I’ve been a bit remiss in putting general news stuff out there, so let me catch up in a quick and timely manner:

1) I’ll be at GDC next week, Sunday the 17th to Friday the 22nd. I’m giving a talk called “The Power of Free-To-Play” (GDC chose the Anthony Robbins-esque title) at the Worlds in Motion Summit on Monday at 2pm. I’m up for coffee with any interested parties, so email me if you’re one of them.

2) I’ll be at SXSW in Austin, March 8-11. Michael Smith (CEO of Mind Candy) was kind enough to invite me to be on a panel called Casual Multi-Player Online Games: Serious Revenues, along with Nabeel Hyatt (Conduit Labs), Jeremy Liew (Lightspeed Venture Partners) and Joe Hyrkin (Gaia Online).

3) Lastly, I left Relic in early January after three great years with the company. Since then, I’ve been doing some design & production work on a variety of exciting free to play projects. So for the time being, you could call me a hired gun.

I hope to see some familiar faces at GDC and SXSW. Take care!

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In the interest of playing devil’s advocate, I thought I’d throw out 10 reasons why free to play might be slower to succeed in the Western world as it has been in Asia.

While I don’t necessarily believe all of these will inhibit F2P’s growth, one of the slides in my GDC presentation this year is to do with the challenges F2P faces – so this should help fulfill that requirement.

1. Virtual Property “Ownership”

The term ‘virtual’ may not have a strict legal interpretation, but if anything it means that the thing being described is NOT whatever comes after the word ‘virtual.

– Ginsu Yoong, Second Life’s legal counsel, Linden v Bragg

Despite virtual property’s ill-defined legal status, developers have had no qualms about starting byzantine in-game economies driven by the exchange of real money for virtual land, clothing, furniture and much more.

Some developers, like GoPets CEO Eric Bethke, have attempted to get out in front of the virtual property legal issue by defining their own “Avatar Bill of Rights.” But most of us have not been as proactive and instead seem content to leave it up to the courts to decide how to define and deal with our users’ virtual property.

As precedents regarding virtual ownership are set, the growth of some F2P products may be curtailed as the legal burden of dispensing virtual property increases.

2. Slow Broadband
On the issue of net speed, there remains a huge disparity between North America’s broadband ISPs and Korea’s military-grade internet provision.

The net effect is that free to play games like Maple Story can take 1-3 hours or more to download in North America, while Korea’s 45mbps network cuts the same download to a paltry 10 minutes or less.

It’s fair to say that we won’t soon be getting such high download speeds – but the North American market might have already found a way around the issue. With the launch of streaming game services like InstantAction and the proliferation of Flash as a full-blown development platform, downloading entire game clients become less and less the norm.

3. Poor Advertising Strategies
Some products in the F2P sector have come to rely heavily on advertiser support in order to keep their offerings free for the majority of players.

A recent OMMA article that claims advertisers are taking the wrong approach when handling virtual worlds. And as the populations of virtual worlds appear to be prematurely plateauing, advertisers may be starting to sweat.

But there is hope if advertisers change their strategies to suit the unique challenges virtual worlds present. As Worlds In Motion put it:

…themed events, branded avatar clothing, and representative personality appearances are finding success and opportunity in worlds like There, Habbo and vSide.

4. MMO Overload
From Maple Story to Silkroad Online, there is no shortage of MMOs in the free to play space. In the same vein, there is an abundance of virtual worlds such as Second Life or Kaneva. It seems as though the vast majority of new free to play game since 2005 have been virtual worlds or MMOs.

Perhaps it’s the very reason that these games have proliferated in the free to play market; MMOs and virtual worlds are inherently more inclusive than an FPS. Still, it would be a shame to see the free to play space flounder due to constant reiteration of the same genres and themes, turning away players seeking a different experience.

Of course, games like Kwari are looking to change that, but it’s too early to tell just how well they will catch on.

5. Rising Development Costs
With more prominent developers announcing plans to take advantage of the free to play model, the days of games fueled by ramen noodles and nights in the basement could, once again, be history. EA’s upcoming Battlefield Heroes is the latest big budget free to play game, signaling that the big publishers aren’t content to sit back and let Far East imports eat their lunch.

