue, and cracked down on viral game messaging. Now Zynga’s got to be leading the pack, not ‘fast following,’ and that’s a big change that Mattrick has to implement.

Investors certainly haven’t been happy with Zynga’s news, driving the stock down by over 15 percent in early trading. It does seem reasonable, though, to give Mattrick some time to make changes and see how it affects the company’s position. Mattrick is a seasoned game executive who really, really likes to win. Rumors are that he turned down a shot at being EA’s new CEO for the Zynga job. Being CEO of EA would have been tough, but much less volatile. Mattrick sees potential in Zynga that perhaps outstrips what he thinks could be in EA’s future. We should know better by the end of this year if Mattrick will be able to actualize Zynga’s potential.

Meteor’s Take On Transmedia

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Adhesive Games has been building the free-to-play giant robot game Hawken for over two years now, and Meteor Entertainment is the publisher. The game has had strong transmedia connections from the beginning, with a graphic novel recently released, digital shorts in the works with Machinima and a feature film in production. The [a]list daily sat down with Meteor’s vice president of transmedia marketing and promotions Paula Cuneo to discuss the unusual nature of Hawken‘s marketing efforts.

Cuneo is a game industry veteran with a varied background, working at companies like MicroProse, Activision, Microsoft, and Digital Development Management. “My background in gaming is super circuitous, Cuneo said. “I was a producer, I was in licensing, and business development, corporate alliances, in-game advertising. Now as VP of transmedia marketing and promotions, Cuneo is overseeing a diverse band. “The group that I sit on top of now and work with is community, social , PR and events, brand marketing and brand planning, customer service and support. It really is soup to nuts. From awareness, from the very beginning when we’re iterating against a new IP, to customer support tickets to make sure the experience keeps people happy and in the space.

Transmedia marketing means reaching across categories to find customers. “Our CEO Mark Long was really specific from the get-go about how he wanted to make sure we’re reaching beyond the gaming industry and hitting a variety of really passionate industry points “ feature films, graphic novels, the whole thing, said Cuneo. “The challenge is that stuff takes a long time. We are like a year and a half in, and finally we have transmedia that’s coming to fruition so we actually can use it to market our game.

“That’s essentially what we consider to be transmedia “ make sure all our media points are helping to market the game, Cuneo continued. “My job has been amended significantly to be much more focused on games as a service. Free-to-play is about a super long tail. You want to make sure minimum viable product goes out in the best way possible, but then you make sure people are in it for the long haul.

The marketing Cuneo is overseeing has little to do with traditional channels. “If a game is really good, it should be all word of mouth, in a perfect world. We’re not spending any money against advertising and we’re not doing any paid media, Cuneo explained. “We’re really making sure that the product itself and the experience you get interacting with the company means you want to stay around.

Cuneo sees the community itself as a great marketing resource. “We’ve created a bunch of advocate groups. We have what we call Hawken’s Heroes, people who have played the longest who are great advocates. They have their own forums and we can poll them about all sorts of things, Cuneo said. “Those are the guys who aren’t just making the game better, but making games as a service better. We want to make sure people stick around even when we make a mistake, because we want to fix that mistake.

Meteor views eSports as a significant target for Hawken. “It would be hard not to, said Cuneo. “That raises the bar considerably in terms of game balance. Absolutely. It’s such a blessing to have Riot come before us; it’s good to have people who are doing it well. They have a wonderful, competitive game to play and they created this balance. It has to be a space where you can keep the playing field level. That will happen when we get that influx of people at go-live.

Finding potential Hawken players for Meteor means going to consumer shows. “We’ve been very event-focused, making sure that we were on the ground so there was a hands-on opportunity, Cuneo said. “We’ve executed a lot of stuff that was very fan-focused. Both the PAXes, East and Prime, were hugely important to us, Gamescom too. Transmedia is great, because it gives us a reason to be there while we’re evolving as a game. We work with a publisher, Archaia, who does our graphic novel, a beautiful hardcover book of Hawken which starts to integrate the lore and backstory of the game. We’ve been allowed to piggyback on the different cons they do. We find that those fans, comic fans, are super-sticky. They’ve read it, they get it, they play, they monetize, they stick around. Those super-passionate fan points are great.

Marketing has to be more creative with a property like Hawken, Cuneo believes. “The idea that you need to react against player behavior is really important. You can’t pretend to care. You cannot phone it in, Cuneo said. “We have hugely passionate players we’ve asked to stick with us through thick and thin. When they say something, you respond to them. It’s a gold mine, but you have to be a sincere and an honest, active listener, and then you have to translate what that means and give it back to development, then development has to appreciate it enough to integrate it. That’s games as a service. The idea that teams used to roll off of games, we’d all have a glass of champagne and move on to a totally different genre . . . no. Everyone’s in it for the long term.

Cuneo doesn’t expect to find Hawken players through traditional marketing channels. “The people we want to get playing our game are playing games now, they’re not watching TV. To pretend that we could advertise where we are not doesn’t make any sense, Cuneo said. “We’re trying to facilitate advocacy inside the community. Publishers clearly are changing the way they do business and they way they are spending. There’s tons of fantastic middleware that allows for real-time results against media buys, you can do microtests to see what people are hitting. That whole ‘We’ll have an agency, and they’ll parse out where our money goes, and they’ll spend it, and we’ll measure it to see if it worked out not and that’s the end’ “ it’s not like that any more.

With Titanfall arriving next year, there will be some well-financed mech game competition for Hawken. Cuneo is ready for them. “Every time they advertise, they’re advertising a mech game. We’re a mech game too, and we’re free! We’re scrappy.