Online Gaming to Spur Standardization? — continued

Service providers are key
In any case, Levine argues that the game industry will have to make room for ISPs in its market model in order to bring its vision to fruition. Currently the game market revolves around game developers, which develop games with funding from game publishers, which market and distribute the games. The hardware manufacturers also have a piece of the action. PC manufacturers have long depended on gamers to move their cutting-edge boxes, while console manufacturers are also some of the world's largest game publishers, moving their consoles as a way to secure revenues through licensing their platforms to developers.

"The service providers must get a cut of the action, or the whole thing will fall apart," Levine said. "They'll evolve to be like the cable MSOs, offering packages of games to subscribers like premium cable channels. Today, 20 percent to 30 percent of [broadband] network traffic is gamer-generated, but they don't make anything on the games. Yet they pay for the high-dollar circuits to Qwest, Level3, etc., and pass the traffic on to centralized hosting centers run by the publishers. The publishers then pay for high-dollar access through AT&T, Qwest, etc. So the long-haul carriers are making all the money. I see a whole new infrastructure evolving (which we're working on in the Global Grid Forum with IBM, Cisco, Samsung, etc.), where game traffic can be passed to the appropriate server on any network, and the service providers can bill the publisher for utilized computing capacity. The publishers and service providers will work out interesting marketing deals for regional promotion of games."

Ivan Verbesselt, vice president of broadband entertainment over DSL at Alcatel, agreed. Alcatel, a telecom equipment maker, has shipped more than 20 million DSL lines and is taking a strong interest in the gaming market. "It's rather clear that we have a vested interest in the broadband market continuing to spiral upward," Verbesselt said.

That interest has led the firm to create the entertainment group. "It's not just about the gaming as such," he said. "It's about the content value chain and how that relates to the delivery model itself. The gaming value chain has some significant similarities to the movie publishing chain. But the tipping point for this epidemic is maybe more nearby than for video. Game publishers don't have the hierarchy of distribution. They're much more motivated to go to an online model than the studios are at this point. That gives rise to more creative delivery models.

Verbesselt foresees a mixture of subscription-base services, advanced payment models, loyalty schemes, etc. "All obvious opportunities for revenue sharing between the game publisher and the telco," he said.

Media and advertising
For the media and entertainment concerns, games are about extending the value of existing intellectual property. While the prospects are attractive, simply translating the content is not enough, according to David Cole, president of DFC Intelligence, a research firm focused on gaming and interactive entertainment.

"You still need a quality game," Cole said. "A license itself doesn't do it. Spider-man did very, very well. Star Wars games have always done quite well. Harry Potter has too, as have games based on James Bond. It's a way to really make something stand out from the rest of the pack."

Advertisers, too, are looking for ways to turn the increasing popularity of gaming to their advantage. One way is product placement, and EA's Larson said its Sims franchise is perfect for that role, allowing advertisers to place products that have brand relevant results in play. For instance, The Sims Online will feature Intel branded computers that players can buy for their Sims. Playing on the computer increases their Sims' "fun" rating, and the Intel branded computers increase the fun rating much faster than other computers players can purchase.

But despite noting that game players are "extremely tolerant" of rich media ads, Larson echoed Cole sentiments that game play comes before all when she said that EA will only place advertising in games where it is a natural fit.

"Advertising will never drive decisions that we make about titles we make or how to please the end user," she said. EA's vision on this is not to take away from the end user experience at all. It's just not a natural fit in all games."

While there appears to be a strong upside to many players in the game industry to standardization on an online platform, that doesn't mean there won't be opposition to the pressure to standardize. With its Xbox Live service, Microsoft has already made a play to control the back-end infrastructure of online play for the Xbox console. And unlike the PS2, which can interoperate with mobile devices, PCs, and other consoles, Microsoft's Xbox will only allow play between other Xboxes without tampering.

"Ultimately, game designers, publishers, and gamers will win," Levine said. "Microsoft can only pay off game designers to do "Xbox only" for so long. Sony realizes it can make plenty of money making sure there are lots and lots of great titles for the PS2."

For Alcatel, though, as long as online gaming is luring users to broadband, it doesn't make a difference. "Whichever way it goes, we think it's extremely good news," Verbesselt said. "It adds immediately to the perceived value of broadband."

— End

"You still need a quality game," Cole said. "A license itself doesn't do it. Spider-man did very, very well. Star Wars games have always done quite well. Harry Potter has too, as have games based on James Bond. It's a way to really make something stand out from the rest of the pack."

Advertisers, too, are looking for ways to turn the increasing popularity of gaming to their advantage. One way is product placement, and EA's Larson said its Sims franchise is perfect for that role, allowing advertisers to place products that have brand relevant results in play. For instance, The Sims Online will feature Intel branded computers that players can buy for their Sims. Playing on the computer increases their Sims' "fun" rating, and the Intel branded computers increase the fun rating much faster than other computers players can purchase.

But despite noting that game players are "extremely tolerant" of rich media ads, Larson echoed Cole sentiments that game play comes before all when she said that EA will only place advertising in games where it is a natural fit.

"Advertising will never drive decisions that we make about titles we make or how to please the end user," she said. EA's vision on this is not to take away from the end user experience at all. It's just not a natural fit in all games."

While there appears to be a strong upside to many players in the game industry to standardization on an online platform, that doesn't mean there won't be opposition to the pressure to standardize. With its Xbox Live service, Microsoft has already made a play to control the back-end infrastructure of online play for the Xbox console. And unlike the PS2, which can interoperate with mobile devices, PCs, and other consoles, Microsoft's Xbox will only allow play between other Xboxes without tampering.

"Ultimately, game designers, publishers, and gamers will win," Levine said. "Microsoft can only pay off game designers to do "Xbox only" for so long. Sony realizes it can make plenty of money making sure there are lots and lots of great titles for the PS2."

For Alcatel, though, as long as online gaming is luring users to broadband, it doesn't make a difference. "Whichever way it goes, we think it's extremely good news," Verbesselt said. "It adds immediately to the perceived value of broadband."

— End

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