If the consumer makes the jump from 2D to more advanced 3D graphics, it could mean the end of the visually rudimentary worlds and Flash-based free to play games as market leaders, making way for the mainstream big budget games.

6. Second Life Slowdown
Second Life is the Apple Newton of virtual worlds. It was here first, but isn’t the best representation of the potential of virtual worlds. However, it still occupies a place in investors’ minds – akin to a coal mine canary, warning of impending danger.

And while investors took note as Second Life soared to the top, they’re noticing its decline as well (active user hours were down 5% in November). There is concern among some that Second Life’s time might be up, and that’s not a good sign for potential investors in the free to play space.

7. Watered Down AdverWorlds
With their lower barrier to entry and great potential to spin money, an slew of less innovative products are beginning to hit the market. Hardest to ignore are adverworlds like Build-A-Bear, Rush Zone, BeBratz, BarbieGirls and their ilk – marketing spend thinly disguised as entertainment.

The consumer’s willingness to pay money for virtual items in a world where their avatar is little more than a target for advertising will be tested by products like these.

8. Unsanctioned Secondary Markets
Then there’s the issue of gold farming. With websites like IGE operating independently of game developers and establishing secondary markets for game currency and items, it’s not just traditional MMOs that are being subjected to this kind of treatment anymore.

What’s worse, while gold farming might fuddle with World of Warcraft’s player-driven economy, some developers believe a secondary market allows players to skip the middleman altogether – a potentially fatal issue for free to play games who survive on item-based revenue streams.

The recent launch of publisher-sanctioned Live Gamer is a step in the right direction for devs and pubs looking to reclaim lost revenue.

9. Limited Payment Methods

We have hanging on our wall a user who sent a $5 bill in a $15 fedEx package.

– Craig Sherman, Gaia Online

While other territories enjoy a plethora of tailored-to-the-consumer payment methods, North America has embraced relatively few.

SMS would surely be nearly as popular a payment method here as it is in Europe if our carrier surcharges weren’t in the range of 50% a transaction. Landlines – an expensive but very secure payment option in China – might also be popular with some services.

GoPets has 90 different payment systems worldwide, catering excellently to foreign payment preferences. Nonetheless, consumers still have trouble getting money into their favorite North American games.

10. Kids Only Games
The current offering of free to play games caters nearly exclusively to the under-25 set. An NPD study released last year showed that while 91% of online gaming among kids aged 2-17 is free to play, by the time those kids graduated high school, the boys had moved to sixty-dollar console games and the girls dropped out of gaming entirely.

In the core gaming arena, Nintendo has found a way to appeal to young and old alike. Free to play’s appeal among adults relies on the proliferation of products that do a Nintendo-quality job of bridging the age gap or target older demographics only.

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OnNet USA is the American subsidiary of OnNet Korea a developer of multiple free to play online games. The American branch of the company acts solely as a publisher through their portal site Games Campus.

Today, OnNet releases their newest game, a free to play third person shooter titled Manga Fighter. We spoke to YJ, Manga Fighter’s Producer, about the project and the free to play model in general.

What is the relationship between OnNet Korea and OnNet USA?

OnNet Korea is an software developer creating search engines and other similar products. OnNet USA is an online publisher of free to play games. They’re two different ideas with two distinct identities.

OnNet USA opened it’s doors three years ago with the launch of our golf game Shot Online.

What did you learn from that experience and what has been carried over to Manga Fighter?

We weren’t very well organized which was a big challenge so this time out we made sure to have the proper management in place. That’s the real risk area with a project like this you need excellent management.

The other important lesson concerning constant content updating. With a free to play game and a virtual goods revenue model you have to make sure that there is always new content for the players. We found that to be the key to player retention.

It’s hard to discuss MMOs without mentioning secondary markets for virtual goods and currency. What are your thoughts?

We’re very aware of the secondary markets and the emerging issues associated with them. At this point we’re taking a neutral stance and kind of waiting to see what the industry trend as a whole is.

Why have the global launch of a manga style game with the virtual goods model in America. Why not use the Korean market where both of those things are more mainstream?

Well in a lot of ways this is a new game for any market. It’s a fast-paced third person shooter aimed at a younger audience and there’s not much out there like that. We believe the US is a great testing ground for our new content.

Just three years ago, some declared the free to play model wouldn’t work. Today it’s beginning to get big. It’s not quite mainstream yet but we’re heading in that direction and America is a huge potential market. There are a lot of gamers in America.

What about the release cycle. OnNet ran two beta tests and a boot camp? What was that?

The Boot Camp was just a term for our third beta. In fact even now that we’ve opened the game up we still haven’t implemented all the commerce aspects of the game. This is more like an open beta and then we’ll see how the market responds before launching the money aspect.

What kind of marketing has gone into the launch of the game?

We haven’t done any big budget marketing campaigns but viral marketing has worked well for us. We’re also mailing collectible cards to players with a code on them. The code unlocks premium content in Manga Fighter and down the road we’re looking at getting these cards into retail outlets.

The other thing we’re excited about is the possibility of getting some famous faces from the rest of the manga universe in game. I can’t release any details yet but we’re in discussion with some major publishers.

Thanks for your time YJ and good luck with the launch of Manga Fighter.

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Back in May, Chris Anderson, WIRED editor-in-chief and author of 2006’s much-buzzed-about “The Long Tail,” announced his next book. Due out in 2008, the book will be titled “FREE” with any one of the following subtitles:

1) FREE: The story of a radical price (zero)

2) FREE: How $0.00 changed the world

3) FREE: How companies get rich by charging nothing

4) FREE: The economics of abundance and the marketplace without money

5) FREE: The past and future of a radical price.

Having read Chris’s original Long Tail article in WIRED and being subjected to endless recitations from his book over the last year, I’ll wager a guess that “FREE” will be equally influential. Chris is writing “FREE” not only about games, but from a pan-industry perspective – which means by this time next year boardrooms the world over will be dreaming about how they might make more money by giving away their product free of charge.

Since October, Chris has started using a “free” tag in his blog posts, which gives us a glimpse into the type of content that might be included in the book. It’s worth checking out.

On a related note, I found an interesting post entitled “There’s No Money in The Long Tail of the Blogosphere” over on Read/Write Web today. It makes the excellent point that the long tail benefits the aggregators of long tail products much more than it does the makers of said products. Although the “products” discussed in the article are blogs and their associated authors, you can see the parallels for games.

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I spent a couple hours today pretending I had infinite time and money to attend free to play-relevant conferences the world over. The result is this list of the top 10 conferences for those who want a crash course on F2P development and a slew of contacts in the sector.

Over the last year, there’s been a deluge of new virtual worlds conferences, but not all are created equal. So in addition to sorting on quality, I decided to sort for those that were at least partially geared toward English speakers.

Some of the following conferences occurred in the past, but have been included in the hopes that they become annual affairs.

1) Virtual Goods Summit
June 22, 2007 – Palo Alto, California

The Virtual Goods Summit is a one day conference focused on the emerging market opportunity for virtual goods and economies. Once restricted to the world of online gaming, virtual goods and currencies are beginning to influence the development of social networks, community sites, and many other new and exciting markets.

The Virtual Goods Summit was a one day affair at the Annenberg Auditorium featuring a series of one hour panel discussions and presentations. Notable speakers included the CEO’s of Gaia Online, Three Rings, Kongregate, GoPets and K2 as well as the Director of Business Development at Nexon. The topics discussed included virtual goods as the next big business model, industry success stories and the forces driving user adoption.

Check out F2P.biz’s summary of the Virtual Goods Summit.

2) Virtual Worlds Forum
October 23 – 27, 2007 – London, England

Our pan-European virtual worlds confex connected brands, major corporations, digital and virtual worlds agencies, media and entertainment players and games companies, technology suppliers, analysts and commentators, lawyers, regulators and venture capitalists and all those harnessing the power of virtual worlds to engage with clients, suppliers or customers.

The Virtual Worlds Forum lasted two days and was by no means focused just on games. The keynotes and panel discussions we’re about many things including brand recognition, corporate opportunity and revenue possibilities. Panelists included Paul Hemp- Senior Editor, Harvard Business Review; Ginsu Yoon- SVP International, Linden Lab and Thomas Bidaux- Director of Product Development, NCSoft Europe.

Check out Wonderland’s summary of the Virtual Worlds Forum.

3) Virtual Worlds Conference
April 3-4 2008 – New York; Autumn 2008 – West Coast

Virtual Worlds Conference and Expo helps businesses harness the power of virtual worlds to engage with their customers, partners and employees. The event follows our sold out Virtual Worlds Spring New York conference.

Speakers from this year’s conference included Paul Yanover, VP and Managing Director at Disney and Anthony Zuicker- creator of CSI. The event featured hundreds of speakers overall and some major corporate support. This year six streams will be available with an emphasis on the financial and operational aspects of virtual worlds. Where as some of the conferences on this list are art or design orientated the Virtual World Conference seems to be strait business.

4) Game Developers Conference
February 18 – 22 2008 – San Fransisco, California

If you are going to attend one industry event in 2008, this is the one. The core objective of this year’s conference is to promote Learning, Networking, and Inspiration. The GDC team has been working hard to create the most exciting and compelling conference yet. Most notably, we have adjusted the timing for the call for papers forward to ensure that we’re presenting you with the most up-to-date topics facing game developers today. You won’t be disappointed.

The GDC isn’t exclusively interesting to free to play followers but in the wake of E3’s fall from grace this is the game industry’s flagship event.

Also at GDC is the Worlds in Motion Summit debuting this year, an event focused on virtual worlds. FreeToPlay.biz was asked to speak at the Worlds in Motion Summit and as a result, Adrian Crook will be presenting a primer on the F2P revenue model at the event. Also giving talks are Raph Koster, Nabeel Hyatt, Eric Bethke, Min Kim, Chris Romero and others – making this a great conference for the F2P sector.

5) Indie MMO Game Developers Conference
March 29 – 30, 2008 – Minniapolis, Minnesota

IMGDC is a venue for Independent designers and developers to come together to share ideas and learn in all areas related to MMOGs. IMGDC 2.0 has positioned itself to be an even larger venue with three fantastic tracks covering design, development and business aspects of Indie MMOGs. The present is a time of MMOG giants, but the future lies in the hands of the passionate Indie developers. Do you have the passion?

2008 will be the second year for the IMGDC featuring presentations from Richard Bartle author of Designing Virtual Worlds, Raph Koster and Gordon Walton who was previously VP/Exec Producer at Sony Online Entertainment, Maxis, Origin Systems and Kesmai Corporation.

Check out Gamasutra’s summary of the Indie MMO Conference.

6) South by South West Interactive
March 7-11 2008 – Austin, Texas

The SXSW Interactive Festival features five days of exciting panel content and amazing parties. Attracting digital creatives as well as visionary technology entrepreneurs, the event celebrates the best minds and the brightest personalities of emerging technology. Whether you are a hard-core geek, a dedicated content creator, a new media entrepreneur, or just someone who likes being around an extremely creative community, SXSW Interactive is for you!

Though SXSW doesn’t provide a ton of events catering specifically to the free to play crowd, it is a phenomenal collection of creative people working in emergent digital entertainment fields. Couple this with the fact that the event is part of North America’s largest music festival and party and attendance seems like more than a good idea.

Check out Throwspace’s summary of SXSW.

7) Austin Game Developers Conference
September 5-7 2007 – Austin, Texas

The Austin Game Developers Conference attracts over 1,100 attendees and provides educational, networking, and business opportunities for game development professionals driving the $11 billion videogame industry. It is the a global forum where programmers, artists, producers, game designers, audio professionals and others involved in the development of interactive games gather to exchange ideas, network, and shape the future of the industry.

Austin GDC has become synonymous with MMO design due primarily to the city’s deep MMO development scene. The conference features talks and panels focused on free to play, “Web 2.o,” MMO development and micro-transactional revenue models.

8 ) Online Game Developers Conference
May 13 -15 2008 – Seattle, Washington

Building on the great success of the 2007 conference, OGDC 2008 will expand the plenary sessions from two to three days, and feature a wide range of keynotes, sessions, and panels, giving attendees new views of the online game universe—everything from an overview of the latest business, product, and legal developments to in-depth looks at scalability, player psychology, and in-game economic systems.

This event features Erik Bethke, founder and CEO of GoPets; Alan Crosby director of global community relations at Sony Online and Steve Goldstein of Flagships Studios. 2007’s OGDC was a good start – hopefully 2008 is a big step forward.

Check out MMORPG’s summary of the OGDC.

9) Gartner Symposium ITxpo 2008
April 6-10 2008 – Las Vegas

Each year, Symposium/ITxpo: Emerging Trends is founded on a framework of six megatrends that Gartner sees as critical to how business and technology will evolve in the near and long term.

A mere sampling of the trends and technologies we’ll focus on includes:

  • User Generated Content
  • Social Networking
  • Community Source
  • The Metaverse
  • Relationship Assets
  • Hyperconnected Enterprise
  • Collective Intelligence

Gartner attracts a different crowd from the game-centric conferences listed here. Typically, Gartner attendees come from the IT or VC worlds. The value of Gartner attendance lies not in the curriculum, but in your fellow attendees.

10) DigiWorld Summit
November 14-15 2007 – Montpellier, France

The 6th Video Game seminar as part of IDATE’s DigiWorld Summit 2007, is organised with financial support from the City of Montpellier. A host of opportunities have opened up over the past two years: the development of serious games, Massively Multiplayer Games and persistent universes, online capabilities incorporated as standard features in home consoles, the emergence and growth of mobile gaming, the development of online poker that’s been as swift as it has been surprising… All constituting innovative technologies and ways to play which, in this era of growing convergence, involve or induce an overhaul of business models.

I’m sure I missed some relevant conferences, so if you can think of any leave a comment for our other readers.

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B-Side reprinted this article on 5 Alternative Revenue Streams for the Music Industry. (I’d link to the original article, but B-Side “cited” the source without a link, so I can only link to their repost.)

In any case, the article outlines 5 revenue models for the faltering music industry. They are:

  1. Free (ad or sponsor supported)
  2. Pay What You Want (donations)
  3. Pay By Popularity (price increasing with popularity)
  4. Subscription (Rhapsody style music services)
  5. Music Tax (ISPs add tax to offset industry losses = bad idea)

The article puts forth these revenue models after asserting that “iTunes isn’t the answer,” but I’d say that it’s a darn good start. iTunes was at least partially responsible for weening me off music pirating entirely (kids and declining music savvy also deserve credit). And while some of us in the game industry like to snicker at “old media” such as music and its antiquated business practices, the game industry is behind the music business in at least one way:

The iTunes model hasn’t been applied to games yet.

We’re still out there trying to get people to buy the whole album, rather than just the tracks they want. Services like Steam and episodic games like Sam and Max are great steps forward for the industry, but neither one allows consumers to instantly purchase and enjoy only the portions of the game they desire, like iTunes did for music.

One way to stop people loading up their Nintendo DS’s Revolution R4 card with 100 pirated games from BitTorrent is to give them all those games “for free” and charge a capped micro license based on which games they play and for how long.

For instance, if I play 10 minutes of Pokemon, 2 hours of Touch Darts and 50 hours of Puzzle Quest*, I would then be billed something like 10 cents, $1.20 and $20 (or whatever the cap for PQ would be). Couple that with electronic distribution’s removal of COGS and you’re right back to the same profit margins you already enjoy (on titles that cap out), with the added benefit of monetizing lesser played titles that would otherwise have been pirated.

While this may be new for traditional AAA games, casual games already have a fledgling version of this model courtesy of Double Trump’s Micro License scheme. Their PlayOn Arcade site has the details, for those interested in creating an iTunes-esque service for big budget, retail games.

* These are actual figures. I finished Puzzle Quest. 🙂

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From a Fortune article, EA CEO John Riccitiello had this to say about the free to play business model and how it will affect traditional retail games.

Riccitiello says the $31 billion gaming industry will suffer if it doesn’t start to reevaluate its business model. Game executives at Sony (SNE), Microsoft (MSFT) and Activision (ATVI) must answer some tough questions in the coming years, like how long they can expect consumers to pay $59 for a video game. Riccitiello predicts the model will be obsolete in the next decade. [Ed: emphasis mine]

“In the next five years, we’re all going to have to deal with this. In China, they’re giving games away for free,” he says. “People who benefit from the current model will need to embrace a new revenue model, or wait for others to disrupt.” As more publishers transition to making games for online distribution, Riccitiello says he expects EA will experiment with different pricing models.

As a colleague just said to me in an email, “It’s encouraging to see they (EA and big publishers as a whole) recognize the issue”.

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